Daily News Digest Featured News

Tuesday September 12 2017, Daily News Digest

Lending Club
Source: Lend Academy

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United States

United Kingdom

China

International

Australia

India

News Summary

United States

SoFi Chief Executive to Step Down (The New York Times), Rated: AAA

Mike Cagney, the co-founder and chief executive of Social Finance, is to step down from the online lender by the end of the year.

  • Several former employees said that Mr. Cagney had inappropriate relationships with SoFi employees.
  • In 2012, Mr. Cagney sent sexually explicit text messages to an executive assistant named Laura Munoz. The company and its board agreed to pay Ms. Munoz a $75,000 settlement.
  • A former employee of SoFi filed a lawsuit in August saying that he had witnessed female employees being harassed by managers and was fired after he reported it. The lawsuit did not initially name Mr. Cagney, but he was added later.
  • Mr. Cagney may have been overaggressive in expanding the business, skirting risk controls and compliance rules.
  • The company said it had raised $90 million in debt financing for one of the loan products that it sold to investors in 2012, but that financing never took place. SoFi eventually bought the loans back from investors.
  • Employees who spoke to The Wall Street Journal also described a culture in which they felt pressure to work extra hours for fear of being fired. These employees also described angry executives breaking furniture and throwing telephones.

SoFi Reportedly Comprehends The Meaning Of “Sexual Harassment” As Well As Everyone Else Comprehends The Meaning Of “Fintech” (Dealbreaker), Rated: A

It used to be that financial services firms would respond to accusations of sexual harassment inside their company with denials, followed by investigations and inevitably a spate of firings and public apologies.

In Silicon Valley, the whole thing seems to be strangely flipped. Harassment is so seemingly rampant in tech that companies are on the offense, attempting to prove a negative and paint themselves as the rare “Woke” tech firm. More often than not, the whole thing unravels.

According to the WSJ, the online lender SoFi is denying widespread sexual harassment inside the company by willfully misunderstanding what sexual harassment is.

So like a Fantasy Football thing, or was this another example of a touching-based-yet-non-sexual dispute? It seems like nothing at SoFi is ever sexual, which is hard to believe at a place that offers such great rates!!!

SoFi Announces ‘SoFi Accelerate’, A Career Retreat For Young Professionals (PR Newswire), Rated: AAA

SoFi today announced its first-ever ‘SoFi Accelerate’ event series for ambitious millennials looking to break away, look beyond, and get ahead in their careers. SoFi Accelerate is a series of one-day retreats taking place just outside ChicagoNew York City, and San Francisco that will give event attendees the time and space to think big—as well as the tools and structures to make their career goals happen.

Launching in September, the retreats will consist of creative visioning and leadership exercises, career strategy sessions with SoFi career advisors, and inspirational talks from unconventional thinkers like criminal justice reform advocate Adam FossStanford professor and co-founder of Electronic Arts Dave Evans, and Gretchen Rubin, author of New York Times bestseller The Happiness Project, among others on how to set and achieve professional goals.

The event also includes transportation to and from the retreat venues, complimentary breakfast and lunch, and a concluding cocktail reception. Both members and non-members can learn more about the program here and sign up via links to each city: www.sofi.com/blog/introducing-accelerate-sofis-first-ever-career-retreat/

UNCONVENTIONAL VENUES
SoFi Accelerate will offer its programming in unconventional retreat settings to encourage expansive views and open minds. These venues include the Chicago Botanic Garden (Glencoe, IL), Grounds for Sculpture (Hamilton Township, NJ), and Montalvo Arts Center (Saratoga, CA).

UNEXPECTED SPEAKERS
A panel of experts from unexpected (i.e. outside of the financial planning realm) and highly relevant disciplines discuss how to create and execute on life, career, and financial goals. These speakers will include:

Chicago – September 24, 2017

  • Ryan Holiday: Writer, media strategist, entrepreneur, and editor-at-large for the New York Observer
  • Adam Foss: Criminal justice reform advocate; co-founder of Roxbury CHOICE Program, a collaborative effort between defendants, the court, the probation department, and the D.A. to recast probation as a transformative experience rather than a punitive process

San Francisco – October 1, 2017

  • Dave Evans: Former tech executive at Apple and Electronic Arts, Stanford d. School professor, and co-author of the New York Times Bestseller Designing Your Life
  • Irene Au: Operating partner at venture capital firm Khosla Ventures, former head of User Experience at Google

New York City – October 15, 2017

  • Gretchen RubinNew York Times bestselling author of The Happiness Project and Happier at Home, and most recently, Better Than Before
  • Coss Marte: Ex-drug dealer, ex-convict, and founder of ConBody, a “prison-style” fitness boot camp with a loyal following of 10,000+ clients that employs formerly incarcerated individuals, giving ex-convicts stability and breaking down barriers between them and the general population

Lending Club Announces Launch of Next Generation Credit Model (Lend Academy), Rated: AAA

Today, Lending Club announced a new credit model in an email to investors. According to the email, this is the most advanced and predictive credit model ever used on the Lending Club platform. This is Lending Club’s fifth generation model that began to go in effect on September 8, 2017 and will roll out to all borrowers in the coming days.

The company outlines that the model further leverages machine learning along with the 10 years of data on 1.5 million borrowers they have accumulated. The new model is 24% better at differentiating the likelihood of a borrower charging off compared to the fourth generation model. It also includes more data points, and uses new custom attributes that Lending Club states are predictive in assessing risk.

  • Instead of using aggregates, the new model uses very granular views of credit data which discern individual borrower actions vs. a simple aggregate (e.g. a borrower’s credit card balance per credit card vs. his total credit card balance).
  • The model makes more extensive use of trended data, which provides insight into a borrower’s credit behavior over time rather than a snapshot into a borrower’s credit behavior at a point in time. Dozens of new custom variables like these improve the model’s predictive power and are proprietary to Lending Club.
Lending Club
Source: Lend Academy

What critics of fintech ILC bids aren’t saying (American Banker), Rated: AAA

The bids by tech firms Social Finance and Square for industrial loan company charters and federal deposit insurance have rekindled debate over two questions: What is the appropriate regulatory oversight for industrial loan companies, and should fintech platforms be allowed to compete with traditional banks?

Many of the arguments in this debate have less to do with either applicant’s qualifications than with traditional banks’ fear of new, innovative competitors, and with a decades-old turf war between the Federal Deposit Insurance Corp. and the Federal Reserve over the regulation of ILCs.

ILCs face greater restrictions on the types of deposits they are allowed to offer compared to commercial banks.

SoFi and Square are actually asking for more regulation, not less, by seeking a charter. This would put leading nonbank fintech providers on more equal regulatory ground with banks — something that mainstream financial institutions say they want. Getting an ILC would add yet another agency — the FDIC — to the regulatory labyrinth the companies must navigate. This should be considered a win for banking industry and consumer advocates who favor more transparency and oversight of fintechs.

KBRA Assigns Preliminary Ratings to Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P1 (BusinessWire), Rated: A

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P1 (“CLUB 2017-P1”). This is a $363.098 million consumer loan ABS transaction that is expected to close September 28, 2017.

Preliminary Ratings Assigned: Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P1

Class Preliminary Rating Expected Initial Class Principal
A A- (sf) $244,234,000
B BBB- (sf) $57,362,000
C BB- (sf) $61,502,000

Groundfloor Announces $ 100 Million Expansion Of Lending Capital With Direct Access Capital (Business Insider), Rated: A

Groundfloor, the only real estate crowdfunding platform that is open to non-accredited investors, today announced that it has entered into a whole loan purchase relationship with Direct Access Capital (DAC), a specialty finance company focused on providing liquidity to non-bank lenders of short term residential backed business loans. This marks Groundfloor’s first institutional partnership to enable the company to scale its loan origination volume and expand its product offerings over the next year. The shared target is $100 million in loans through 2018.

Online mortgage lender Lenda raises $ 5.25 million to fund expansion (Housingwire), Rated: A

Lenda, an online mortgage lender based in San Francisco, announced Monday that it closed its Series A round of funding, raising $5.25 million from a group of investors.

According to the company, the funding round was led by SF Capital Group, along with CreditEase Fintech Investment Fund and inside investor, Rubicon Venture Capital.

Fintech Startup PayJoy Bags $ 6 Million Investment (Bank Innovation), Rated: A

It’s been a busy few days for fintech startup PayJoy, which today announced that it closed a $6 million investment, only a few days after it reached another milestone.

Based in San Francisco, PayJoy hopes to make the smartphone a mainstream financial tool for those who cannot afford these devices. Established in 2015 at Stanford University, PayJoy provides payment plans to purchase smartphones for people with limited or no access to credit.

Square’s ILC bid may open floodgates for fintechs (American Banker), Rated: A

Trends pick up fast in Silicon Valley and for financial innovators, the up-and-coming regulatory strategy is to seek a bank charter.

In June, the online lender Social Finance, or SoFi, applied for an industrial loan company charter in Utah to process certain depository accounts and credit cards.

Betterment for Business Survey Shows that Majority of Employees Do Not Receive Advice on their Retirement Investments (Business Insider), Rated: A

Betterment for Business, the technology-led 401(k) provider that aims to deliver better retirement outcomes and personalized advice, today announced the results of its new consumer retirement survey, the State of Consumer Retirement Advice. The results of the survey show that alongside the expansion of digital and employer-sponsored retirement advice resources, a majority of respondents (53 percent) report receiving absolutely no advice on their retirement investments. For the 47 percent of consumers who do seek retirement advice, 65 percent of this group utilize a financial advisor, the top source of advice among those consumers.

Less than half of respondents (42 percent) correctly identified the definition of a fiduciary; 20 percent of respondents believed that the terms “fiduciary” and “financial advisor” are synonymous, and 27 percent did not know what one was at all.

Nearly all (94 percent) of respondents in a 401(k) with auto-enrollment, which allows an employer to “enroll” an eligible employee in their plan unless the employee affirmatively elects otherwise, currently make contributions to their plan. In fact, for those who remained enrolled, 49 percent of respondents increased the contribution rate. Millennial respondents were most likely to remain enrolled in the plan after auto-enrollment. 78 percent of respondents that have access to an auto-escalation feature, which gradually increases plan contribution amounts over time, use it.

Targeted education could go a long way in setting consumers on the right path–given that 89 percent of respondents were offered a 401(k) match by employers, but 23 percent didn’t take full advantage of it. Of those 23 percent, 16 percent don’t max out their match, and 7 percent don’t know if they do.

LendUp Recognized by Fast Company for 2017 Innovation by Design Awards (Business Insider), Rated: A

LendUp, a socially responsible financial services firm for the emerging middle class, was selected as a finalist in the Social Good category of Fast Company‘s 6th annual Innovation by Design Awards.

“We believe there are two types of financial products: chutes and ladders. Ladders help you up, chutes push you down. We’ve used design to create loan and credit card ‘ladder’ products for the more than half of Americans who’ve traditionally been shut out of mainstream banking due to poor credit or income volatility,” said Sasha Orloff, co-founder and CEO of LendUp.

According to Fast Company, the award—one of the most sought-after in the design industry—is based on seven core factors of innovation: functionality, originality, beauty, sustainability, depth of user insight, cultural impact and business impact.

Studies have shown that 56 percent of Americans don’t have access to traditional financial services due to low credit scores or thin credit files1, and nearly half of U.S. families don’t have enough savings to cover a $400emergency expense2. As workplace trends shift from careers to jobs to the gig economy, 40 percent of Americans blame irregular work schedules for volatile monthly incomes, with paychecks sometimes varying by more than 30 percent3.

Congress should reject rent-a-bank predatory lending legislation (CUInsight), Rated: A

Today, the Center for Responsible Lending (CRL), the National Consumer Law Center (NCLC), and more than 150 national and state organizations sent a letter urging Members of Congress to reject S. 1642 and H.R. 3299, the Protecting Consumers’ Access to Credit Act of 2017, a bill that poses serious risks of enabling a vast expansion of predatory lending across the country. Specifically, the legislation makes it easier for payday lenders and other nonbanks to use rent-a bank arrangements to ignore state interest rate caps and make high-rate loans.

In about 34 states, a $2,000, 2-year installment nonbank loan exceeding 36% APR is illegal. But this legislation could effectively allow high-cost lenders to partner with banks to ignore rate caps across the country.

Reversing the Second Circuit’s decision, as these proposals seek to do, would make it easier for payday lenders, online lenders, debt buyers, fintech companies, and other companies to use “rent-a-bank” arrangements to charge high rates on loans.

Fintech Opens Opportunities for Small Business Lenders – and Borrowers (Small Biz Trends), Rated: A

Small business lenders have unprecedented opportunities ahead of them, according to Rohit Arora, the CEO of Biz2Credit.

The only thing is, not all lenders are positioned to seize these opportunities. The ones that are, says Arora, are the lenders that understand two things. “They understand the changing expectations of today’s borrowers. They also understand how to leverage new technology,” Arora explains.

Biz2Credit recently analyzed 30,000 small business credit applications. Based on the analysis, one of the top expectations small business borrowers have is for 24/7 customer availability. In fact, 51 percent of customer application activity occurred outside of regular banking hours or on weekends.

In other words, banks and other financial institutions that are not available 24/7 may be losing out on potentially half of their future customer base.

The 4 Big FinTech Trends of the Year (Newsmax), Rated: B

  1. Advanced Credit Repair Technology – Last year alone, Lexington Law helped clients remove more than 9 million negative items from their credit reports. This wouldn’t have been possible without advanced technology.
  2. Growing Focus on Artificial Intelligence
  3. Biometric Security
  4. Emergence of Challenger Banks – If there’s one thing we know about Millennials, they’ve shown an affinity for online banking and “challenger banks.” On a related note, there’s been a massive increase in the use of virtual wallets and alternative forms of payment. These two trends go hand-in-hand and will support each other.

Pittsburgh Tech Council Names Real Estate Crowdfunding Platform Small Change Tech 50 Awards Finalist (Crowdfund Insider), Rated: B

On Monday, real estate crowdfunding platform Small Change announced the Pittsburgh Technology Council has named it a Tech 50 Awards Finalist in the “Start-Up of the Year” Category.

Small Change revealed that the Pittsburgh Technology Council’s annual Tech 50 Awards recognize southwestern Pennsylvania’s most successful, innovative, and thought-leading technology companies.

Who Are The Major Shareholders In China Rapid Finance Limited (XRF)? (Simply Wall Street), Rated: B

XRF’s 14.61% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade.

XRF insiders hold a significant stake of 16.89% in the company.

A big stake of 38.57% in XRF is held by the general public.

Private equity firms hold a 29.92% stake in XRF.

United Kingdom

Zopa users are reporting significant delays when trying to sell their loans, with the firm battling against slow speeds on its platform.

At present, users trying to sell their loans on the site are currently told to expect delays beyond the standard 20-day sales window. The platform says: “We will continue to try and sell your loans for 20 days, but there is no guarantee that you will be able to access your money before your loans mature.”

Fellow Moneywise reader John Mitchell is an existing Zopa customer and wished to transfer his holdings to its IF Isa. When the Isa product was launched, customers were told they would soon be able to sell their existing Zopa loans – without incurring a 1% sales fee – before purchasing new loans within the Isa wrapper.

Three months on, and Zopa is yet to offer these fee-free sales to its customers.

Moneywise reader Jonathan Yonge, who manages his own portfolio of assets for a living, is one of the customers that has been affected by the issue. He currently has around £220,000 invested in the Zopa Access product and a further £100,000 in Zopa Plus. Zopa Access has now been closed to new investors and he has been unable to sell most of his loans.

Funding Circle, Zopa and RateSetter named among fastest growing tech firms (P2P Finance News), Rated: AAA

THE ‘big three’ peer-to-peer lending platforms have been recognised among Great Britain’s fastest growing technology firms.

Zopa, Funding Circle and RateSetter have been included in latest Tech Track 100, featured in the Sunday Times.

Funding Circle was the highest ranked out of the ‘big three’ lenders, placed at number 27.

The list was topped by personalised children’s books company Wonderbly, while former P2P platform LendInvest ranked at 37, with average sales over three years of 97.9 per cent.

Goldman Sachs invests £100m in UK consumer lender Neyber (Financial Times), Rated: AAA

Goldman Sachs is making its first investment in the British consumer lender market by providing £100m of debt and equity financing to Neyber, a fintech start-up providing loans that are repaid out of people’s salaries.

Founded by two former Goldman Sachs investment bankers five years ago, Neyber partners with companies to offer their employees loans at lower rates than credit cards or payday lenders.

The company says its loans are less likely to default because of the security of deducting repayments directly from a borrower’s salary, and the extra information it gains about its customers by tapping into their employer’s payroll systems.

From regulation to securitisation, a year in the life of Peer2Peer Finance News (P2P Finance News), Rated: A

September 2016
Peer2Peer Finance News launched just a month after interest rates had been cut to record lows amid uncertainty following the shock Brexit vote.

October 2016
Lending Works became the first major P2P lender to gain full authorisation from the Financial Conduct Authority (FCA).

November 2016
The structure of some of the UK’s most high profile P2P lenders came under the spotlight.

December 2016
The FCA revealed its long-awaited interim feedback as part of a post-implementation review of regulation of the P2P sector.

January 2017
The P2P sector was given a New Year boost with the government-backed British Business Bank pledging a further £40m for lending through Funding Circle.

February 2017
The first Innovative Finance ISAs (IFISA) from more established P2P firms began to get released, starting with Lending Works, which saw an inflow of funds of more than £1m in 24 hours, followed by Landbay.

March 2017
Zopa showed how popular P2P had become by having to create a waiting listto cope with demand from investors on the platform.

April 2017
There were plenty of shifts in strategy during April.

Funding Circle announced it was winding down its property lending to refocus entirely on its original small- and medium-sized enterprise (SME) target market.

May 2017
Zopa became the first of the ‘big three’ platforms to gain full FCA approval, later joined by Funding Circle.

June 2017
It was an interesting month for dropping plans.

One of the early members of the P2PFA, LendInvest, announced it had cancelled its application for FCA authorisation.

July 2017
A freedom of information request by Peer2Peer Finance News showed regulation has cost the sector up to £2m.

August 2017
Funding Circle announced a re-brand and the end of manual lending on the platform and RateSetter departed the P2PFA amid transparency concerns over its approach to wholesale lending.

September 2017
We are barely halfway into the month but have already seen a high-profile departure, with Jane Dumeresque leaving Folk2Folk.

How to invest in renewable energy (IG.com), Rated: B

The government launched the Innovative Finance ISA last year to give savers a tax-efficient way to participate in peer-to-peer lending. Official figures for the last tax year showed low take-up of the new ISA so far, with just £17 million invested. But there are renewable projects available through this route so it could be worth a look.

A crowdfunding platform called Abundance Investments launched what it said was the UK’s first green energy ISA in 2016. It allowed customers to invest directly in renewable energy projects through a range of bonds, and predicted a 6% annual return.

China

Leader of China’s $ 9 Billion Ezubao Online Scam Gets Life; 26 Jailed (U.S. News), Rated: AAA

A Beijing court on Tuesday sentenced the architect of the $9 billion Ezubao online financial scam to life imprisonment, and handed down jail time to 26 others, marking the close to one of the biggest Ponzi schemes in modern Chinese history.

Beijing First Intermediate People’s Court sentenced Ding Ning – chairman of Anhui Yucheng Holdings Group that launched Ezubao in 2014 – to life in prison and fined him 100 million yuan ($15.29 million) for crimes including illegal fundraising, illegal gun possession and smuggling precious metals.

Ding Dian, the chairman’s brother, was also sentenced to life, while Zhang Min, Yucheng’s president, and 24 others were sentenced to imprisonment for 3 to 15 years, according to an article on the Beijing Courts social media account.

International

B2BPay, PayJoy & Pineapple Payments (Paybefore), Rated: A

Pittsburgh-based Pineapple Payments, which offers omnichannel payment processing technology, has secured a $35 million growth equity commitment from Providence Strategic Growth (PSG), the an affiliate of Providence Equity Partners, a global private equity firm with more than $50 billion in assets under management.

PayJoy, which offers smartphone financing for underserved consumers, has closed $6 million of new investment with strategic partners that will help the San Francisco-based company, which has offices in Mexico City, to further expand throughout Latin America, Asia and Africa.

Finnish B2BPay earned the top spot among hundreds of entries in its segment in BBVA’s Open Talent competition “because of the way their solution enables SME businesses to grow internationally and trade with greater ease.”

Australia

NAB’s wealth builder vows to lift the game, restore trust (The Australian), Rated: AAA

In his first interview since being appointed chief executive of the nation’s largest retail superannuation fund, MLC Super, Matthew Lawrance told The Australian that the industry needed to lift its standards.

He also called for more balanced media commentary that would help to inform the public rather than instil fear.

“Our customers want more targeted support and advice across banking and wealth management, and so we need to invest to develop new and innovative solutions that give them the ability to engage us — whenever, however, and through whatever means suits them, whether it be digital or face-to-face,” Mr Lawrance said.

NAB is currently developing its robo-advice capabilities, with more details to be released in the coming months, but Mr Lawrance says it won’t replace traditional face-to-face advice. Rather, the two will complement each other.

India

How fintech startups can help banks bridge the gap in SME Lending in India (Moneycontrol), Rated: A

There is no doubt that future growth would also be sustained by the performance of the 50-million plus strong SME sector, which employs close to 40 percent of India’s total workforce and contributes 45 percent of the total industrial output.

A major challenge that could stymie SME sector growth is the lack of adequate and timely funding.

Fintech lenders use non-conventional data sources for underwriting

This movement makes available data pertaining to these businesses which new-age Fintech lenders can use to accurately assess the SMEs. For instance, an SME registered under GST files documentation that reveals their sales trajectory, income sources, inventory sold, credit cycles, etc.

Banks want to diversity loan books without scaling OPEX

Banks have large balance sheets from which they churn loans, catering to millions of customers. However, traditional underwriting practices have prevented them from effectively underwriting certain SME segments.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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Allen Taylor

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