- Today’s main news: Experian legislative update. P2P platforms predicted to shift to hybrid models. Millennials spend over 1/3 of take home pay on rent. WeChat Pay enters U.S.market.
- Today’s main analysis: Lending Club’s lost year (and a half). Alternative return metrics (Cash on Cash Returns).
- Today’s thought-provoking articles: Record number of banks want to partner with LC. Q1 cybercrime report.
- Legislative Update 158. AT: “This is a must-read report.”
- Lending Club’s lost year (and a half). GP:”A lot of interesting charts. I expect Lending Club to have no problem increasing their origination amount via partnerships with institutions like banks and go back into profit in the next year.” AT: “Seeking Alpha does not favor LC on the short-term.”
- Alternative return metrics (Cash on Cash Returns). GP:”PeerIQ analysis on annualizted return calculation methodology.”
- Record number of banks want to partner with Lending Club. GP:”I think it’s great news and it makes sense. I am not surprised.”AT: “In case you missed it Friday.”
- Online lenders feel the pinch. GP:”The take away: eventually all lending will be done online. I would say yes, but below a certain loan amount only, not all lending, perhaps all lending below $1mil.”AT: “Data glitches are going to happen. Security experts can reduce them, but eliminating them is near impossible. Online lenders that realize that are more apt to create the right firewalls and barriers to entry for bad actors. And, yes, all lending may eventually be done online.”
- LendingTree announces top customer-rated lenders by loan product for Q1 2017. AT: “It looks like customers are still happiest with incumbents, but Lending Club and Avant are at First Midwest Bank’s back door. As Baby Boomers continue to age and more younger generations enter the market, I think we’ll see a shift to online lenders dominating in all ways, including customer ratings.”
- How will a real estate lending slowdown affect MPLs? AT: “MPL is looking good despite a slowdown in real estate lending.”
- A simple macroeconomic case for avoiding LC. AT: “I don’t agree. If LC is a good investment long-term, and I believe it is, just as Seeking Alpha stated in the previous article above, then investors shouldn’t be avoiding it. Now is the time to buy.”
- Small banks warm up to MPL for SBA expansion.
- Is Max Levchin making the next credit card killer? AT: “Affirm looks destined to be a dominant player in payments.”
- Big asset managers and Glass Steagall.
- JPMorgan quits R3.
- Real estate tech firms look to China for cash.
- The fintech revolution is nigh.
- OnDeck subsidiary amended, restarted asset-backed revolving debt facility.
- Mr. Wonderful loves fintech.
- P2P platforms predicted to shift to hybrid models. AT: “As will banks.”
- Millennials spend over 1/3 of take home on rent.
- How fintech is revolutionizing personal banking. AT: ‘This is an interesting look at different online financial services, such as the online bank for freelancers Coconut and a number of mobile apps.”
- Use P2P for monetary stimulus, says Desai. AT: “An interesting idea.”
- Direct lending fund targets 6.5% yield, fresh capital. GP:”Give how the public funds have been faring lately 6.5% is probably aggressive and optimistic. It may also be difficult to find capital.”
- The role robots can play in financial advice.
- 5 ways to finance your startup.
- WeChat Pay to enter U.S. market. AT: “And other interesting news about China from WeiyangX Fintech Review.”
- Ning Tang on MPL, credit scoring, and more. AT: “The interesting part are his predictions regarding the future of credit in China.”
- Over 60% of Chinese P2P lenders are profitable. AT: “The highest net profit is AVATAR China with 59.65%. Impressive.”
- Q1 Cybercrime report. AT: “It’s important for online lenders to study cybercrime tactics and get out in front of them. It may be the most important technological knowledge of all since security is a major trust issue and give players a competitive advantage.”
- Fintech proving less of a battleground.
- Islamic Fintech Alliance publishes industry snapshot report.
- Financial advisors should consider bitcoin an asset class.
- Australia going cashless is great for fintech.
- United States
- Legislative Update 158 (Experian Email), Rated: AAA
- Lending Club’s Lost Year (And A Half) (Seeking Alpha), Rated: AAA
- Alternative Return Metrics: Cash on Cash Return (PeerIQ), Rated: AAA
- Record Number of Banks Want to Partner with Lending Club (Bank Innovation), Rated: AAA
- Online lenders feel the pinch (Crain’s Chicago Business), Rated: A
- LendingTree Announces Top Customer-Rated Lenders by Loan Product for Q1 2017 (PR Newswire), Rated: A
- How Will a Real Estate Lending Slowdown Affect Marketplace Lenders? (National Real Estate Investor), Rated: A
- A Simple Macroeconomic Case For Avoiding Lending Club (Seeking Alpha), Rated: A
- Small banks warm up to marketplace lending for SBA expansion (American Banker), Rated: A
- Is PayPal Co-Founder Max Levchin Making The Next Credit Card Killer? (Forbes), Rated: A
- A new era for big asset managers? Glass Steagall and fintech (The Financial Revolutionist Email), Rated: A
- JPMorgan formally quits R3 (Finextra), Rated: A
- Ping-pong capitalism: RE tech firms look to China for cash (The Real Deal), Rated: A
- The fintech revolution is nigh. Our next move is critical. (The Hill), Rated: A
- On Deck Capital subsidiary amended and restated its existing asset-backed revolving debt facility (Reuters), Rated: B
- Shark Tank Star Kevin O’Leary Loves Fintech. (Crowdfund Insider), Rated: B
- United Kingdom
- P2P platforms predicted to shift to hybrid models (P2P Finance News), Rated: AAA
- Millennials spend over a third of take home pay on rent despite price growth beginning to slow (LendIt), Rated: AAA
- Current accounts: How fintech is revolutionising personal banking (Independent), Rated: A
- Funding Circle’s Desai: use P2P for monetary stimulus (P2P Finance News), Rated: A
- New direct Lending fund targeting 6.5% yield seeks fresh capital raise (AltFi), Rated: A
- What role can robots really play in the financial advice market? (The Herald), Rated: A
- 5 ways to finance your start-up business (Business Zone), Rated: B
- WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA
- CreditEase CEO Ning Tang on China’s Marketplace Lending Industry, Robo-Advisors, Credit Scoring, & More (CB Insights), Rated: A
- P2P Industry News (Xing Ping She Email), Rated: A
- European Union
- Temenos hires FinTech heavyhitter for Marketplace (IBS Intelligence), Rated: A
- Q1 CYBERCRIME REPORT (ThreatMetrix), Rated: AAA
- Financial technology is proving less of a battleground than feared (The Economist), Rated: A
- Islamic Fintech Alliance Publishes Fintech Industry Snapshop Report (Crowdfund Insider), Rated: A
- Financial advisers should consider bitcoin as an asset class: Dunworth (Financial Standard), Rated: A
- Australia going cashless is great for fintech (AltFi), Rated: B
- Instamojo Wants To Help India’s Five Crore Small Businesses Transact Online (Bloomberg Quint), Rated: AAA
- Middle East, North Africa (MENA) FinTech Update: Slow to Adopt or Miles Ahead? (EdgyLabs), Rated: AAA
Legislative Update 158 (Experian Email), Rated: AAA
Highlights this issue:
- On April 14 the CFPB’s Office of Fair Lending and Equal Opportunity issued its annual report on fair lending. The report provides an overview of the work that the Bureau has done over the past year to provide oversight and enforcement of the fair lending laws under its jurisdiction.
- In March, US Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) announced that they were seeking legislative proposals to promote economic growth. Proposals were due to the Committee on Friday, April 14. Experian worked closely with the CDIA and Chamber of Commerce to ensure that our policy priorities were included in their letters. CDIA’s comment letter recommended that the Committee take up and pass CROA reform, credit score competition and legislation to cap class action damages under the FCRA.
- On April 19, GAO released a report on fintech and marketplace lending. The report was intended to provide an overview of fintech, as well as the potential benefits and challenges for consumers and small businesses.
- Texas, H.B. 2333 would require a business that accepts a credit card or debit card for payment and retains any data related to the card, other than a confirmation number, for the transaction, to secure the retained information against a breach of system security. If a breach of system security occurs in which credit card or debit card information is compromised, the business shall notify the attorney general within 24 hours.
See the full report here.
Lending Club’s Lost Year (And A Half) (Seeking Alpha), Rated: AAA
One year later, the question hangs in the air: Has Lending Club recovered?
Meanwhile, G&A expenses ballooned as the company increased spending in compliance, retention, and recruiting. Despite only releasing one product, relative engineering costs also increased significantly during the same period. The company spent $35M in non-adjusted engineering costs, an increase of $11.5M from a year prior. Why have costs expanded, even though the company hasn’t grown?
Following the Jefferies incident (and even in the months leading up to it), one of the concerns that was brought up in 2016 was regarding Lending Club’s underwriting, both in its efficacy and in its efficiency. Many institutions temporarily halted their investments on the platform during the second quarter to do more due diligence, specifically on the concern that additional loans may have had their details changed.
This issue was recognized in the first quarter of 2016, when Lending Club stated that it had begun eliminating high-risk populations from its credit policy. The company announced several more cuts to its underwriting throughout 2016, most recently eliminating another 6% of borrowers from its credit policy. Cumulatively, approximately 17% of borrowers who formerly qualified for loans were cut from the credit policy.
Why is credit deteriorating? Lending Club noted these deteriorating credit trends early in 2017:
“Throughout 2016 and into 2017 we have continued to observe the same trends on the Lending Club platform: indicators suggest a strong U.S. economy, but some borrowers are not offering appropriate levels of risk adjusted return.”
The delinquency rates for grades D-G do seem to be flat/trending down over the course of 2016, but delinquency rates for 36-month loans grades A-C are flat/trending up over the same period.
While not a perfect corollary, S&P/Experian consumer credit default indices also show an increase in bank card defaults over the past six months, which suggests that the increasing level of charge-offs is not limited to Lending Club.
Lending Club also noted that it is spending a significant amount more on in-house collection efforts. Servicing and Origination expenses increased $2M from 4Q 2016 to 1Q 2017.
Lending Club noted that, although its servicing portfolio balance only increased 8% year over year, the revenue collected on its servicing portfolio has increased 34%.
If we tally up our score card, we have:
- Revenue has not recovered (but the company has guided investors to growth in 3Q and 4Q).
- Relative spend has increased in 3 out of 4 expense categories.
- Bad debts will continue to impact note investor portfolios while the 2016 vintages progress through their hazard curves, although there are signs that the increase in loan charge-offs is slowing down and/or reversing for high-risk borrowers.
Alternative Return Metrics: Cash on Cash Return (PeerIQ), Rated: AAA
As evidenced from Prosper’s annualized return calculation methodology, the return calculation can be complicated, involving several moving parts. Marketplace institutional investors appreciate the complexity and diversity of return calculations. At PeerIQ, we have had numerous conversations in the past with our clients and developed the “Cash-on-Cash Return” metric as one of several tools to monitor portfolio performance.
It varies from Prosper’s Estimated IRR by only considering realized cashflow information. Unlike Annualized Return, it eliminates complication springing from annualizing simple returns. In short, CoCR utilizes few readily available loan and pool level data points and summarizes the historical return of the investment on monthly basis.
The disadvantage of the CoCR metric is that returns are not forward-looking. Also, the declining cash-on-cash return performance (a typical characteristic of installment loan portfolios) can create confusion or frustration for retail investors. Retail investors experience strong net annualized returns in the early periods, only to experience returns consistently decline as loans season.
Record Number of Banks Want to Partner with Lending Club (Bank Innovation), Rated: AAA
Banks made up a “record” 40% of the lender’s almost $2 billion originations for the quarter, up from 31% last quarter, according to Lending Club CEO Scott Sanborn.
Bank participation hit its lowest (for the past 12 months) in the third quarter of 2016 — 13% of the total $1.9 billion originations — and has been on a steady increase ever since.
Online lenders feel the pinch (Crain’s Chicago Business), Rated: A
Data glitches are bad for any company. But they are especially terrible for online lenders that trumpet having high-quality data as a main selling point.
And now comes Prosper Marketplace, which said on Thursday that it told investors their returns were inflated because of a systems error. Annual returns for some investors were cut in half, while others declined by 2 percentage points or less.
For example, take a look at a recent securitization by Avant, the Chicago-based online lender that cut its staff by about 30 percent last year and whose loan default rates had been higher than expected. To attract investors to the nearly $220 million deal, Avant had to materially improve the underlying creditworthiness of loans by reducing their length and the amount financed and increasing their risk-adjusted yield, according to PeerIQ.
Data provider Orchard Platform said the average return on online consumer loans was 3.95 percent last year, which doesn’t seem sufficient unless the default rate was extremely low, especially compared with average returns of 6.93 percent in 2015.
The U.S. economy will slow at some point, leading to a reduction in loans and higher defaults. And eventually, all lending will be done online.
LendingTree Announces Top Customer-Rated Lenders by Loan Product for Q1 2017 (PR Newswire), Rated: A
LendingTree®, a leading online loan marketplace, today released its quarterly list of the top customer-rated lenders on its network based on actual customer reviews for the first quarter of 2017. The list features the top lenders in multiple loan product categories, including Mortgages, Personal Loans, Business Loans and Auto Loans, all of which are included in LendingTree’s online loan marketplace.
Lender rankings are based on a weighted average of overall rating and the total volume of customer reviews for mortgage, personal, business and auto loans. Lenders were rated on offered rates, fees and closing costs, responsiveness, customer service and overall customer experience.
J.G. Wentworth Home Lending, LLC
CBC National Bank
Arcadia Financial Group LLC
Veterans United Home Loans
First Midwest Bank
AmeriSave Mortgage Corp
Wyndham Capital Mortgage
First Direct Lending, LLC
Personal Loans Category
First Midwest Bank
Business Loans Category
Student Loans Category
up2drive – a division of BMW Bank of North America
How Will a Real Estate Lending Slowdown Affect Marketplace Lenders? (National Real Estate Investor), Rated: A
According to new statistics from the Mortgage Bankers Association, real estate lending is slowing down. Lenders closed $491 billion in mortgage loans in 2016, down 3 percent from the previous year. The decline in the last quarter of 2016 was even more significant, falling 7 percent in comparison with the fourth quarter of 2015.
In commercial real estate, reports show that the decline is even sharper. According to Real Capital Analytics, U.S. commercial property purchases were down 10 percent in 2016 from the previous year, and the trend seems to be continuing into 2017. U.S. investors purchased $50.3 billion in commercial property in January and February of 2017, compared to $80.1 billion during the same timeframe in 2016.
With $300 billion in loans coming due in the next 18 months, it is unlikely that the slowdown is a sign that the industry is poised for a more significant decline.
Strong outlook for marketplace lending
While banks will likely continue to have a small pullback in commercial real estate lending, the outlook for marketplace lending is strong. In 2015, alternative lenders originated 68 percent more loans than the year prior, according to the Mortgage Bankers Association. With American Banker reporting a 700 percent growth in the marketplace lending industry in just four years, this growth is poised to continue.
While commercial real estate lending as a whole may have been down slightly in 2016, the outlook for marketplace and other non-bank lenders is strong for 2017.
A Simple Macroeconomic Case For Avoiding Lending Club (Seeking Alpha), Rated: A
We believe the most commonsense case for avoiding Lending Club (NYSE:LC) as an investment is pretty simple and doesn’t involve a deep dive into the numbers. We think the reasons for avoiding peer to peer lenders can be explained simply and are relatively easy to understand. Lending Club, along with other peer to peer lenders and smaller aggressive regional banks, will likely be a poor investments in coming quarters as a shorter-term debt cycle turns over and the lowest creditworthy types of loans begin to see a spike in delinquencies and faults.
While Lending Club loves to point out to its investors and those who participate in its online marketplace that a lot of its borrowers have great credit scores, the reality of the situation is that the lowest creditworthy people who are denied loans elsewhere will drift to platforms like Lending Club in order to secure a loan they otherwise would not be able to obtain. This is just simply a function of lending markets: the least creditworthy people will find the lowest spot on the totem pole to borrow money.
Enter Lending Club, a pool of investors chasing high yield and borrowers who were likely unable to obtain credit elsewhere. We think the obvious outcome for the broader economy will be significant and continued pressure on all peer to peer lenders, not just Lending Club, going forward over the next couple of years.
Small banks warm up to marketplace lending for SBA expansion (American Banker), Rated: A
Marketplace lenders are slowly gaining traction with community banks eager to do more Small Business Administration lending.
Five Star Bancorp in Rocklin, Calif., is the latest small institution to follow the trend, agreeing earlier this year to try out SmartBiz Loans.
Is PayPal Co-Founder Max Levchin Making The Next Credit Card Killer? (Forbes), Rated: A
Now, Max Levchin’s latest venture, the financial technology company Affirm, is seeking to bring more accountability and transparency to the banking industry through what he calls “fair and honest financing.”
According to CreditCards.com, the average amount of credit card debt is about $9,600. If you make the minimum monthly payment, you could pay more than $11,615 in additional interest during the life of the loan — which is more than you originally borrowed.
Affirm lets shoppers pay for purchases — such as a Casper mattress or Peloton bike — over time with simple-interest loans that are free of any penalty or late fees.
Last month, the San Francisco-based company completed its 1 millionth consumer installment loan.
Max Levchin: We started Affirm 5 years ago with the thesis that we could build smarter underwriting and anti-fraud technology to improve on the tired traditional systems, and therefore create financial products that are simple, transparent, fairly-priced and free of incentive misalignment that so often defines consumer banking.
Since 2014, our loan volume has grown 40+ times over, we’ve added 900 merchant partners including Expedia, Wayfair, Peloton, Casper and Eventbrite, issued more than 1 million loans, all while maintaining an industry-first Net Promoter Score (NPS) of over 70.
Max Levchin: Since 2001, the [CFPB] found that more than 29 million consumers had been harmed by illegal practices perpetrated by bad actors in the finance industry.
There are also several legal, yet equally harmful, practices being used by the industry today that are disproportionately affecting the most financially vulnerable populations.
I would also like to see the CFPB affirm a consumer’s right to access and permission their financial data. Doing so expands access to credit for the 58 million Americans considered credit invisible – those with no credit files or insufficient information in their files to generate a credit score.
Max Levchin: Over the next few years, we [plan] to offer many more services expected from a modern financial institution, while bringing transparency to the industry where too often the customer has to lose for the service provider to win.
A new era for big asset managers? Glass Steagall and fintech (The Financial Revolutionist Email), Rated: A
The current clamor for breaking up America’s big banks should serve to remind those institutions to carefully manage the newfound freedom they will enjoy if Dodd-Frank gets defanged. It should also spur them to continue to seek out new risk-detection and monitoring technologies to avoid the kinds of systematic problems that sparked neo Glass-Steagallism in the first place. Regtech and cyber security startups in particular should be happy that the future conduct of major banks will remain under a big microscope, as even the most respected banking brands are viewed with suspicion.
Does voice trading have a future?
It’s easy to believe that with the growing role of IM/chat messages, computer on computer communications, sophisticated algos and machine learning, the telephone is destined for oblivion when it comes to trading. But in a new survey conducted by Greenwich Associates, “voice” was reaffirmed as an important element to building trust and detecting nuance between trading counterparties. That’s good news for start-ups like Cloud9 Technologies and a reaffirmation that sometimes tech doesn’t replace humans, it just augments their capabilities.
Apple should buy Canada or PayPal.
So instead of creating a money transfer service from scratch, Apple should consider scooping up Venmo and the rest of PayPal with it (and/or Square). These fintech fantasy targets have seen their stock prices surge, but that shouldn’t matter.
A two pizza, Agile future for banks.
ANZ, for example, is the latest bank to announce that it would shift to Agile teams of about ten as a way to “blow up” bureaucracy. It’s also a core emphasis at Barclays, which has linked building more agility into teams as a way to prepare for the MiFID II tidal wave.
JPMorgan formally quits R3 (Finextra), Rated: A
JPMorgan Chase has formally exited blockchain consortium R3, following in the footsteps of fellow titans Goldman Sachs and Banco Santander who split last November.
The departure comes as R3 continues to pursue fundraising efforts, looking to raise to raise $150 million from its members and strategic investors in return for a 60% stake in the business – a downgrade from its original funding target of $200 million.
Ping-pong capitalism: RE tech firms look to China for cash (The Real Deal), Rated: A
Real estate tech startups like LendingHome, Fundrise, Cadre, RealtyShares and Roofstock also raised money from Chinese firms.
Between 2011 and 2015, annual Chinese investment in U.S. technology companies rose from $300 million to $9.9 billion, according to research firm CB Insights, before falling in 2016 amid a general slowdown in venture investment. The data doesn’t break down how much money went into real estate technology, but sources said it holds a special appeal to Chinese investors.
Hone is backing the real estate investment platforms Roofstock, RealtyShares and Clara Lending, the Airbnb competitor Overnight and the drone-based property inspection service BetterView, among others, making it one of the most active Chinese investors in the space. The social media company Renren invested in mortgage platform LendingHome and crowdfunding company Fundrise, among others. Alibaba founder Jack Ma is an investor in Cadre, the Jared Kushner-backed real estate investment startup.
The fintech revolution is nigh. Our next move is critical. (The Hill), Rated: A
The technology of the future that is thought capable of revolutionizing financial institutions and its regulators is already here. But with no national plan to harness it for economic betterment or regulatory transparency, it may well represent another missed opportunity to restructure the financial system.
One need only look to the evolution of the internet, with its revolutionary concepts of distributed communication that fundamentally changed how the world and its financial institutions communicate. A similar revolutionary technology, distributed ledger technology (DLT), is promising to fundamentally change how financial institutions store and report information, but only if it can become a common good like the internet.
With the CAT rollout and data collection not yet begun, a more robust and comprehensive DLT solution could be proposed, one which combines important CFTC products with those of the SEC in a shared data collection undertaking.
The U.S. needs a comprehensive fintech and regtech (regulatory technology) plan to efficiently deploy DLT.
With standardization, fintech and regtech innovation can enable virtual global views of financial data that is disbursed throughout local computer nodes (data collection points) across the globe. But this is only possible if these nodes conform to both common data standards and common networking protocols.
On Deck Capital subsidiary amended and restated its existing asset-backed revolving debt facility (Reuters), Rated: B
* On May 4, 2017 subsidiary amended and restated its existing asset-backed revolving debt facility – SEC filing
* Fourth A&R credit agreement provides for increase in lender’s revolving commitments from an aggregate amount of $75 million to $100 million
Shark Tank Star Kevin O’Leary Loves Fintech. (Crowdfund Insider), Rated: B
Shark Tank star Kevin O’Leary, also known as “Mr. Wonderful” to some, is a fan of Fintech. O’Leary is sharing the love by delivering the Keynote address at the upcoming Benzinga Fintech Awards scheduled to take place this coming Thursday in New York City (May 11, 2016). O’Leary is said to be a regular suspect at the Benzinga offices too.
O’Leary will be presenting the keynote at the pinnacle of the award celebration.
Alongside O’Leary the following executives will be presenting or participating;
- Kathleen Murphy, President, Personal Investing at Fidelity Investments
- Tim Hockey, President and CEO of TD Ameritrade
- Ron Suber, President of Prosper Marketplace
- Matt Burton, CEO of Orchard
- Adam Dell, founder and CEO of Clarity Money
- Bill Emerson, Vice Chairman at Rock Holdings
P2P platforms predicted to shift to hybrid models (P2P Finance News), Rated: AAA
UK PEER-TO-PEER lending platforms are poised to shift towards hybrid models to stay afloat, a financial services think tank claimed on Monday.
The P2P industry has re-shaped the country’s small corporate funding and investment market, putting pressure on traditional lenders to step up their game, said the Centre for the Study of Financial Innovation. But it is now facing a plateau that may require it to expand into direct lending and balance-sheet operations, as well as cutting interest rates, to become profitable.
He pointed out that SME lending growth has become relatively stagnant and that less than half of UK small businesses are aware of new online sources of finance. This casts a shadow over the volume growth that P2P lenders need to achieve to become a mass market.
And in response to the digital innovation brought about by P2P players, traditional banks have begun to change the way they address the SME market, upgrading their online services and shortening their decision-making timeframes.
Attracting borrowers and scaling up investment volumes is going to be one of the key challenges for platforms going forward, the report said, alongside proving the soundness of their underwriting during a credit downturn and investing in continued innovation in customer service.
Millennials spend over a third of take home pay on rent despite price growth beginning to slow (LendIt), Rated: AAA
Cash-strapped millennials renting in the UK are spending upwards of a third of their take home pay of £17,359 on rental payments, according to the latest Landbay Rental Index, powered by MIAC.
For tenants aged between 18-39 and living alone, 69% of a monthly post-tax income of £1,447 is spent on £1,012 of rent. In a shared house of two people, overall rent of £1,152 adds up to 39% of each tenant’s income, while those co-habiting in a three-bed property would each spend 30% of their monthly take home pay on a rent of £1,322.
Rents have continued to rise over the last five years, increasing by 9% across the UK since April 2012 and by 8% in London – with monthly payments remaining a huge burden on those struggling to save, despite the pace of rental growth beginning to slow since August 2015, from 2.66% to 0.82%. While rents have begun to fall in prime Central London, outer boroughs popular with millennials, such as Barking and Dagenham, Havering and Bexley have seen rents grow by 26%, 18.9% and 18.2%.
Current accounts: How fintech is revolutionising personal banking (Independent), Rated: A
The gig economy continues to grow, with about 5 million people in the UK working as independents. It makes sense that a bank account provider would want to cash in on that and that is why Coconut has sprung up – to provide tailored banking for freelance and self-employed workers.
Customers can manage and track their income and outgoings via an app, and it even gives reminders of tax deadlines and the end of the financial year.
Increasing numbers of customers are relying on their phones for their daily banking, with data from the British Banking Association revealing that customers used their phones to check their bank balances 895 million times in 2015 alone, a number that is no doubt rocketing upwards.
A number of fintech start-ups are trying to capitalise on this trend and Monzo is one.
The app gives customers a real-time insight into what they are spending and how they are spending it, helping to budget and stay in the black. Users can access their account via an app that gives data on their daily and monthly spending, as well as the overall health of their account.
The first bank to gain a licence while being centred entirely around an app, Atom is racing ahead in the fintech current account stakes. It offers some far-sighted technological developments, including the opportunity to do away with passwords and even debit cards, instead relying on voice and face recognition.
And DiPocket is a new financial app that isn’t a bank but offers customers mobile banking facilities via a prepaid Mastercard.
Funding Circle’s Desai: use P2P for monetary stimulus (P2P Finance News), Rated: A
UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.
The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.
New direct Lending fund targeting 6.5% yield seeks fresh capital raise (AltFi), Rated: A
The Edinburgh-based RM Secured Direct Lending trust is seeking to raise fresh capital just five months after its launch as it nears full deployment of its capital.
Launched back in December 2016, the closed-ended fund targets the SME lending space investing in loans it originates of between £2-10m. It specialises in secured debt investments and the portfolio has had a good run since its initial public offering (IPO) with most of its capital invested or moving towards deployment.
Total Net Assets are today £48.9m. Nearly £40m has been invested in a total of 11 loans, with borrowers ranging from a healthcare group, a UK high street retailer and a large UK/European forecourt provider.
What role can robots really play in the financial advice market? (The Herald), Rated: A
So, when Royal Bank of Scotland announced in March that it would be rolling out robo-advice for mortgage applications by the end of the third quarter it was clear that that particular innovation is no longer quite so innovative.
Put simply, websites such as Nutmeg, which is by far the best-known name in the fledgling UK market, present would-be investors with a range of questions designed to ascertain their attitude to risk before directing them to a model portfolio that should suit their needs.
However, the issue, according to Stephen Martin, head of Brewin Dolphin’s Glasgow office, is that even where needs are uncomplicated, robo-advisers can only go so far because they will never be able to tease out information peculiar to individual situations.
Hollands agreed, noting that while robo-advisers are a positive addition because they are helping open the investment marketplace to a wider range of people, they cannot be seen as a like-for-like replacement for full financial advice.
While the robo-advice market in the UK remains small, covering in the region of £1.5-2 billion of assets, research from Deloitte suggests that with more and more people having to take responsibility for investing their own pensions the potential for growth is high.
The accountancy giant found that 43 per cent of 35 to 44 year olds with a pension would use robo-advice on where to invest it, with those with the smallest pension pots, who may not be able to afford traditional financial advice, most likely to go to a robo-adviser.
5 ways to finance your start-up business (Business Zone), Rated: B
Business grants: In an unsettled economy, start-ups are seen to be important as a way of encouraging economic growth- this is why so many banks and publicly funded organisations are happy to support your ambitions.
Short term loans: One way in which you can look to finance your business is through a quick loan from a reputable company. Quick loans can help to offer you the perfect cash injection necessary to get your business up and running with the ability for the debt to be paid back over a series of repayments. The key with funding your business through a short term loan is in finding a loan with a low interest rate.
Crowdfunding: Peer to peer lending and crowdfunding have become an increasingly popular way for entrepreneurs to start up their own businesses.
Friends and family: Something to always consider when looking towards funding your own business is to pitch for funding from your family members and friends.
Angel investors: Angel investors can be a great source of investment and can be found in most cities.
WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA
WeChat Pay, one of the biggest mobile payment platforms in mainland China, has boosted its cross-border business by entering the U.S. market.
One in four of those aged between 18 and 27 use pay-by-credit services Ant Check Later, a personal loan and installment service under e-payment provider Ant Financial Services Group, as these freer spenders form the very core of the country’s burgeoning consumer-credit landscape.
People born in the 1990s constitute 47.3 percent of the platform’s registered users. Among them, nearly 40 percent prioritized the service as a payment option over its sister service Alipay, China’s largest mobile wallet by market share. This is 11.9 percentage points higher than those born before 1985.
Baidu Financial has announced to launch new consumer mortgage products with the aim of encroaching on consumer credit market.
On May 2, the National Committee of Experts on Internet Finance Security Technology, which was sponsored by the National Internet Emergency Center and the Internet Society of China, released a piece of evaluation criterion for P2P online lending platforms.
The rating standards mainly include five aspects: corporate strength, enterprise qualification, operation indices, cyber security and social reflection.
In another attempt to secure a firm grasp on China’s Fintech market, Chinese tech conglomerate LeEco has turned its next venture towards insurance and fund consignment. Since 2015, LeEco has got several financial licenses on various fields: micro credit, private placement, insurance and fund. Specially, LeEco is trying to build a fintech ecosystem, which covers micro finance, equity management, fund and insurance sales.
CreditEase CEO Ning Tang on China’s Marketplace Lending Industry, Robo-Advisors, Credit Scoring, & More (CB Insights), Rated: A
In recent weeks, Ant Financial‘s Yu’e Bao surpassed JPMorgan’s US government money market fund to became the largest in the world, China Rapid Finance became the second Chinese P2P lender to go public on a major US exchange, and Ant Financial upped its bid to acquire MoneyGram, the second largest global money transfer provider.
On the state of marketplace lending in China
Two fintech sectors — payments and marketplace lending — are more mature than others in China, as they have been around for over 10 years, have massive scale, and operate within robust regulatory frameworks and ecosystems.
We think that, over the next decade, sectors like crowdfunding, robo-advisors, insurance tech, blockchain and blockchain-driven applications will emerge. Some are behind marketplace lending by 3 years, some by 5 years, and some are behind by even 10 years, but I think all will go through a similar process in China.
It took 10 years for marketplace lending to grow from an idea to an industry in China. Recently, there has been tightening in the market, but I believe a tighter market will help the industry become more stable and healthy.
On credit scoring in China
Regulators have adopted a strong view that credit scoring is key for China to develop its credit bureau system. It will be a very strict process.
Currently, we use eCommerce data, telecommunications data, bank and credit card data, insurance data, and social security data. Big data is very helpful, but alternative data needs to cooperate with traditional finance and credit data to make the risk evaluation model really work.
I think China will develop a multi-layer system. The core will be the credit bureau — consisting of core credit data — and around it will be different applications for different industries utilizing some industry-specific data. Around that will be additional ancillary data services utilizing big data for anti-fraud, marketing, and so forth.
Still, the core layer will look quite similar to what the US credit system looks like.
On insurance tech in China
The biggest pain point for the insurance industry in China is that it’s never sold in the right way.
We don’t need more insurance products, we need more education and intelligent matching.
Where CreditEase is investing
Chinese investors are in the process of building globally diversified portfolios. From our point of view, we help clients who already have foreign currency outside of China to invest in the US and other parts of the world.
We are still quite interested in opportunities in lending. For example, we invested in (former Lending Club CEO) Renaud Laplanche’s new venture, Upgrade. I believe there are still a lot of opportunities left over from marketplace lending 1.0. We are similarly interested in crowdfunding, insurance tech, and — not only robo-advisors — but also B2B fintech models helping the wealth management and asset management industry.
P2P Industry News (Xing Ping She Email), Rated: A
Over 60% Chinese P2P Lenders achieved profit
According to the latest statistics from Online Lending House, 28 P2P Lending platforms disclosed their financial results, accounting for 1.3% of all the platforms. In 2016, 17 (61%) platforms have achieved profit, while 11 P2P Lenders had a loss.
The data shows that the most profitable platform is Yirendai, with $1.12 billion net profit. However, another US listed platform, China Rapid Finance, has lost $0.23 billion. Excluding lost platforms and those with incomplete data, the average net interest rate of 17 platforms are 25.92%, performing well in profitability.
|NetProfit Rate||Founding Time||Public Company||shareholding ratio|
|Jul. 2011||HAKIM UNIQUE|
|Jun. 2011||Jiayin Fin-tech|
Wan Hui Technology
Neo Telemedia Limited
|Nov. 2013||Hemei Group|
Panda Financial Holding Corp., Ltd.
|Aug. 2015||Nuode Share|
|China Rapid Finance|
After the Internet Finance mania in China, more attentions now are paid to bank depository of the auto loan market. In China, with the rapid development of economy, cars gradually become ordinary people’s necessary life consumption, especially in developed areas, and almost every family owning a car.
Meanwhile, the large holding numbers and high liquidity of cars make it one of the most promising vertical field in P2P industry. It was reported that the number of car users in China are rapidly increasing, which contributed to the rapid development of the auto loan market.
According to the latest data, the total volume of Internet auto finance in China is expected to reach at 1.85 trillion RMB, driving the penetration ratio of consumer finance to about 30%.
Temenos hires FinTech heavyhitter for Marketplace (IBS Intelligence), Rated: A
Temenos has announced Duena Blomstrom as Chief Growth Officer for Marketplace, its online store of 100+ FinTech solutions that have been certified and pre-integrated with the Temenos Suites.
Blomstrom is well known in the FinTech sector as an analyst, entrepreneur and Angel Investor, a mentor for Startupbootcamp and Techstars, and the inventor of the Emotional Banking, EX and Bank Branding concepts. For the past 18 years, she has operated on the strategy and consulting side, be it for sales or marketing.
But banks are not easily displaced. Peer-to-peer lending, for instance, has grown rapidly, but still amounted to just $19bn on America’s biggest platforms and £3.8bn in Britain last year, according to AltFi Data, an analytics company. And some marketplaces now involve banks. Lex Sokolin, director of fintech strategy at Autonomous, a research firm, argues that music—one of the first industries to be attacked by digital revolutionaries—was fairly easily disrupted. Retailing was a little harder, but customers got used to not handling books, cameras and clothes before buying. Finance and health care, he says, are much more difficult. People are rarely inspired by financial products, says Mr Sokolin, which makes it costly to build a brand. It is easier to team up with those who already have the customers.
In the West, regulation is opening up more of the field to fintechs, both large and small. A revised European Union directive on payment services, known as PSD2, allows third parties to offer more convenient ways of paying online or to consolidate information from different accounts (with the holder’s permission) so that people can keep track of their finances. America has no equivalent, but the Office of the Comptroller of the Currency, which oversees national banks, has proposed giving special licences to fintechs.
China’s digital behemoths worry less about such things. Companies like Ant Financial, the financial arm of Alibaba, an e-commerce giant, and JD.com, another online marketplace, have masses of data about those who buy and sell on their platforms. They know their spending habits and how much cash they can spare, so an easy next step is to offer them small loans. Big Chinese banks in any case neglect consumers and small businesses, so customers feel no loyalty towards incumbent lenders. Regulators have also been willing to let online companies shift into finance.
Q1 CYBERCRIME REPORT (ThreatMetrix), Rated: AAA
In the ever-evolving world of cybercrime, authentication continues to be a mainstay of global digital businesses; accurately recognizing trusted returning users and promoting a frictionless online environment builds a loyal customer base and reduces attrition.
However, cybercrime is becoming an increasingly global phenomenon, operating across borders in well organized criminal gangs, with knowledge sharing and centralized intelligence. Attacks continue to evolve quicker than the tools and techniques used to detect them.
Some key attack trends analyzed this quarter include:
- The multifarious attack methods used in a 2017 cybercrime attack
- The evolution of attacks from single to multi-vector approaches
- Identity theft is a key issue for all industry sectors as they continue to see attacks involving stolen and synthetic credentials, harvested from omnipresent data breaches
- The proliferation of RATs in the financial services sector
- The sophistication of bot attacks
- The only effective armor is to genuinely understand who your real customers are and how they transact, by collecting and processing all the information you know about them and using this to make informed risk decisions.
See the full report here.
Financial technology is proving less of a battleground than feared (The Economist), Rated: A
To be sure, a gang of newcomers have muscled their way into their domains. Peer-to-peer or marketplace lenders, such as Lending Club and SoFi in America, or Funding Circle and RateSetter in Britain, connect people and companies that want to borrow with those that have money to lend, promising both sides keener rates. Britain’s MarketInvoice allows small companies to borrow against receivables immediately, rather than turn to a bank or wait for bills to be paid. Digital banks such as N26 in Germany, Tinkoff Bank in Russia and an array of British hopefuls are challenging incumbents.
Islamic Fintech Alliance Publishes Fintech Industry Snapshop Report (Crowdfund Insider), Rated: A
The Islamic Fintech Alliance (IFT Alliance) has published its inaugural report on the emerging Fintech sector for the Muslim community.
Munshi is the founder and CEO of Ethis Ventures, a company that operates several platforms including crowdfunding. Mushis states that Muslims must unite to take advantage of this “unprecedented opportunity” to invigorate Islamic financial services with new forms of finance.
See the full report here.
Financial advisers should consider bitcoin as an asset class: Dunworth (Financial Standard), Rated: A
This week the cryptocurrency broke record-highs when it started trading above USD$1680 against the US dollar. As at May this year, the total market cap of the bitcoin market has more than doubled to US$23 billion since it hit the US$10 billion mark just three years ago.
“A lot of people say that bitcoin is very volatile. It is in the short term but if I were doing fund management for my client, I see it as a very good long term investment,” he said.
Cambridge University counts as many as 5.8 million unique users of the so-called crypto currency wallet, most of whom use bitcoin. More than 100,000 merchants and vendors now accept bitcoin as a form of payment albeit regulators warn that bitcoin users are not covered by refund rights.
Australia going cashless is great for fintech (AltFi), Rated: B
Australia is set to be an almost cashless society by 2020, promising benefits for fintech.
Since 2010, cash payments have declined a staggering 46 percent, and now make up less than 10 percent of all payments, according to new research by East & Partners Australia.
The hope for fintechs is that as payments go digital and the data supply increases, so too will demand for new technologies. It will also improve Australia’s attractiveness to foreign investors.
Writing in The Guardian, the economist Philip Soos denounced a cashless economy as empowering the security state and the banks.
Instamojo Wants To Help India’s Five Crore Small Businesses Transact Online (Bloomberg Quint), Rated: AAA
Digital modes of payment are becoming ubiquitous, riding on the government’s less-cash drive after demonetisation. Yet, Instamojo, a Bengaluru-based fintech company, feels not enough is being done for small businesses.
The company wants to help India’s micro, small, and medium enterprises receive payments online in a simple, hassle-free manner, said Sampad Swain, one of its founders and also the chief executive officer. The government last year projected that the number of such businesses has grown to over 5 crore.
The only two requirements for the company’s service to work is that both parties must have a mobile number and a bank account.
“If the mango seller wants to use our platform, he has to first do an e-KYC, which takes a few minutes,” said Swain. This can be done either through a mobile application that can be downloaded from the Play Store, or on Instamojo’s website.
The seller then generates a link by providing information on the ‘purpose’ of the transaction, and the amount that the buyer has to pay. In this case, the purpose would be a crate of alphonso mangoes, and the price would be Rs 1,700, Swain explained.
Once the link is generated, the seller can forward it to the buyer by any messaging mode, like WhatsApp, Facebook, email, or even an SMS. When the buyer clicks on the link, he or she is directed to Instamojo’s website, where a number of online payment options are available.
Middle East, North Africa (MENA) FinTech Update: Slow to Adopt or Miles Ahead? (EdgyLabs), Rated: AAA
Headquartered in Dubai, Wamda (which means “sparkle” in Arabic) is an organization that supports the entrepreneurial spirit and business initiatives in the MENA region. Along with PAYFORT, an online payment platform, Wamda Research Lab released a report that provides in-depth data about FinTech in MENA.
According to the ‘State of FinTech,’ over $100 million USD were invested in Fintech in the MENA region over the last decade, with $50 million expected for 2017 alone. In 2013, the number of Fintech startups was 46. Then, in 2015, that number increased to 105–with the United Arab Emirates leading the pack with 30 independent FinTech startups–and the overall MENA number is expected to reach 250 by 2020.