Daily News Digest Featured News

Friday May 12 2017, Daily News Digest

LC servicing portfolio balance

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News Summary

United States

Citi Appointed Depositary Bank for CRF Limited’s Sponsored ADR Program (BusinessWire), Rated: AAA

Citi’s Issuer Services business, acting through Citibank, N.A., has been appointed by China Rapid Finance Limited (“China Rapid Finance”), a Cayman Islands exempted company with limited liability and operations in China, as the depositary bank for its American Depositary Receipt (ADR) program.

China Rapid Finance’s program was established in connection with a $69 million initial public offering (inclusive of the fully exercised over-allotment option), originally priced at $6.00 per ADR. The ADRs are listed on the New York Stock Exchange under the symbol “XRF.” Each ADR represents one Class A ordinary share of China Rapid Finance. As a single-listed ADR program, the underlying Class A ordinary shares are not listed or publicly traded in the issuer’s home market.

Investors Are Betting Big Against Lending Club — Are They Right? (The Motley Fool), Rated: AAA

As of the latest available data, 14% of Lending Club‘s (NYSE:LC) shares are sold short — among the highest percentages in the financial sector. That means more than $300 million is being bet against the peer-to-peer lender.

Lending Club investors who got in at the beginning have seen their shares lose three-fourths of their market value, despite strong performance in the overall market.

For 2014, Lending Club originated $4.4 billion in new loans, compared with just $3.2 billion in its entire history before that year.

Lending Club growth
Source: Lending Club Q1 2016 Investor Presentation

After the first quarter of 2016, loan originations fell by 29% and have not managed to recover yet.

In fact, revenue is down 18% year over year, and Lending Club lost nearly $30 million in the first quarter of 2017, compared with a profit of more than $4 million in the same quarter a year ago.

LC servicing portfolio balance
Source: Lending Club Q1 2016 Investor Presentation

Auto Loan Fraud Soars in a Parallel to the Housing Bubble (Bloomberg), Rated: AAA

Borrower fraud in U.S. auto loans is surging, and may approach levels seen in mortgages during last decade’s housing bubble, according to a startup firm that helps lenders sniff out bogus borrowers.

As many as 1 percent of U.S. car loan applications include some type of material misrepresentation, executives at data analytics firm Point Predictive estimated based on reports from banks, finance companies and others. Lenders’ losses from deception may double this year to $6 billion from 2015, the firm forecast.

Those fraud rates are coming closer to the over-1-percent level for mortgages in 2009, when the financial crisis was boiling and more lenders started reporting incidents to one another, Frank McKenna, chief fraud strategist at the firm, said in an interview. While those losses will sting lenders, the impact on the overall economy will likely be much more muted than with the housing crisis, just because there’s less car debt outstanding.

Point Predictive has put together a consortium of lenders to share data about dealers and loans. The group, now 13 strong, met at the headquarters of Santander Consumer USA in Dallas last month. Common types of fraud include borrowers lying about their income and their jobs, including falsifying paystubs. Loan applications can also include bogus information about the type of car being financed, or its value. The deception can be perpetrated by consumers, or car dealers, or both.

About 3 percent of dealers can be responsible for all of a lender’s fraudulent applications, Point Predictive said in a February report. Losses from auto loan fraud this year will likely be $4 billion to $6 billion, up from $2 billion to $3 billion in 2015, the firm said.

During the housing bubble, as few as 3 percent of mortgage brokers helped perpetrate most or all of the reported fraud, Point Predictive said. Loans that required little or no documentation allowed borrowers and brokers to lie about employment, salary, and other key facts about their financial condition. One borrower’s application for a mortgage said she made $6,900 a month, when she actually made about $3,286.

What You Need to Know About The CFPB and Small Business Lending (deBanked), Rated: AAA

On Wednesday, the Consumer Financial Protection Bureau (CFPB) held a hearing on small business lending. Here’s why it mattered and what you need to know:

Why: The 2010 Wall Street Reform and Consumer Protection Act, aka Dodd-Frank, empowered the CFPB to collect data on small business lending. The CFPB is just now getting around to rolling this out.

Who: “I’m an MCA funder, factor, equipment lessor or other, and this only applies to lenders right”?
Maybe, maybe not. Although Section 1071 makes several references to loans and credit, it doesn’t refer to the companies subject to data collection as small business lenders. Instead it says financial institutions which it defines as “any partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity that engages in any financial activity.”

What: What are they trying to collect?

  • the number of the application and the date on which the application was received;
  • the type and purpose of the loan or other credit being applied for;
  • the amount of the credit or credit limit applied for, and the amount of the credit transaction or the credit limit approved for such applicant;
  • the type of action taken with respect to such application, and the date of such action;
  • the census tract in which is located the principal place of business of the women-owned, minority-owned, or small business loan applicant;
  • the gross annual revenue of the business in the last fiscal year of the women-owned, minority-owned, or small business loan applicant preceding the date of the application;
  • the race, sex, and ethnicity of the principal owners of the business; and
  • any additional data that the Bureau determines would aid in fulfilling the purposes of this section.

Elevate Credit Inc’s Quiet Period Will End on May 16th (Sports Perspectives), Rated: A

Elevate Credit’s (NASDAQ:ELVT) quiet period will end on Tuesday, May 16th. Elevate Credit had issued 12,400,000 shares in its initial public offering on April 6th. The total size of the offering was $80,600,000 based on an initial share price of $6.50.

Several research firms recently issued reports on ELVT. Jefferies Group LLC assumed coverage on Elevate Credit in a research report on Tuesday, May 2nd. They set a “buy” rating and a $12.00 target price for the company. Compass Point restated a “neutral” rating and set a $9.00 price target on shares of Elevate Credit in a report on Tuesday, April 18th. Credit Suisse Group AG assumed coverage on Elevate Credit in a report on Tuesday, May 2nd. They set an “outperform” rating and a $11.00 price target for the company. Stifel Nicolaus assumed coverage on Elevate Credit in a report on Monday, May 1st. They set a “buy” rating and a $12.00 price target for the company. Finally, William Blair assumed coverage on Elevate Credit in a report on Monday, May 1st. They set an “outperform” rating for the company. One research analyst has rated the stock with a hold rating and four have issued a buy rating to the stock. The stock has a consensus rating of “Buy” and a consensus target price of $11.00.

Elevate Credit (NASDAQ:ELVT) opened at 7.99 on Thursday. The stock’s market cap is $104.97 million. Elevate Credit has a 12-month low of $7.00 and a 12-month high of $8.86. The firm’s 50-day moving average price is $8.01 and its 200 day moving average price is $8.01.

KBRA Upgrades Ratings on Earnest Student Loan Program 2016-B LLC (KBRA Email), Rated: A

Kroll Bond Rating Agency (KBRA) upgrades the ratings on two classes of notes issued under Earnest Student Loan Program 2016-B LLC (EARN 2016-B), a private student loan ABS transaction which closed on May 11, 2016.

Credit enhancement has increased for each class of notes as a result of low losses, no delinquent loans that are 30+ days past due, low borrower usages of deferment and forbearance, and the deleveraging which has occurred as the notes have amortized. Current credit enhancement for the Class A and Class B notes is 15.23% and 10.44% as a % of Adjusted Pool Balance, respectively. Credit enhancement consists of overcollateralization, subordination of junior notes, cash reserves, and excess spread. The transaction has breakeven loss multiples which are sufficient for an upgrade of the ratings on the Class A and Class B notes.

Get the full report.

Why a virtual bank is making bank branches part of its US launch (Tearsheet), Rated: A

Iam Bank, a startup virtual bank based in Ireland that has offices in the U.K., is set to launch in the U.S. this fall — and it’s going to do it via a physical bank branch.

The bank, which is now in the process of buying a Chicago-based bank it declined to name, said it will set up its first branch, known as a “customer experience center” in Milwaukee in the fall.

“We’ve done a lot of research and it all comes down to trust and credibility,” said Simona Stankovska, head of communications for Iam Bank. “For us, the research shows that people have a massive distrust of purely digital offerings. They need to have a human touch, they need to be able to communicate with someone.”

Despite expectations about the death of the branch (for example, a report last month from commercial real estate firm JLL projected that the number of branches across the U.S. will shrink 20 percent in five years), recent surveys support Iam Bank’s view that consumers — especially millennial ones — will continue to demand a human touch to banking. An Accenture survey last year found that 87 percent of customers, including 86 percent of millennials, feel that they will continue to use branches because they trust or sense that they get more value from letting a human to deal.

Now the hard part for bank robos: Getting customers to use them (American Banker), Rated: A

A few years ago, many in financial services thought robo-advisers would completely disrupt traditional wealth and asset management services at banks.

That hasn’t entirely turned out to be the case. In fact banks have begun to partner with, acquire or create their own robos in an effort to appeal to wealth management clients who want more digital services.

With that in mind, Fifth Third recently launched several digital wealth management products it hopes will compel retail customers to use their wealth and advisory services. One is its Life360 product, which combines human advice with a digital platform that gives customers a full overview of their financial life, including accounts and investments that aren’t held at Fifth Third.

This month, the bank began offering a new digital estate planning product called LegacyLink. The service, available online and through its own dedicated mobile app, provides educational content and interactive checklists around estate planning. The basic service is free and there is an additional paid-subscription service that helps users catalog, track and distribute estate assets.

Indeed, an Accenture survey published in March found that customers who relied on both digital tools and personal help were more engaged clients. The survey found that 64% of hybrid users seek out and receive assistance on financial planning, compared with 44% of those who rely either entirely on digital products or those who use traditional advisory services.

These Millennials Stress about Finances, Jobs and Living Arrangements (BusinessWire), Rated: A

Elevate’s Center for the New Middle Class released a series of reports on Millennials today that shed new light on the financial, employment and familial struggles faced by non-prime Millennials – defined as those with credit scores below 700 – as well as their remarkable optimism.

The Center’s Millennial series covers a variety of topics including savings, personal finance management and unexpected expenses. The series of corresponding reports are titled:

  • Millennials and Work: The Non-Prime Experience
  • Millennials’ Day-to-Day Finances: The Non-Prime Experience
  • Financial Education & Attitudes: Non-Prime Millennials
  • Getting By: How Non-Prime Millennials Overcome Financial Challenges

The first study of the series of four, “Millennials and Work,” notes that non-prime Millennials are 68 percent more likely to live in households with 4+ people, but much less likely to have two income-producing adults in the home, when compared to their prime counterparts.

Half of non-prime Millennials say that their finances cause them significant stress, with 58 percent living paycheck to paycheck and 41 percent running out of money every other month, or more often. The Center’s research found that this group is 55 percent less likely than their non-prime counterparts to say they can come up with $1,200 in an emergency. In fact, this group is 160 percent more likely to intentionally use overdraft to cover an expense when they didn’t have the money.

Core banking veterans raise $ 12m for new cloud-based venture (Finextra), Rated: A

Frank and Mike Sanchez, the men behind the Profile core banking platform, have raised $12 million in seed funding for their new cloud-based fintech firm Finxact.

The funding, which comes from Live Oak Ventures and other strategic investors and angels, will by used to complete development of Finact Core, a cloud-based core banking platform aimed at banks looking to overhaul their systems for the digital age.
Finxact says it is focused on creating an open API, cloud-based Core-as-a-Service platform that will enable the next generation of always-on, digital-first banking.
While several new cloud-based core banking providers, such as Mambu and ThoughtMachine, are looking to hoover up the host of digital-only challenger banks entering the market, Finxact is aiming to win over incumbents saddled with decades-old technology.

Foreign ‘FinTech’ companies flock to Atlanta (CBS46), Rated: A

Dozens of foreign financial tech, or FinTech, companies have chosen to call Atlanta home in recent years, a migration spurred by the area’s relative affordability and friendly business climate.  No less than 50 foreign companies have offices in the city, according the Atlanta Metro Chamber of Commerce.

Both he and Nelson cited the affordable rent and living prices, compared to the west coast and New York, as reasons why Atlanta was able to attract their business.

Anti Bank SoFi Will Become a Bank (Crowdfund Insider), Rated: A

SoFi has decided to become a bank. The Fintech firm that has spent so much time telling the world they were not a bank has decided to join the ranks of their erstwhile adversaries and apply for a bank charter.

The ILC or “Industrial Loan Charter” is a financial institution in the US that can lend money and be owned by a non-financial institutions. Importantly ILC’s can hold FDIC deposits.

SoFi wants to outdo mega-banks like Citi by providing better, cheaper services around the world.  SoFi lays claim to the largest single Fintech investment ever when SoftBank kicked in $1 billion.  Not too long ago this was augmented by another $500 million giving SoFi plenty of head room to expand and grow.

6 FinTech Companies Disrupting the Investment and Lending Landscape (Due), Rated: A

We have the millennials to thank, however, for pushing changes to the investment and lending landscape because like all other financial matters, they want to do it on their terms with the technology that they have grown up with.

Acorns proves that the spare change in your life can go toward something much better than collecting dust under the seat in your car or a jar in a kitchen cupboard. Instead, this extra money can be turned into investment vehicles that grow over time.

With so many consumers and businesses becoming frustrated with traditional banks and lending institutions, it was time for a new kind of finance company that resonated with how people interact and make decisions today.

SoFi has delivered on that with the creation of what it has termed “social finance” in which it offers a range of lending and personal finance products, including life insurance, mortgage loans, personal loans, student loan refinancing and wealth management.

YieldStreet is an online marketplace that connects accredited investors and vetted borrowers with alternative investment opportunities and capital. While this sounds pretty straightforward, there’s much more to what the company is doing. They are opening up the world of investing in ways typically not available before.

One of the most difficult aspects of investing is knowing where and what to invest. While you can do research or get an advisor, not everyone has the time or access to do so.

However, Openfolio is turning investing into a social activity where you can leverage everything that is good about social networks and use your peer group to teach you the best investment tricks. You can also connect with the app’s team of advisors to get assistance and advice on an on-demand basis as well as receive numerous projections and tracking reports to help you better understand investing.

One of the most difficult aspects of investing is knowing where and what to invest. While you can do research or get an advisor, not everyone has the time or access to do so.

However, Openfolio is turning investing into a social activity where you can leverage everything that is good about social networks and use your peer group to teach you the best investment tricks. You can also connect with the app’s team of advisors to get assistance and advice on an on-demand basis as well as receive numerous projections and tracking reports to help you better understand investing.

Robinhood has leveled the investment playing field and has encouraged more people than ever to get involved in creating their own investment portfolio through this technology-driven brokerage. With market data and regular content updates, you’ll be able to learn more about what to invest in and what impacts the stock market. You can get real-time updates about dividends, stock splits, and upcoming initial public offerings (IPOs). This allows you to move on any of those actions immediately.

Intent on revolutionizing the business loan space, Fundera offers a convenient and efficient way to locate the best lending options for your company — from startups to established small businesses to large corporations.

$ 1.25M Raised in 3 Days Through DiversyFund (Digital Journal), Rated: B

DiversyFund, Inc., a fast growing, full-service online real estate investment platform, announced today that their online network of investors have successfully funded a $1.25 million investment in a record time for the Company’s first high-end luxury real estate project in La Jolla, California, with world-renowned design-builder, Roman James.

The investment is being used to fund the construction of a 7,200 SF luxury single-family home in San Diego’s seaside La Jolla community. Genesis Capital provided a $4.2 million construction loan as well for the project.

Cambridge Technology Partners Introduces New Capabilities for a Digital World (PR Newswire), Rated: B

Cambridge Technology Partners the preeminent company for foresight-based digital strategies (www.CambridgeTechnologyPartners.com) announced two new strategic capabilities today:

I.     Digital Strategies: Scenario Planning practice for a New Digital World; and

II.     Digital Platform: FinTech Innovation for Financial Wellness in the Workplace.

Cetera Financial Group Continues Build-Out of Advice-Centric Solutions with Launch of New Advisory Platform (PR Newswire), Rated: B

Cetera Financial Group® (Cetera)*, a leading network of independent firms supporting the delivery of objective retail financial advice, today announced the launch of the first of its new Advice Architect Ecosystem™ suite of tools for financial advisors and their clients: My Advice ArchitectTM, a technology-driven, innovative investment solutions offering that provides advisors with a seamless and streamlined approach to conducting advisory business.  The platform constitutes a key component of the broader Advice Architect Ecosystem, a series of integrated platforms and services that the company will be announcing in the coming months as it works toward its strategic vision of creating a truly advice-centric experience for its advisors and their clients.

My Advice Architect, developed in collaboration with Envestnet, brings Cetera’s three core advisor-driven investment programs together on the same technology platform, enabling advisors to serve their clients with an unprecedented degree of flexibility, choice and transparency.  The new platform is being made available to financial advisors and financial institutions supported by Cetera in a phased rollout across the network, beginning with Cetera Financial Institutions, its firm specifically focused on serving the wealth management programs of banks and credit unions.

My Advice Architect combines the following investment programs on a seamless technology platform under a single client agreement with no ticket charges, allowing advisors to position their clients among the three solutions as needed:

  • Unified Program: Enables advisors to combine any number of advisor-directed models, fund strategist portfolios (FSPs) and separately managed accounts (SMAs) into one custodial account, thus eliminating the artificial silos around the different investment solutions and allowing advisors to invest their clients in the most appropriate portfolio. The platform provides advisors with access to a broad selection of nearly 100 strategists offering more than 800 mutual fund and ETF strategies, as well as approximately 300 managers offering more than 700 SMA models.
  • Guided Program: A solution that allows advisors to leverage asset allocation models created by third-party model providers and enables them to apply these models to their clients’ needs through asset-class weight adjustments and fund selection.
  • Advisor Program: A purely advisor-directed solution that offers a wide selection of asset types for both discretionary and non-discretionary client accounts.
United Kingdom

Zopa becomes the first of the ‘Big 3’ peer-to-peer lenders authorised by City watchdog (Business Insider), Rated: AAA

Zopa has become the first of the UK’s ‘Big 3’ peer-to-peer lenders to gain full authorisation from the Financial Conduct Authority (FCA).

Zopa announced on Thursday that it has gained full authorisation from the FCA, almost two years after it applied in 2015.

CEO Jaidev Janardana says in a statement: “The authorisation process has been rigorous and in-depth and involved extensive scrutiny of our business.”

Funding Circle and RateSetter, the UK’s two other biggest peer-to-peer lenders, are still waiting for authorisation from the FCA. The size and complexity of their businesses is thought to be part of what is delaying the process. Funding Circle has lent £2.1 billion to date and RateSetter has lent £1.9 billion. Zopa has lent £2.1 billion.

Zopa gains full FCA approval (P2P Finance News), Rated: A

The news is a pivotal moment for the industry, which has been waiting for the largest players to become fully regulated to move the sector into the mainstream. The regulator’s stamp of approval on the so-called grandfather of P2P lending is expected to boost the sector’s legitimacy to investors and financial advisers alike.

With smaller platforms already experiencing an influx of investor demand for the IFISA, it is likely that Zopa’s tax-free wrapper will attract high volumes of new inflows.

Seedrs To Launch UK’s First Equity Crowdfunding Secondary Market (Forbes), Rated: AAA

Seedrs is to be the UK’s first equity crowdfunding platform to offer secondary trading in the shares of businesses raising money on its website, the founders of the company announced today. If successful, the move could overcome the biggest fear of many investors considering crowdfunding – that they’ll be locked into their holdings.

Seedrs, launched five years ago, has so far raised £210m for around 500 companies and, along with rival platform Crowdcube, dominates the UK’s equity crowdfunding sector.

The facility will be open for trading for a single week each month, with shares trading only at a “fair value” dictated by Seedrs’ valuation policy.

Jeff Lynn, the founder of Seedrs, said each one-week trading window would begin on a “trading Tuesday”, and that the company would monitor the experiment closely to avoid abuses. The window could be expanded at a later date if trading volumes justify it.

LendInvest completes its largest development finance deal (P2P Finance News), Rated: A

LENDINVEST has completed its largest development finance deal to date, which will fund the construction of 66 new homes in West Drayton, a town set to benefit from a Crossrail station in 2019.

The online mortgage lender, which is a member of the Peer-to-Peer Finance Association, has lent a total of £21m to Kearns Property Management and Development.

It first provided a bridging loan for the borrower to acquire the site, which subsequently transitioned to a £17m development loan to finance the construction. Then LendInvest lent a further £4m to the borrower to purchase a neighbouring site that became available.

LendInvest to test investors (Business Insider), Rated: A

In December 2016, the UK’s Financial Conduct Authority (FCA) published a report warning marketplace lenders that they don’t explain how their products work effectively enough to consumers, making it hard for lay investors to assess the risks and returns associated with their platforms.

Some of these lenders have already begun making adjustments to stay on the regulator’s good side ahead of any new, potentially tighter, regulations being introduced, and on Tuesday, LendInvest became the latest lender to introduce changes toward this end.

Here are the changes LendInvest is making to its model:

  • Until now, retail and institutional investors could invest freely on LendInvest’s platform. Now, the company is introducing a rigorous exam that all investors will have to pass to be able to invest or continue investing on the platform.
  • Restructuring loans on its platform as investment funds.

Innovate Finance Seeks Support From UK Government (Crowdfund Insider), Rated: A

Innovate Finance, the membership association for global fintech, announced on Thursday it sought support from UK Government, as well as political parties across the spectrum, for its Fintech Election Pledge.

While sharing details about the Fintech Election Pledge initiative, Innovate Finance stated:

“The UK’s digital economy accounts for 16% of UK domestic output, comprises 3 million workers, and between 2012 – 2016 attracted more venture capital (VC) and private equity investment than any other European country, at £28bn. At the heart of this digital revolution, stands the UK’s thriving Financial Technology (FinTech) sector.

Whilst VC investment in global FinTech rose to $17.4bn last year (an increase of 10.9% from 2015), over the same period UK FinTech saw a 33.7% decline in investment, to $783m. Although the United Kingdom continues to remain internationally competitive, ranking 3rd globally for investment in FinTech, the UK must continue to remain open to the talent, ideas and capital which underpin and strengthen our digital economy.”

China

CRF Unveils Full Exercise of Underwriters’ Option For Purchase of Additional ADSs (Crowdfund Insider), Rated: AAA

On Thursday, peer-to-peer lender China Rapid Finance (NYSE: XRF) that the underwriters of its previously announced initial public offering (IPO) have exercised in full the option to purchase an additional 1.5 million American depositary shares (“ADSs”) from China Rapid Finance to cover over-allotments.

According to the online lender, each ADS represents one Class A ordinary share of China Rapid Finance and was sold at the initial public offering price of $6 per ADS.

CREDIT CHINA FINTECH HOLDINGS LIMITED (Credit China Fintech), Rated: AAA

Read the full report.

P2P Industry News (Xing Ping She Email), Rated: A

Chinese P2P lender Wangcaigu Received 60 Million RMB in A+ round of financing
On May 9th, Chinese P2P lender Wangcaigu announced an A + round of financing of 60 million RMB, which was jointly invested by Delta Capital and other investors. On July 8, 2015, Wangcaigu raised A round of funding of tens million RMB from Ruiye Funds, a company with listed background. After the finish of this round of finance, Wangcaigu has expanded its business from accounts receivable business financing to P2P lending with comprehensive services. Recently, the platform has reached agreements on funds depository with Bank of Shanghai.

NIFA requires P2P companies disclose information and related platform is on the way.
The information disclosure work on P2P lending agencies will become more normative. On May 9th, National Internet Financing Association of China (NIFA) announced the Notice of Holding a Training Seminar for the future access to Centralized Information Disclosure Platform. According to the Notice, the beta version of disclosure platform built by NIFA will open in the near future.

In fact, early in November 30, 2016, Zheng Xiaodong, the director of business department of NIFA, declared that the situation of information disclosure of Chinese P2P lenders vary greatly, some are still not transparent. “All the members can disclose information on the platform according, which will avoid different criteria and improve transparency of the industry.

Rates on Bank Deposits Varies, Investors Prefer P2P lending platforms
Recently, the topic of tight finance in banks caused widely discussion again, and the accompanying growth of deposit rates is still weary. For many banks in China, the growth of rates in the long-term deposits is less than the short and medium term deposits.

Actually, there are some banks even offering the same or lower rates for a longer-term deposit. Such low rates can’t arouse attention for people anymore, especially for young people. A girl handling with banking business said that she put majority of her money in P2P financial products such as Yu’E Bao, in which are convenient for payment and enjoy the higher rates than one-year fixed-term deposits in the bank.

European Union

Why We Believe PSD2 Should be Better (Finextra), Rated: AAA

In April this year the European Banking Authority released their final RTS draft for PSD2 to be presented to the European Parliament.

To make our voice heard, an association has been formed consisting of 65 European Fintech companies (and growing), and a manifesto presented, to ask the European Parliament to ensure the RTS be technically neutral and in line with agreed objectives and text of the final PSD2 agreement.

We believe the proposed regulatory standards are inconsistent with PSD2 and will make Fintechs technologically dependent on banks and therefore grant incumbents a gatekeeper role on the fintech sector.

Digital banking arms race continues (AltFi), Rated: A

Monzo’s May Journal, which went out to users yesterday, indicated that its debit card launch is just around the corner. Meanwhile, a recent update to the Revolut app revealed new insurance and wealth tabs, currently listed as “coming soon”.

Both Monzo and Revolut have recently staged equity crowdfunding campaigns on Crowdcube and Seedrs respectively. Both rounds were oversubscribed and both were part of larger institutional investment rounds.

11 members of the Monzo team are also testing out overdraft facilities, which is relatively uncharted territory for digital banks.

Asked about its insurance and wealth plans, Revolut’s head of partnerships Rishi Stocker said that the focus has been on creating fully integrated insurance products, and that the first of these could launch within the next few weeks.

Solid full-year numbers for fintech firm Nucleus (The Scotsman), Rated: A

Nucleus Financial, the Edinburgh-based financial technology (fintech) specialist, has reported a hike in full-year profits and assets under administration despite a choppy economic backdrop.

Figures from the wrap platform, headed by founder and chief executive David Ferguson, show that profit before tax hit £4.3 million last year, up 21 per cent on a like-for-like basis from 2015.

Assets under administration reached £11.4 billion at the end of 2016, an increase of 23 per cent on the year before, with that total climbing to £12.2bn as of the end of March 2017.

Norwegian banks to expand mobile payment app for business use (Reuters), Rated: A

In February more than 100 Norwegian banks agreed to develop Vipps electronic payments app in a bid to fend off competition from Nordic rivals and the likes of Facebook, Apple and Google

International

Fintech in Microfinance: In Search of the High-Tech High-Touch Unicorn? (Center for Financial Inclusion), Rated: AAA

While microfinance still makes up a major share of impact investing portfolios, many investors appear to have moved on to fintech, the next wave of creative destruction. Rather than be toppled by it, microfinance institutions (MFIs) look to ride that wave too, to extend reach, reduce costs and prices, improve and deepen client services, and improve risk management.

As growth slows, should MFIs now abandon that approach and use high-tech to go low-touch for cost efficiency? If MFIs stay their course, will they be overtaken by new entrants with new models, like Chinese online peer-to-peer lender Yirendai, which went IPO on the New York Stock Exchange last year? Or instead, will MFIs find innovative high-tech ways to further leverage their deep relationships with clients and understanding of client needs?

Mobile payments networks like M-Pesa and BiM are high-tech, but decidedly low-touch delivery channels. Low-touch too are big data algorithms like those of Yirendai and its corporate parent CreditEase used for automated credit scoring and risk management. However, as digital financial technologies like these mature, will base of pyramid (BoP) financial customers still need high-touch MFIs? As fintech-driven models become more sophisticated, can MFIs hope to deliver anything that technology sophisticated telecoms and global commercial banks can’t?

Turns out MFIs, clients, and even global banks themselves demonstrably think the answer is Yes, plenty.

Quarterly InsurTech Briefing Q1 2017 (Willis Towers Watson), Rated: A

Arguably, insurers who stick too long with the old model will fade as premiums and their balance sheets shrink.

The $100 billion small business insurance sector is one of the most promising for disruption, as insurers attempt to navigate the complexity of automating underwriting processes to accommodate a broad range of business classes in a user friendly format and combat the inefficiency of processing small ticket premiums and claims.

While digital distribution platforms have achieved limited market penetration to date, industry research suggests that up to 25% of total small business insurance premium could be digitally underwritten by 2020 – a hypothesis supported by demographic trends and changing small business owner behaviors.

insurtech

Read the full report here.

The Most Well-Funded Blockchain Startups (CB Insights), Rated: A

Q1’17 saw blockchain startup investment deals rise for the third consecutive quarter and funding rebound after a three-quarter drop, even as debates around scaling bitcoin, cryptocurrency ETFs, and token sales raged on. Notably, ethereum — a smart-contract enabled network that seeks to be the platform of choice for the development of decentralized applications — has seen real growth with its announcement of the Enterprise Ethereum Alliance, a consortium of top tech firms and corporations advancing ethereum business use-cases. Ethereum’s price on cryptocurrency exchanges has skyrocketed along with the media attention.

blockchain startups

Australia

Class partners with robo-advice provider (SMSFAdviser), Rated: A

Class has teamed up with an SMSF advice provider, allowing accountants administering SMSFs to offer financial advice services to clients without the need for an AFSL.

The partnership with Plenty Plus, which operates under its own AFSL, allows accountants to generate advice without the need for their own license.

India

P2P lending startups face funding woes (India Times), Rated: A

The fledgling peer-to-peer lending start-ups, which had been waiting for almost a year for the Reserve Bank of India to lay down the rules of operations, may find the going tougher.

“The Ministry of Corporate Affairs is said to have expressed worries regarding lending for corporate entities through P2P platforms,” said one a founder of a Mumbai based P2P lending platform. “While for retail lending it is not a major issue, SME lending falls under a different set of regulations of the Registrar of Companies which needs to be adhered to,” said the person quoted above.

In case of SME lending, it can either be as an investment against shares or as corporate deposits, but in case of P2P lending, it is a pure debt lending – thus those clarifications would be required before the final guidelines came out, resulting in further delays and might require a fresh set of rules around lending within the ministry.

As various issues keep delaying the final guidelines, P2P startups are finding it difficult to raise funds to scale their business because of regulatory uncertainty.

Asia

Funding Societies launch mobile app to get investors in the P2P game (Astro AWANI), Rated: AAA

Funding Societies Malaysia, fresh from their recent collaboration with RHB to enhance the Peer-to-Peer (P2P) lending scheme, has today launched a new mobile app, that is geared to get investors to join in on the P2P investing landscape.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

About the author

Allen Taylor

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