- Today’s main news: SoFi announces student loan refinancing product for medical residents, fellows. Orca creates comprehensive P2P lending guide. ID Finance aims to raise $100M in the next year. Revolut expanding to Singapore.
- Today’s main analysis: Payday lenders are getting around Google’s ad ban.
- Today’s thought-provoking articles: Financial services disruption: Gradually then suddenly. How Payday lenders are making an end-run around Google’s ad ban. Why the payday lending rules are not the last word. Key takeaways from LendIt Europe 2017.
- SoFi announces student loan refinancing product for medical residents, fellows. AT: “Apparently, medical students are a hot market within the student loan market.”
- SoFi aims to raise $100K for employee wildfire relief.
- SoFi starts GoFundMe to aid their employees.
- Financial services disruption. AT: “The interesting thing to me is that customers of the 4 big tech giants say they would like to do their banking through these companies: 40% of them. The big quetion is, would regulators allow it to happen? My guess is, they would allow Amazon, Google, Facebook, and Apple to get so big before antitrust concerns kick in.”
- Payday lenders find ways to get around Google’s ad ban. AT: “This really isnt as hard as it may seem. Google’s ads, and therefore it’s ad ban algorithms, are keyword-based. Even semantic language has its limitations.”
- Why the final payday rules are not the last word. AT: “A very good run-down of the sentiments being expressed regarding the payday lending rules and where the pundits meet on common ground.”
- Cutting off consumers. AT: “More on the payday lending rule.”
- Payday loans rule could lead to cheaper alternatives.
- Texas payday lenders face tougher standards. AT: “The debate is now hitting the states, and not just a few, as this and the following news stories indicate. The issue of payday loans will no doubt be one of the biggest battles in the next election cycle. My prediction is that new rules will develop that allow the industry to exist with strict regulation, and it will be at the federal level. How it will look exactly is anyone’s guess.”
- Will newly proposed payday loan rules help in Oregon?
- Lawmakers ask to continue studying payday lending bill in Kansas.
- Legislative committee won’t recommend payday loan restrictions.
- Consumer bankers say Consumer Financial Protection Bureau too hasty.
- Elevate’s RISE product now offers lines of credit in Tennessee.
- eShares raises $42M. AT: “Congratulations.”
- Pave announces ICO token sale.
- Pennsylvania says alternative financie companies offering regulated services must get a state license.
- Wells Fargo AI bot places sell ratings on Google, Facebook.
- How should legacy financial institutions respond to new players?
- LendingHome expands into Pittsburgh.
- Bringing lending into the future with LoanBit.
- Orca creates comprehensive P2P lending guide.
- Key takeaways from LendIt Europe 2017.
- Renaud Laplanche makes bold predictions. AT: “Laplanche’s predictions are the talk of the globe.”
- Monzo receives one takeover offer per month. AT: “I don’t know how that compares to the average company on the move, but this is interesting. It makes me wonder if we’ll see a successful move.”
- iwoca launches API, partners with Tide bank.
- Do investment trusts offer better returns?
- Circle focuses on connecting digital wallets.
- Interview with CEO of ETHLend.
- Yes Bank partners with Abu Dhabi Global Market.
- Why blockchain, P2P lending are natural allies.
- Creativity can deliver Reserve Bank of Innovation.
- On steady ground with Reserve Bank of India regulation.
- Revolut to launch in Singapore.
- PINTEC launches Singapore robo-advisor.
- Temasek co-leads funding for Tongdun’s $72.8M round.
- United States
- SoFi Announces Student Loan Refinancing Product for Medical Residents and Fellows (PR Newswire), Rated: AAA
- SoFi aims to raise $ 100K for employee wildfire relief (Inman), Rated: A
- SoFi starts GoFundMe to aid their people impacted by California wildfire (Housingwire), Rated: B
- Financial Services Disruption: Gradually And Then Suddenly (Forbes), Rated: AAA
- Payday lenders are finding ways around Google’s ad ban (American Banker), Rated: AAA
- Why The Final Payday Lending Rules Are Far From The Last Word (PYMNTS), Rated: AAA
- Cutting Off Consumers (U.S. News), Rated: A
- Payday loans rule could lead to cheaper alternatives (Freep.com), Rated: A
- Texas payday lenders face tougher standards with new federal rules (The Texas Tribune), Rated: A
- Will Newly Proposed Payday Loan Rules Help In Oregon? (KXL.com), Rated: A
- Lawmakers ask to continue studying payday lending bill after hearing input on high-rate loans (LJWorld), Rated: A
- Legislative committee won’t recommend restrictions for payday lenders (CJOnline), Rated: B
- Consumer bankers say CFPB too hasty in finalizing payday lending rule (Financial Reg News), Rated: B
- Elevate’s RISE Product Now Offering Lines of Credit in Tennessee (Crowdfund Insider), Rated: A
- eShares raises $ 42 million to manage equity compensation and investments (TechCrunch), Rated: A
- Pave Announces Token Pre-Sale for the Global Credit Profile (GCP) (PR Newswire), Rated: A
- Pennsylvania: ‘Fintech’ Businesses Offering Regulated Financial Services Require State License (PR Newswire), Rated: A
- An AI bot operated by Wells Fargo just slapped sell ratings on Google and Facebook (Business Insider), Rated: A
- As new providers gain ground, what actions should financial institutions take? (Fiserv), Rated: A
- LendingHome Expands: Opens New Office in Pittsburgh (Crowdfund Insider), Rated: B
- P2P Lending & Investment – Bringing Lending into the Future (NewsBTC), Rated: B
- United Kingdom
- Orca Creates Comprehensive P2P Lending Guide (Orca Money Email), Rated: AAA
- Key Takeaways From LendIt Europe 2017 (Lend Academy), Rated: AAA
- Renaud Laplanche reveals fintech predictions (AltFi), Rated: A
- London fintech star Monzo is fending off one takeover offer each month (City A.M.), Rated: A
- Fintech lender launches API, partners with digital bank (AltFi), Rated: A
- Peer-to-peer lending: do listed investment trusts offer the best returns? (ig.com), Rated: A
- Circle centres itself for digitally connected wallets (Banking Tech), Rated: A
- ICO go to end while bitcoin rebound to boom (Xing Ping She), Rated: A
- European Union
- Online lending startup ID Finance plans to raise $ 100 million in the next year (Business Insider), Rated: AAA
- My Lendit Europe Recap 2017 (P2P-Banking), Rated: A
- Interview with Stani Kulechov the CEO of ETHLend, Decentralized Lending, Using Ethereum (TechBullion), Rated: A
- Yes Bank partners Abu Dhahi Global Market to help fintech cos (Money Control), Rated: A
- WHY BLOCKCHAIN TECHNOLOGY AND P2P PLATFORMS ARE NATURAL ALLIES (International Banker), Rated: A
- RBI: With a touch of creativity, we have the Reserve Bank of Innovation (India Times), Rated: A
- On steadier ground (The Hindu Business Line), Rated: A
- Revolut to Launch in Singapore (Fintech News), Rated: AAA
- China’s PINTEC launches Singapore robo advisor backed by insurer FWD (NASDAQ), Rated: A
- Singapore’s Temasek co-leads $ 72.8m funding in Chinese fintech firm Tongdun (Deal Street Asia), Rated: A
- Bahrain firm signs pact to create fintech bridge (Zawya), Rated: A
SoFi Announces Student Loan Refinancing Product for Medical Residents and Fellows (PR Newswire), Rated: AAA
SoFi announced today the launch of its Medical Resident Student Loan Refinancing product, an extension of its market-leading Student Loan Refinancing offering, specifically targeted for medical residents and fellows.
With this product, eligible medical residents and fellows can keep their student loan interest from compounding over the course of residency (up to 54 months), and only make $100 monthly payments during residency or fellowship1. After that, their regular payment schedule will commence. SoFi offers five different full repayment terms, ranging from five to twenty years at low fixed and variable rates.
Medical residents as a group are one of the most debt-burdened populations of students in America. Seventy-six percent of 2016 medical school graduates have student loans, with a median student debt load of $190,000 at graduation.2 At the same time, medical residents and fellows typically earn only $60,000 a year.
SoFi aims to raise $ 100K for employee wildfire relief (Inman), Rated: A
In one day a GoFundMe page that the company says came about by employee demand has raised over $46,000 of its $100,000 goal. As of press time on Wednesday, Oct. 11 there were 183 contributors donating anywhere from $25 to $1,000 apiece. Many left thoughtful messages while some are creating solidarity with the hashtag #SoFiStrong.
SoFi starts GoFundMe to aid their people impacted by California wildfire (Housingwire), Rated: B
Here’s the description from the GoFundMe page:
SoFi will pay the fees taken from every donation to ensure that 100 percent of funds donated will go to our employees.
Some of the latest articles on the fire report that the “fires torched 20,000 acres in about 12 hours on Monday alone. This means the fires advanced at a rate of more than a football field every three second.”
Financial Services Disruption: Gradually And Then Suddenly (Forbes), Rated: AAA
Leading financial services firms are facing unprecedented pressures, from technologically savvy customers, from hard-pressed regulators to Washington DC politicians of all political spectrums, and from aggressive new market entrants. This wave of financial services innovation and disruption possesses serious potential to unsettle perhaps the most traditional and central industry in our economy. The American financial system is what Hamilton built. Today, longstanding incumbents – major banks, insurance companies, asset management firms – are under competitive siege.
According to the FDIC’s 2013 National Survey of Unbanked and Underbanked Households, as many as 46% of Americans are unable to obtain credit on favorable terms from traditional banks and financial services providers.
It was noted that 40% of the customers of the tech giants have stated that they want to have the ability to do their banking through these platforms.
Ultimately, it was argued, that the large tech firms lack the required expertise in the intricacies of banking and financial services. These are firms that, by their actions, have shown themselves to be highly averse to regulation. The recent news about Facebook confirms this point of regulatory aversion. Wouldn’t the tech giants face the potential of strong anti-trust backlash if they entered banking? It is the view of many in the industry that the tech giants just don’t need the headaches, and simply don’t have the stomach to enter banking.
Payday lenders are finding ways around Google’s ad ban (American Banker), Rated: AAA
Almost two years later, when Google banned ads for U.S. loans with annual percentage rates above 36%, the tech giant cited the payday lending debt cycle as a key reason.
Google’s 2016 ban drew praise from consumer advocates and civil rights groups, along with jeers from one then-executive at ACE Cash Express.
A year after it took effect, American Banker found numerous ads on Google from ACE Cash Express and other payday lenders, often on the first page of search results.
This loophole enabled payday lenders to continue advertising on the site as long as both the ad itself and the specific page where the user landed after clicking on the ad did not mention high-cost loans.
Exploiting a loophole
Loan sharks in 2017 operate mostly online. Because the Internet is borderless, companies can set up shop overseas and make loans to Americans without regard to federal and state consumer protection laws.
Online payday lenders typically charge higher interest rates than in-store lenders, according to a 2014 report by the Pew Charitable Trusts.
Pew found that 30% of online payday loan borrowers reported having been threatened by a lender or a debt collector. It also determined that advertisers were typically paying $5 to $13 per click on online loan ads.
The Google ban covers all U.S. personal loans with annual percentage rates of 36% or higher, a category that includes both payday loans and high-cost installment loans. Personal loans that require repayment in full in 60 days or less are also subject to the ban.
Gaming the policy, or flouting it
Google says that its ban on high-cost loans applies not only to lenders but also to so-called lead generators. These are companies that collect a raft of personal and financial data from potential borrowers and then sell it to lenders.
Consumers who elect to provide sensitive data to online lead generators may be so desperate for cash that do not see another choice.
Mobiloans, an online lender that is owned by the Tunica-Biloxi Tribe of Louisiana, was among the top results from a Google search for “payday loan online.” When users clicked on the Mobiloans ad, they landed on a page that listed APRs between 206% and 425%.
LoanSolo.com, another lead generator that was recently advertising on Google, stated on its landing page that the company is unable to provide customers with an exact annual percentage rate, but that the APR on a short-term loan can range from 200% to 2,290%.
Why The Final Payday Lending Rules Are Far From The Last Word (PYMNTS), Rated: AAA
Perhaps less expected is where opinions came together, because outside the standard reaction camps, a consensus is building.
Consumer advocates and democratic legislators and those who have generally been largely supportive of the CFPB and it efforts were pretty happy with the agency’s ruling last week.
On the other side of the issue, however, industry representatives were far less excited and genuinely concerned about the unintended casualties of the “consumer protection” legislation.
Somewhat Unexpected Agreement
Even more surprising is that the editorial boards and writers at The Washington Post and The Boston Globe agree with them, given their historical pro-CFPB stance. But both made similar arguments: Consumers need payday loans; for many, it is their only option. Driving payday lenders from the market without an alternative puts them at risk.
Advance America’s Fulmer also explained that contrary to popular news reporting on the subject, the short-term lending industry is not hostile to regulation or more legislation; in fact, regulation to clarify the segment would be helpful and welcome in a marketplace where rules swing so widely from jurisdiction to jurisdiction. Fulmer said that most players don’t even object to more competition from banks and applaud regulatory clarity that would allow them to compete in the market.
But, he said, competition is only competition if both sides compete on an equal playing field — instead of a regulator who is arbitrarily picking a winner.
Banks, he said, have no reason to enter the segment if they can’t make money; they can’t make money if they can’t automate and they can’t automate without specific regulatory guidance.
Cutting Off Consumers (U.S. News), Rated: A
The new rule mandates that lenders collect and share sensitive customer data with credit reporting agencies, including Equifax. This unnecessarily puts an enormous amount of customer data at risk, but the CFPB doesn’t see it this way. In fact, the bureau’s rule complained that most payday lenders do not “report any information … to the nationwide consumer reporting agencies, TransUnion, Equifax, and Experian.”
To make matters worse, this sensitive information will also be shared with the CFPB – the same agency that the Government Accountability Office already criticized for not implementing appropriate privacy controls to secure people’s personal data. It hardly instills confidence that, just last week, another financial regulator, the Federal Deposit Insurance Corporation, announced that their database was breached 54 times over the past two years.
Around 12 million Americans use payday loans each year as a means to stay afloat between paychecks.
In fact, surveys have found that 95 percent of borrowers say they value having the option to take out a payday loan, while the same proportion also believe they provide a safety net during unexpected financial trouble.
Payday loans rule could lead to cheaper alternatives (Freep.com), Rated: A
Before that happens, Bourke said banks would need to receive clear guidelines from regulators. But the loans could be six to eight times less costly than payday loans.
Banks and credit unions have some advantages because they already have customer relationships and can automate loan origination. Pew has advocated for streamlined underwriting guidelines on bank-issued installment loans that allow monthly installment payments of up to 5% of monthly income.
What won’t change: People who are cash-strapped still will be looking for ways to cover their bills.
Starks said he knows of one woman who lost her job and didn’t have a regular paycheck. But somehow, she got a payday loan to cover some of her bills. Many lenders do treat Social Security and disability payments as sources of income.
But Bourke noted that Pew’s research indicates that a debt spiral can be triggered if a payday loan payment exceeds 5% of one’s paycheck.
In Michigan, the maximum payday loan is $600. The fee in Michigan is $35.50 for a $250 loan, and $76 for a $600 loan.
But because the loan is short-term, the annual percentage rate can end up being 300% or 400%.
Texas payday lenders face tougher standards with new federal rules (The Texas Tribune), Rated: A
In Texas, a state where payday lending is largely unregulated, advocates for increased oversight view the new rules as a crucial step in protecting vulnerable borrowers.
But others say the new rules limit underbanked Texans’ access to short-term credit.
Payday loans, which are already effectively banned in 15 states, involve customers taking small-quantity loans with very high fees.
About 8 percent of Texans have taken out payday loans, compared to the national average of 5.5 percent.
More than 40 municipalities in Texas have passed ordinances restricting the expansion of short-term loan agencies. Still, statewide laws regulating payday loan practices have largely failed in the state Legislature. In 2013, a bill that would have curtailed many of the practices critics have called predatory failed as legislators could not agree on regulatory details.
Will Newly Proposed Payday Loan Rules Help In Oregon? (KXL.com), Rated: A
Newly proposed rules on payday loans may close a loophole in Oregon, that is suppose to cap interest rates. They would take effect in July 2019 IF congress approves, and the payday loan industry doesn’t stop it, like they’re hoping to. One issue is a CAP on interest rates. 36% is the max according to law, but a loophole in Oregon allows lenders to charge MORE FEES, making the rates effectively as high as 154%. The newly proposed rules would put an end to that, by making lenders make sure that borrowers can pay it back first, before doing the loan.
Lawmakers ask to continue studying payday lending bill after hearing input on high-rate loans (LJWorld), Rated: A
The payday lending industry scored a temporary victory in Kansas Wednesday when a special legislative committee decided not to make an up or down recommendation about a bill that would put tight limits on the interest rates and fees those lenders can charge.
Instead, the panel said its members want to hear more information from the Office of the State Bank Commissioner about the impact that new federal regulations that were just announced last week will have in Kansas.
Legislative committee won’t recommend restrictions for payday lenders (CJOnline), Rated: B
A special legislative committee Wednesday backed away from recommending restrictions on payday lenders to reduce what critics call “predatory” loan practices. The industry says the changes would put them out of business and cut access to credit.
The bill legislators heard would cap the interest rate on those loans at 36 percent per year. Payday loans can currently carry an annual percentage rate above 200 or even 300 percent. The bill would also limit the maximum monthly payment based on the borrower’s income and cap associated fees. Borrowers could only have one outstanding loan for $500 or less.
Humphrey helps oversee the Kansas Loan Pool Project that converts high-interest payday loans into lower-interest, long-term loans for clients.
Consumer bankers say CFPB too hasty in finalizing payday lending rule (Financial Reg News), Rated: B
The Consumer Financial Protection Bureau’s (CFPB) new payday lending rule, which requires lenders to determine upfront whether people can afford to repay their loans, has drawn criticism from the Consumer Bankers Association (CBA).
Elevate’s RISE Product Now Offering Lines of Credit in Tennessee (Crowdfund Insider), Rated: A
Elevate Credit, Inc., a tech-enabled provider of online credit solutions for non-prime consumers, announced on Wednesday its RISE product is now offering lines of credit in the state of Tennessee. This news comes just after the product’s successful line of credit launch in Kansas and it makes Tennessee the 17th state that RISE is available and the second state that RISE is available as a line of credit.
eShares raises $ 42 million to manage equity compensation and investments (TechCrunch), Rated: A
eShares wants to be the platform for all things equity.
From cap table management to secondary transactions, eShares’ software helps businesses like Slack, Flexport and Funding Circle keep tabs on their shares.
The startup is raising a $42 million Series C, led by Menlo Ventures and Social Capital. Matt Murphy from Menlo Ventures and Arjun Sethi from Social Capital will be joining the board.
Pave Announces Token Pre-Sale for the Global Credit Profile (GCP) (PR Newswire), Rated: A
Pave, the innovative online lender, announces the start of the pre-sale period for its upcoming token sale scheduled for mid-October. This token sale will fund the launch of Pave’s new product — a Global Credit Profile (GCP, http://gcp.pave.com). The pre-sale is restricted to accredited investors only.
It is estimated that just in the U.S. about 45 million people are kept on the margins of the financial system because they do not have credit records that can be scored. Shockingly 70 percent of the millennial population in the U.S. have subprime credit scores despite data showing them to have better credit risk than elder population. Pave’s GCP uses data that is currently being ignored by traditional credit bureaus, such as bank account spending data, alternative payment data and educational achievements. By enabling a user to enrich their own credit profile the GCP would help to realize Pave’s mission to unlock access to credit to millions of mispriced consumers.
Pennsylvania: ‘Fintech’ Businesses Offering Regulated Financial Services Require State License (PR Newswire), Rated: A
Today in a letter, Secretary of Banking and Securities Robin L. Wiessmann stated that companies and individuals offering regulated financial services using innovative technology or alternative means of offering such services – so-called “fintech” companies – are required to be licensed by the Department of Banking and Securities if they wish to conduct business with Pennsylvania residents.
Any companies or persons offering these regulated financial services that fails to obtain an appropriate license may be subject to any penalties provided for under the governing statute for that service. The department, Wiessmann reiterated, regulates financial transactions based upon the transaction offered or delivered, not the method of delivery.
The letter can be found online: http://www.dobs.pa.gov/Documents/Secretary%20Letters/All%20Business/10.6.17%20Fintech%20Licensure%20Letter.pdf
An AI bot operated by Wells Fargo just slapped sell ratings on Google and Facebook (Business Insider), Rated: A
And here comes an AI bot developed by stock analysts at Wells Fargo Securities. The human analysts have an “outperform” rating on Google’s parent Alphabet and on Facebook. They worked with a data scientist at Amazon’s Alexa project to create the AI bot. And after six months of work, the AI bot was allowed to do its job. According to their note to clients on Friday, reported by Bloomberg, the AI bot promptly slapped a “sell” rating on Google and Facebook.
This is in blatant contradiction to Wall Street’s human hype machine, which has 42 “buy” recommendations out of 47 ratings on Facebook, according to Bloomberg, and 34 “buy” recommendations out of 41 ratings on Alphabet.
People choose financial services options that make their lives easier. To a growing number of people, that could mean transferring money to a friend through social media, tracking budgets through an app or taking out a loan through an online lender. That’s changing the way people bank, but is it changing how your financial institution offers and markets your services?
New research from Expectations & Experiences, the quarterly consumer trends survey from Fiserv, finds many consumers are comfortable with nontraditional entrants. That’s especially true among younger, urban and high net worth individuals. The Expectations & Experiences: Channels and New Entrants survey conducted by Harris Poll found 16 percent of consumers overall would be comfortable paying bills through a social media company, compared with 35 percent of millennials, 28 percent of urban dwellers and 23 percent of those with more than $1 million in investable assets.
LendingHome Expands: Opens New Office in Pittsburgh (Crowdfund Insider), Rated: B
Marketplace lending platform LendingHome announced on Wednesday it has expanded operations by opening its new office in Pittsburgh. The online lender revealed it plans to bring a total of 50 well-paying financial technology jobs to Pittsburgh over the next year.
P2P Lending & Investment – Bringing Lending into the Future (NewsBTC), Rated: B
LoanBit, a newly founded company, aims to change this with their innovative solution which involves a move away from conventional methods, and towards one that centres around a Peer-to-Peer (P2P) based lending archetype.
Orca Creates Comprehensive P2P Lending Guide (Orca Money Email), Rated: AAA
Orca, a leading independent whole of market research service for UK peer-to-peer lending (P2P), has created a comprehensive guide for investors evaluating P2P lending. ‘Peer-to-Peer Lending Investor Guide: Innovative an Ancient Credit Model’ was created by the team at Orca and published live on their website today, free to download. The authors, Samantha McBride (Director, Orca) and Iain Niblock (Co-founder, Orca), were motivated by the lack of accurate and detailed research available providing insight into the market, which is still growing in favour with retail investors but often suffers unjust stigma from the broader investor market.
Orca’s analytic service recorded a new milestone for the asset class this month – £11bn cumulatively lent, all-time in the UK. With over 200,000 active investors and 30% of market share attributed to institutional investment, UK P2P lending is maintaining its growth trajectory, set for a market value of £15bn by 2020. In 2017 year-to-date, £3.4bn has been invested across P2P lending platforms, which is over £100m more than the 2016 total lent figure.
The ‘Peer-to-Peer Lending Investor Guide: Innovating an Ancient Credit Model’ covers all bases, aiming to paint the full picture of P2P lending, tracing its history, right through to the potential it offers moving forwards. A select few headings include:
- What is P2P?
- The UK Landscape
- Mega Trends
- Future of FCA Regulation
- The Benefits
- The Risks
- Best Practices
- The Mythbuster
Access the guide by leaving your email in the pop up form on Orca. Click here.
Key Takeaways From LendIt Europe 2017 (Lend Academy), Rated: AAA
The fourth annual LendIt Europe event was in London earlier this week with around 1,100 people in attendance.
We kicked off the event with Imran Gulamhuseinwala, the Global Head of Fintech for EY and also the head of the UK’s Open Banking initiative. Open banking is mandated to arrive in January 2018 and Imran is in charge of making sure this process goes smoothly. He delivered an optimistic message saying that open banking is simply an idea whose time has come.
We heard from IBM and Deutsche Bank on a new AI initiative they have implemented for doing KYC that reduced the time to on board a new customer from 13 minutes to 5 minutes.
Nick Ogden, the CEO of ClearBank, the first new UK clearing bank in 250 years, talked about how the power is shifting to the consumer in financial services for the first time. In a lively panel discussion on small business lending, the CEO of Funding Circle, Samir Desai, said that many of their customers like interacting with Funding Circle precisely because it is not a bank.
Day two was headlined by Renaud Laplanche, the CEO of Upgrade, in his first appearance at LendIt Europe. He talked about how more complete data will make underwriting better in online lending 2.0. He also gave three predictions for the near future:
- The growth of online lending will accelerate in the next 15 months
- An organized secondary market for online loans will emerge in the next 15 months
- The re-bundling of financial services will give birth to at least one major product innovation in 2018
In the UK this re-bundling has been going on now for a couple of years with many app-based digital banks or neo banks beginning to offer a suite of financial services. I don’t know exactly what Renaud has in mind here as far as new product innovation but I agree with the trend – finance is digitally re-bundling.
I chaired a panel on the US online lending market with Renaud, Karen Mills (former head of the SBA in the Obama Administration), Perry Rahbar of dv01 and Meg Zwick of Millennium Trust. One of the interesting topics we discussed was the possibility of Google, Amazon, Facebook or Apple becoming a dominant force in financial services. Both Google and Amazon have small business lending operations already and the regulators may be open to these companies obtaining a banking license of some kind. Karen Mills thinks that these big companies are the ones to watch as lending moves into its next phase.
Christoph Rieche is the CEO and co-founder of iwoca, an online small business lender. Christoph announced on stage that his company was releasing an open source API and teaming up with Tide, a mobile-first banking service. In less than a year Tide is now responsible for 7% of all new UK business current (checking) accounts.
Beyond the educational sessions we had a full expo hall that was buzzing the entire event. The thing I got the most positive feedback on was our 1-on-1 networking tool. Called Brella, this unique matching tool not only allowed people to setup meetings but also recommended those people who were a good fit. We had well over 1,000 meetings that took place over the course of the event and many people found valuable connections.
Renaud Laplanche reveals fintech predictions (AltFi), Rated: A
Nonetheless growth in lending origination levels is not what it once was, but Laplanche believes that by the end of 2018 growth could well pick up again to its stellar levels of previous years.
The entry of new players to online lending such as Goldman Sachs will help this growth, he says, but also the underlying economic conditions favour renewed growth for lower cost loans.
“Credit card balances have been going up pretty quickly, with growth rates of 5 per cent representing a $50bn growth annually,” he said.
In addition, Laplanche says over the same 15-month period, however, a meaningful secondary market will develop for online loans.
He says the use of third party data verification will be an important part of this as “the data is necessary for securities to be more liquid,” he said.
London fintech star Monzo is fending off one takeover offer each month (City A.M.), Rated: A
Monzo, one of London’s biggest fintech success stories, is fending off a takeover offer every month as larger rivals try to get their hands on a slice of its ultra-hip clientele, its co-founder has said.
Fintech lender launches API, partners with digital bank (AltFi), Rated: A
Iwoca partners with Tide as its API goes live, allowing third parties to offer loans to small businesses.
Speaking at the second day of LendIt Europe this morning, Iwoca CEO Christoph Rieche (pictured) announced the formal launch of the firm’s partnership API, which has been in testing with a number of partners throughout the course of this year.
The API allows third parties to offer what Rieche describes as “seamless” access to credit, powered by Iwoca’s technology platform and underwriting process. Iwoca’s platform, which specialises in credit facilities, is able to advance credit to businesses within 10 minutes.
Peer-to-peer lending: do listed investment trusts offer the best returns? (ig.com), Rated: A
The best known P2P platforms include Zopa (which until recently was closed to new deposits), RateSetter and Funding Circle, but there are around one hundred operating in the UK market.1
Lenders on P2P platforms face several different types of risk, not all of which can be avoided:
- Rise in defaults
- P2P platform credit checks are not sufficiently robust, causing lenders to misallocate their capital
- The P2P platform goes out of business
- Accessing your money
UK-listed investment trusts are an alternative
Among the broad range of specialist income funds listed on the London Stock Exchange (LSE) are several that focus on P2P lending.
Some of the vehicles listed below only invest in loans originated on P2P platforms (e.g. Funding Circle SME Income Fund) and therefore offer the purest exposure to the asset class. Others may take stakes in the lending platforms themselves or have balance sheet loans which offer slightly better protection in the case of defaults.
UK listed peer-to-peer lending Investment Trusts
|Name||Ticker||Currency||Market Cap (GBP m)||12m Yield||Discount/ Premium to NAV|
|Funding Circle SME Income Fund Limited||FCIF||GBP||175.1||6.2%||2.3%|
|Honeycomb Investment Trust||HONY||GBP||356.9||7.6%||20.4%|
|Hadrian’s Wall Secured Investments||HWSL||GBP||85.2||2.5%||9.2%|
|P2P Global Investments||P2P||GBP||652.6||5.7%||-11.5%|
|Ranger Direct Lending||RDL||GBP||129.6||13.4%||-26.0%|
|SQN Secured Income||SSIF||GBP||50.8||7.2%||-1.7%|
|VPC Speciality Lending Investments||VSL||GBP||291.5||7.9%||-11.0%|
Circle centres itself for digitally connected wallets (Banking Tech), Rated: A
Payments services provider Circle has introduced Centre, an open source project built on blockchain and designed to connect multiple digital wallets to process money transactions.
ICO go to end while bitcoin rebound to boom (Xing Ping She), Rated: A
After China’s ICO regulation, the multinational regulators, including the United States and South Korea, have introduced regulatory measures in succession to reduce their local financial risk brought by the ICO. ICO has encountered tough controls and poor rating worldwide. So far, the ICO fever broke out in May nearly go to the end.
However, bitcoin has performed very well in last month, and recently its price even broke 32,000 RMB. Many investors celebrate for the rising, some said that the price of bitcoin keeps rising but never fall, and some active investors claimed that the price will reached to 50,000 RMB or even 80,000 RMB. It seems the golden time of bitcoin come back. Meanwhile, there are also some investors keep waiting and seeing.
“When the policy came out, the price of bitcoin briefly dipped below 20,000. Now that the short-term biggest bear market is exhausted, it is justified for the price rebounding. But where to go after the rebound, of course, it would be slowly going down until reach a relative dynamic balance. Nam Koong Won (pseudonym), a famous columnist of marketplace lending industry in Xing Ping She said. Also, as an experienced bitcoin investor, he is not that optimistic about the rebound of bitcoin. Anyway, China’s regulations about bitcoin have settled down.
Online lending startup ID Finance plans to raise $ 100 million in the next year (Business Insider), Rated: AAA
Online lending business ID Finance plans to boost its borrowing over the next year to fund expansion in Latin America and the US.
ID Finance has already submitted the paperwork for a bond issue in Batin’s native Russia that should take place in November. ID Finance hopes to raise as much as $20 million (£15.2 million) from that issuance, with more international bonds planned over the next 12 months.
My Lendit Europe Recap 2017 (P2P-Banking), Rated: A
I’ll start with 3 predictions Renaud Laplanche, CEO Upgrade made in his motivating outlook on Online Lending 2.0:
- Prediction 1: ‘The growth of online lending will accelerate in the next 15 months’
- Prediction 2: ‘An organized secondary market for online loans will emerge in the next 15 months’
- Prediction 3: ‘Continued re-bundling will give birth to at least one major consumer product innovation in the next 15 months’
Furthermore there were several sessions around machine learning, artifical intelligence and automated underwriting with a wide range of opinions to what extend processes will be fully automated or whether human intervention or oversight is stll desireable for some specific decisions.
Interview with Stani Kulechov the CEO of ETHLend, Decentralized Lending, Using Ethereum (TechBullion), Rated: A
ETHLend creates an effective way for the borrowers to access funding globally and lenders to fund loan requests around the world. ETHLend uses decentralization and cryptocurrency to create a global lending market. The effect is that a borrower in the UK is not limited to local lenders and banks in the UK. Instead, the borrower can access funding from Asia, South-America and other parts of the world.
How are you different?
Cryptocurrencies open the liquidity gates. Such global liquidity pool might pressure the interest rate on local lending markets and additionally create more opportunities for local lenders to fund loans abroad.
Transparency. Since all transactions are broadcasted on the Ethereum distributed ledger, anyone can explore the transactions. Such transparency removes trust between the parties and provides more information for other lending market participants on the lending activity and interest rates.
Where are you based?
ETHLend consists of over 20 people who are working remotely on creating the global lending market. I am myself based in Helsinki, Finland and rest of the team is located in different parts of the world such as Frankfurt, Paris, Los Angeles, Uruguay, Delhi, Hong Kong and Seoul. We are incorporated in Estonia and are relocating to Zug, Switzerland from 2018 onward.
What have been your biggest wins to date?
ETHLend has encountered a big breakthrough since a decentralized loan was funded with the annualized return of 12.87%. The first decentralized loan transaction got well noticed in Ethereum subreddit where total of 185 upvotes were given by the Ethereum enthusiasts
Further, economically our greatest strength has been that ETHLend has not accepted any VC funding within these past months. Instead, the company aims to launch an Initial Coin Offering (ICO) pre-sale on 25 September 2017.
What type of people (market segment) are you trying to attract to your product?
ETHLend is an open protocol, which means that the platform can be used in different market segments such as peer to peer lending or financing small businesses or even institutional investor could use ETHLend to provide fast lending transactions between continents.
Yes Bank partners Abu Dhahi Global Market to help fintech cos (Money Control), Rated: A
Abu Dhabi Global Market (ADGM) and Yes Bank have entered into a pact to help fintech companies venture into cross-border markets.
WHY BLOCKCHAIN TECHNOLOGY AND P2P PLATFORMS ARE NATURAL ALLIES (International Banker), Rated: A
But finance is where blockchain technology was conceived, and it is in finance that blockchain technology is arguably most transformative.
In January 2018, MIFID II launches – and with it, additional rules and restrictions for these platforms. No matter their niche, alternative finance companies will be forced to reckon with overlooked flaws and deficiencies; either evolving to correct them or failing entirely. It’s not a matter of whether or not the industry will change: it’s about whether it changes fast enough.
Blockchain provides clear opportunities for P2P lending platforms. Companies will need to prioritise data transparency, create digital wallets to verify user identities and aggregate accounts, and work to mitigate the costs of operating this technology.
Adapting early to blockchain will, I believe, place a marketplace finance platform (of any kind but including P2P debt platforms) at an advantage.
RBI: With a touch of creativity, we have the Reserve Bank of Innovation (India Times), Rated: A
A popular notion is that regulations kill innovation and to a large extent it is true. Regulations have the potential of adding unnecessary bureaucracy, laws that inhibit the spirit of creation and sometimes takes the concept of safeguarding something or someone too far. However, what has gained momentum is the concept of regulations that enable innovation.
Regulations at the right time and at the right amount can work wonders for a sector. This then begs the question – is the peer to peer (P2P) sector in the country ready for regulation?
When mobile wallets in the country were classified as prepaid payment instruments, it led to rapid growth of such companies. According to Tracxn, wallet companies raised a whopping $2.1 billion in venture money 2016 and have raised about $791 million this year.
On steadier ground (The Hindu Business Line), Rated: A
With the Reserve Bank of India spelling out the guidelines for peer-to-peer (P2P) platforms, the fledgling lending space is all set to gather steam. With the Reserve Bank of India spelling out the guidelines for peer-to-peer (P2P) platforms, the fledgling lending space is all set to gather steam.
The clarification that an NBFC-P2P can act only as an intermediary, facilitating lending activity, and not take deposits or lend on its own, spares such platforms of the burden of provisioning or capital adequacy. It also helps avoid conflict of interest which could have risen if P2P platforms were allowed to use their own funds for on-lending.
That said, some of the norms appear restrictive and could prove counterproductive for the growth of the industry.
Revolut to Launch in Singapore (Fintech News), Rated: AAA
Revolut, a London-headquartered neo-bank, is about to launch in Singapore as the company started letting users join the waiting list to get early access. Revolut, which currently serves some 800,000 customers across Europe, announced plans to expand to the US, Australia, Hong Kong and Singapore earlier this year.
China’s PINTEC launches Singapore robo advisor backed by insurer FWD (NASDAQ), Rated: A
Financial technology company PINTEC Group said on Thursday it launched a venture in Singapore, its first outside China, betting on booming demand for automated investment advice in fast-growing Southeast Asian countries.
Singapore’s Temasek co-leads $ 72.8m funding in Chinese fintech firm Tongdun (Deal Street Asia), Rated: A
Singapore’s state investment firm Temasek Holdings, along with Chinese investment firm Tiantu Capital and Xindahanshi Capital, has led a $72.8 million funding round in Chinese fintech start-up Tongdun Technology, as per a CMN report.
Founded in 2013 and headquartered in Hangzhou, Tongdun primarily provides its anti-theft and fraud management services to financial, insurance, payment, online shopping and social networking companies.
Bahrain firm signs pact to create fintech bridge (Zawya), Rated: A
Former chief financial officer at Batelco, Sameer Altaf, has joined the board of directors of Finocracy. He will advise on the growing convergence of telecom and banking sector across GCC market.