Daily News Digest Featured News

Tuesday July 11 2017, Daily News Digest

cumulative volume asset class securitizations

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United States

United Kingdom

China

European Union

International

Australia

India

Asia

Africa

News Summary

United States

CFPB bans mandatory arbitration clauses, allows class action against banks (Housingwire), Rated: AAA

The Consumer Financial Protection Bureau revealed its new rule to ban companies from using mandatory arbitration clauses, allowing consumers to participate in class action lawsuits.

The new rule mainly pertains to consumer financial products like credit cards and bank accounts that have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing.

However, the new rule is not applicable to mortgage finance.

So for who the rule does apply to, according to the CFPB, it applies to the major markets for consumer financial products and services overseen by the bureau, including those that lend money, store money, and move or exchange money.

Under the rule, companies can still include arbitration clauses in their contracts, but companies subject to the rule may not use arbitration clauses to stop consumers from being part of a group action.

CFPB issues final rule prohibiting class action waivers in consumer arbitration agreements; Ballard Spahr to hold July 20 webinar (Consumer Finance Monitor), Rated: AAA

The CFPB announced today that it has issued a final rule that prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action with respect to the covered consumer financial product or service.

On July 20, 2017, from 12 p.m. to 1 p.m. ET., Ballard Spahr attorneys will hold a webinar: The CFPB’s Final Rule Prohibiting Class Action Waivers: What You Need to Know.  The webinar registration form is available here.

Our analysis of the CFPB’s proposed rule and arbitration study found that the CFPB’s own data confirmed that arbitration is a faster, less expensive, and far more effective way for consumers to resolve disputes with companies than class action litigation.  The CFPB’s study showed that consumers who prevailed in an individual arbitration recovered an average of $5,389.  By contrast, the study showed that the average class action settlement for consumers who received cash payments was only $32.35.  And those consumers often had to wait as long as two years to receive the payment.  Class counsel, however, recovered a staggering $424,495,451.

Consumers who prevailed in individual arbitration thus received 166 times as much as the average putative class member.

The final rule will take effect 60 days after publication in the Federal Register and will apply to agreements entered into more than 180 days after that.

Ballard Spahr’s Comment on Arbitration Rule (Ballard Spahr), Rated: A

The rule is expected to cost the roughly 53,000 financial services companies who currently use arbitration agreements between $2.62 billion and $5.23 billion over the next five years to defend an additional 6,042 class actions that will be brought by plaintiffs. The CFPB expects those numbers to be repeated every five years after that.

CFPB’s long-awaited arbitration rule may be a short-lived victory for consumers (LA Times), Rated: A

It’s all but certain that Republican lawmakers in control of the House and Senate will move quickly to overturn the rule as part of their ongoing efforts to cripple the consumer-watchdog agency and create a more business-friendly regulatory landscape.

PeerIQ Reports on Q2 2017 Marketplace Lending Securitizations (Lend Academy), Rated: AAA

Q2 2017 was no exception with nine securitizations taking place totaling $3 billion, a 76% growth over the second quarter of 2016. This is in line with Q1 2017 where issuance was the same, but there were only seven deals. Total issuance is now $21.9 billion across 92 deals.

Other highlights provided by PeerIQ include:

  • Multi-seller club deals and self-sponsored deals have emerged at several leading platforms.
  • Dealer and rating agency participation continues to intensify.
  • New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.
  • Delinquency rates have continued to increase across several verticals—such as subprime auto, student, and personal loans—due to exposure to riskier borrowers, a re-leveraging of consumer balance sheets, “loan stacking,” and shifting payment priority trends.
  • Initial pricing is near record tight levels.

MPL securitizations
cumulative volume asset class securitizations

Millennial Money Study (Fully Vested), Rated: AAA

Are Millennials really so different than their Boomer and X’er counterparts?

Given that even the oldest Millennial is a Digital Native—potentially more connected than any prior generation in history— how does this inform their financial lives? What is their relationship to money? Their relationship to earning and saving? To legacy and innovative banking products? Do they prefer “cloud banking” (banks without physical branches or ATM’s) to “terra banks” (brick and m ortar ? ltraditional branches)?

Of course, any generational cohort that is so unwieldy in size contains a multitude of opinions and approaches—in fact, Millennials are now the largest living generation, according to Pew. In this survey, we show that there are substantive differences between the mindsets of the youngest (20–24) and oldest (30–35) Millennials.

Millennial moneyQ: Which institutions do you trust the most?

  • Among the four institutions we queried, Big Tech was the most trusted at 34%.
  • The government is the next most trusted at 25%.
  • The press is only trusted by 21% of those polled.
  • Coming in at last is the Big Banks at 20%.

Q: What institutions do you trust the least?

  • The press and the government are in a tie for least trusted at 34%, with 41% of our youngest Millennials distrusting the press.
  • Big Banks are only trusted by 24% of those surveyed.
  • Big Tech is only found to be “least trustworthy” by 8% of our sample.

Read the full report here.

Millennial Men Trust Trump on Finance; Women Don’t (BusinessWire), Rated: A

  • Millennials between 18 and 22 years of age say the Great Recession did not impact them, while those at the other end of the age bracket very greatly felt, and continue to feel, negative impact.
  • Female Millennials are significantly less likely to take a credit card than their male counterparts.
  • Having a high income, being male, and living in a city are predictive of high levels of interest in cloud banking, or banks without physical branches.

Comptroller Concerned About Banks And FinTech Partnerships (PYMNTS), Rated: A

FinTech firms — which, in many cases, appeared on the landscape as banks’ competitors because of their ability to offer faster, easier access to financial services like online credit or money transfers — are now evolving into bank partners. That is a scenario, the OCC warns, that should have banks showing particular caution.

FinTech firms and their products are still new and require greater care by banks, according to the OCC’s warning, particularly when it comes to underwriting loans for consumers and small businesses.

Why Your Phone Will Be the Key to ATMs of the Future (WSJ), Rated: A

Over the past year, lenders such as Wells Fargo & Co., J.P. Morgan Chase & Co. and Bank of America Corp. have started to roll out new ATMs that can link to customers’ mobile devices. Customers will sign in through their phones, potentially using a fingerprint, and then transmit a code to the ATM.

Other banks have shared similar difficulties with how to approach biometric data. A survey by the U.K.’s University of Oxford andMastercard Inc. published in June found that while nine out of 10 bankers wanted to take advantage of biometrics, only about a third reported a good experience so far using the technology.

Meanwhile, the need for next-generation ATMs is urgent. For one, card fraud is rising despite new security measures such as chip-enabled cards. Fair Isaac Corp. , a credit-data provider, has said it detected a 70% uptick in compromised cards being used at ATMs and merchants in 2016.

In their quest to use smartphones for biometrics, banks are relying on processes that are already well established. A customer using a phone at an ATM would authenticate her identify, using, say, a fingerprint as is the case with Apple Inc.’s iPhone and Apple Pay.

That means banks wouldn’t have to protect treasure troves of genetic templates from hackers. This is because the biometric data would be stored on individual devices, not in a central location.

That approach does shift more of the security burden to the user.

ATM withdrawals

Is Realty Mogul the Easiest Way to Invest in Commercial Real Estate? (DoughRoller), Rated: A

Is it possible to get involved in large-scale real estate projects without actually buying property outright on your own? Realty Mogul proves it is.

Realty Mogul has actually succeeded at financing the first crowdfunded hotel in the country. The company famously raised $1.5 million to build the Hard Rock Hotel in Palm Springs, California, easily selling out of its offered shares in the campaign.

Accredited, non-accredited, and institutional investors can all use the tool. It actually offers tailored tools and features for all three types of investors. Users can also choose to invest in real estate loans or equity investments.

To date, users have invested over $265 million through RealtyMogul.com. Investors have used this money to successfully finance more than 350 properties. The combined value of investments is over $700 million.

ETHLend.io White Paper – Democratizing Lending (Github), Rated: A

Abstract: ETHLend.io introduces decentralized lending on Ethereum network by using ERC-20 compatible tokens or Ethereum Name Service (ENS) domains as a collateral.

Read the white paper here.

Betterment Yearns to be Amazon of FAs. Does Amazon? (Financial Advisor IQ), Rated: A

The CEO of robo-advice pioneer Betterment believes his firm can turn into the Amazon of financial services, he tells Business Insider. But if Amazon itself entered the game, it could drastically alter the wealth management industry forever, financial planners tell InvestmentNews.

But Amazon itself could get into wealth management, considering that it’s already doing $1 billion in small business lending and brisk business in payments and credit cards, InvestmentNews writes.

Now, what if Amazon partnered with Betterment?

Nearly a Third of Millennials Say They’ve Used This App to Pay For Drugs (Fortune), Rated: A

Venmo’s a handy app for those times when you need to split a check or pay a buddy back a round of beers—but according to a new survey, some Venmo devotees are using it to settle a different kind of debt: the one they owe their drug dealers.

A survey of more than 1,200 millennials by student loan marketplace LendEDU found that nearly one-third of them admitted to using the payment app to buy drugs. Notably, that’s more than the 21% who said they’ve used the app for gambling purposes.

Daniel Gorfine Appointed as Director of CFTC’s Fintech Sandbox LabCFTC (Crowdfund Insider), Rated: A

U.S. Commodity Futures Trading Commission (CFTC) Acting Chairman J. Christopher Giancarlo has appointed Daniel Gorfine to serve as Director of LabCFTC and Chief Innovation Officer. Launched in May, LabCFTC is the CFTC’s sandbox type environment for Fintech innovation.

Gorfine is well known in the Fintech and alternative lending space due to his previous roles at both OnDeck and the Milken Institute. In this role, Gorfine will be responsible for coordinating with international regulatory bodies, other US regulators, and Capitol Hill to discuss best practices around implementing digital and agile regulatory frameworks and approaches for the CFTC.

LendingTree Announces New Chief Marketing Officer, Brad Wilson (Cision), Rated: B

LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, today announced that Brad Wilson has joined the company as its new Chief Marketing Officer. Effective immediately, Wilson will oversee LendingTree’s brand strategy, marketing operations and consumer engagement as the company continues to expand into new financial service categories.

United Kingdom

Seedrs & Nutmeg Partner with Fidor Bank on Fintech Marketplace (Crowdfund Insider), Rated: AAA

Seedrs has announced that it will be the sole equity finance provider in a new partnership with Fidor Bank, a challenger bank that launched in the UK back in 2015. Nutmeg, an online wealth manager, will also be joining Seedrs on Fidor’s new marketplace. The two platforms are the inaugural partners with additional partners expected to be announced in the coming months. The marketplace is expected to include a number of debt based peer-to-peer lending platforms as well.

Government urged to boost British Business Bank’s P2P resources (P2P Finance News), Rated: A

THE FEDERATION of Small Businesses (FSB) has called for the government to boost the resources it gives to the British Business Bank so firms can access better information on alternative sources of finance such as peer-to-peer lending.

The report warns that many small- and medium-sized enterprises (SMEs) remain unaware or wary of alternative finance options, with respondents expressing concerns that P2P lending has not been tested through the economic cycle and that the sector remains “worryingly unregulated.”

FinTech Disruption: TransferWise Case Study (The Market Mogul), Rated: A

Gone are the days when many assumed that big banks were the only options consumers had in banking, savings and foreign exchange.

They offer this fast service at a cheap price, with amounts to around £400, costing a flat fee of £2 after that, with a fee of 0.5% on the amount sent. This proves to be transparent, easy and straight-forward, especially as TransferWise communicates with users on every step of the process.

Automatic saving bots harness artificial intelligence, data science and algorithms to challenge traditional banking with what many consider inflexible, untailored, and rather boring personal finance.

Millennials are at ease; they can simply open Facebook to manage their finances, or sit back and let the machines save for them.

For example, there are a number of neo-banks and challenger banks who directly challenge the larger banks.

Monzo bank, for example, offers this new banking outlook. It offers instant balance updates and notification on spending for transparency, with handy insights, such as why a transaction was declined.

Mergermarket Group rebrands as ‘Acuris’ (BusinessWire), Rated: A

Mergermarket Group, the provider of business intelligence and research for fixed income, transactions, infrastructure, compliance and equities, today announced that it has re-launched under the brand name Acuris.

Folk2Folk launches “locaI” ISA (Business Cornwall), Rated: A

Folk2Folk, Peer-to-Peer lending platform for local and rural business today announces the launch of its Innovative Finance ISA (IFISA), giving investors the opportunity to support British businesses within their local area whilst earning tax-free interest on their Folk2Folk loans.

Launch of AlgoMe Set to Disrupt Asset Management and Fintech (Cision), Rated: B

AlgoMe, the London-based start-up using intelligent technology for career development and job placement, has announced its official launch today. AlgoMe is a unique and compelling proposition for professionals and companies. It is designed with the user in mind, specifically the Asset Management and Fintech professional and company.

China

China Rapid Finance: 20 Million in Cumulative Loans Facilitated (Crowdfund Insider), Rated: AAA

China Rapid Finance announced on Monday it has exceeded 20 million cumulative loans facilitated since its marketplace lending platform launch. According to the lender, this new milestone demonstrates accelerating the growth of its consumer marketplace due to the fact that the number of facilitated loans has nearly doubled within the past six months from 10.7 million cumulative loans as of the end of 2016.

The news of the 20 million cumulative loan facilitated milestone comes less than two months after China Rapid Finance released its unaudited financial results for the first quarter of 2017, which revealed the following:

  • Total gross billings on transaction and service fees: Increased by 13.1% to US$16.8 million from US$14.8 million in the prior year period.
  • Gross billings from consumption loans: Increased by 336.8% to US$6.7 million in the first quarter of 2017 from US$1.5 million in the prior year period. 
  • Gross billings from lifestyle loans: Totaled to US$10.1 million in the first quarter of 2017, as compared with US$13.3 million in the prior year period. 

China Rapid Finance Exceeds 20 Million Cumulative Loan Milestone (PR Newswire), Rated: A

This milestone demonstrates accelerating growth of China Rapid Finance’s consumer lending marketplace, as the total number of facilitated loans has nearly doubled within only the past six months from 10.7 million cumulative loans as of the end of 2016. On a year-over-year basis, second quarter facilitated loans jumped by over 350% to more than 5 million, up from approximately 1.1 million loans in the same quarter of last year.

China Rapid Finance also continues to achieve a high rate of customer retention. Approximately 73% of borrowers on its marketplace were repeat borrowers as of March 31, 2017. The Company expects that its lower cost of acquiring borrowers, higher customer retention rate, and larger loan sizes for repeat customers will contribute to its long-term sustainable growth.

China’s estimated population of 500 million EMMA, who have no credit histories and substantial difficulty borrowing money from traditional banks, constitutes one of the world’s largest untapped consumer credit market opportunities.

European Union

German Consumer Lender Auxmoney Passes the Half-Billion-Euro Mark (Crowdfund Insider), Rated: AAA

German online consumer lending marketplace auxmoney announced that it has crossed a new milestone: the marketplace has granted more than 70,000 loans worth more than €500 million in cumulated volume.

Auxmoney
Source: Crowdfund Insider

Moneypark Buys Rival Fintech (FiNews), Rated: B

Moneypark has agreed to buy DL Conseils en financement immobilier (DL), based in Lausanne, the company said in a statement today.

Moneypark’s owner, Helvetia insurance company, financed the acquisition.

Moneypark didn’t say how much it paid for Lausanne-based DL, which has been active as a business for ten years.

International

Which advisers profits are under threat from robo-advice? (FT Adviser), Rated: AAA

The highest-margin part of the financial advice business is safe from being carried out by automated services because customers value the personal touch most in these areas, a global survey has suggested.

These include creating a comprehensive financial plan, where 64 per cent thought human participation was beneficial, buying a pension, where 61 per cent thought it was beneficial, and looking to reduce a tax bill, where 58 per cent felt personal was better.

However, those advisers who focus more on fund and stock-picking face a greater threat from the march of robo-advice.

Despite perceptions that Millennials, or so-called ‘digital natives’ were less interested in interacting with people, more than half of those in this age group agreed with putting personal customer service over tech  – 53 per cent versus 65 per cent for the Baby Boomer generation.

Among the 60 per cent who believe that technology can’t replace personalised customer service, the belief is held more strongly by investors in the US and Europe, where 76 per cent and 64 per cent respectively agreed, than in Asia Pacific, where just 52 per cent agreed.

Women were more likely to agree, with 65 per cent of women agreeing that robots cannot replace advisers, against 55 per cent of men.

Global and regional M&A: H1 2017 (Mergermarket), Rated: AAA

Global M&A in the first half of 2017 has seen a 8.4% increase by value despite 1,117 fewer deals on the same period last year. H1 2017 recorded US$ 1.49tn across 8,052 deals, compared to US$ 1.38tn with 9,169 deals. Companies have been looking at ‘future-proofing’ in the wake of rapid changes to technology and politics to keep ahead of rivals. There have been 17 megadeals (> US$ 10bn) announced since the beginning of the year, versus 14 such deals in H1 2016.

As faith in the market continues to grow, European M&A has surged ahead, securing a 32.3% share of the global value. Both the US (US$ 602.6bn, 2,446 deals) and Asia Pacific (exc. Japan) (US$ 272.9bn, 1,585 deals) saw their share drop to 40.4% and 18.3% from 42.8% and 21.3% respectively. Following political uncertainty across the continent earlier in the year, European activity rose by 28.7% in Q2 to US$ 271.2bn (1,450 deals) compared to Q1 2017 (US$ 210.7bn, 1,641 deals). With 3,091 announcements in H1 2017, dealmakers generated a substantial US$ 481.9bn-worth of deals in Europe representing a 30.1% increase on the same point in 2016 (US$ 370.5bn 3,732 deals).

Quarterly M&A

See the full report here.

A bizarre co-working scheme and the global rise of online real estate fraud (The Real Deal), Rated: A

An Australian in New York, Cindy, who like many other victims only spoke to The Real Deal on the condition that her name be changed, is one of more than a hundred investors from around the globe who lost their savings to what appears to be a bizarre fraud.

In reality, however, the space, along with other Bar Works locations in Manhattan, Brooklyn, San Francisco, Las Vegas, Miami and Istanbul, looks to have served as a front for Renwick Robert Haddow, a British career fraudster. Through a labyrinth of agents and websites, of emails and social media ads, Haddow and his associates orchestrated a global fraud scheme, sources said.

In the world of scams, Bar Works is relatively small. But it is a perfect example of why real estate investment fraud is on the rise around the globe, bolstered by the spread of e-commerce and social media, the lack of an international enforcement authority, the complex nature of development projects, and investors’ thirst for outsized returns.

For Ruth*, a British retiree, it began with a “very slick” Facebook ad by an investment agency called Heron Global Partners.

Prosecutors claim he raised more than $36 million from Bar Works investors and wired $16 million to foreign bank accounts that were likely tied to him or his associates. They also allege he ran a separate scheme, Bitcoin Store, that promised high returns from investments in the virtual currency.

Endeavor Company, NovoPayment, Takes Major Global Fintech Honor (Crossroads Today), Rated: B

NovoPayment, a leading financial technology service provider and member of the Endeavor network, has earned the honor of the 2017 PayAwards Best in Category in the Outstanding White-Label Platform classification. PayAwards has conferred the most prestigious recognition of excellence in payments technology worldwide for 11 years. The awards are presented annually by Paybefore, whose publications are the leading source of industry information for payments executives.

Australia

As temperatures dip and winter energy bills soar, Australian homeowners are borrowing an average of $13,230 to make their homes more energy efficient according to an analysis of thousands of RateSetter’s personal loan customers. The peer-to-peer lender says that almost one in five (18%) home improvement loans are now taken out for green renovations that will reduce their energy bills.

The analysis of RateSetter data also shows that amongst all renovators, 89% see the use of energy efficient and environmentally friendly options as important or somewhat important to their project; selecting options such as energy efficient lighting, alternative power sources and low toxicity products in their renovation.

RateSetter’s survey of loan customers also found that around four in ten (41%) current home improvement borrowers indicated that they would make additional green changes to their home over the next 12 months.

Fintech companies are unlikely to completely replace the more conventional sectors of the financial services industry as they are mostly inexperienced in financial sector operations, according to a CFA report.

The report also found that blockchain technology would bring the most significant change to the financial services industry at 40 per cent, followed by robo-advisers (22 per cent), mobile payment (19 per cent), P2P lending (eight per cent), crowdfunding (seven per cent), and other (three per cent).

Fintechs pose disintermediation threat (Financial Standard), Rated: A

The latest CFA Institute report shows fintechs specialising in blockchain, robo-advice, mobile payments and peer-to-peer lending have the highest potential to disintermediate the financial services industry.

CFA Society Sydney president Anthony Serhan said innovation in these areas will likely disrupt financial institutions together with artificial intelligence, big data and cyber security – albeit with “limited discussion.”

India

Clocking an average of Rs 3 crore a month in lending, says Faircent’s CEO (Moneycontrol), Rated: AAA

In an interview with Moneycontrol, Rajat Gandhi, CEO and Founder of peer-to-peer lender Faircent, said that lenders can analyse the credit risk of borrowers by looking at their bank statement, income tax filings and physical verification of the borrower at the residence and at the office.

“One loan does not get funded by one lender, we have a rule that no lender can fund more than 20 percent of any borrowers requirement,” Gandhi said.

Speaking about Faircent’s financial performance, Gandhi said that around Rs 20 crore worth of loans have been disbursed over the platform till now and they are clocking an average of Rs 3 crore a month in lending.

With funding from Chinese investors, LoanMeet is trying to build a loan book of Rs 100cr (YourStory), Rated: A

At present, LoanMeet provides ultra-short-term loans of (15, 20, and 30 days) to retailers to buy inventory and repay them. But while being purely in inventory financing, there are two verticals for distribution.

The first entails giving the loan directly to the retailer who buys inventory and repays the loan after selling the goods. The second model revolves around tying up with distributors from whom retailers procure their goods. This helps bring in even more retailers as consumers of loans.

LoanMeet has a retailer (consumer) app which allows businesses to upload their Aadhaar number, business registration proof, PAN number as well as bank statement for the last three months.

Asia

CB INSIGHTS, a private research company on the startup industry, has named Modalku to the Fintech 250, a group of emerging private companies working on groundbreaking financial technology.

Modalku, the pioneering fintech (financial technology) peer-to-peer lending company operating in Indonesia, Singapore, and Malaysia, is the only peer-to-peer lending company from Southeast Asia selected to be on the list.

Africa

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George Popescu
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