News

March 24th 2016, Daily News Digest, Lending Times

  • The rise of the challenging banks vs p2p lenders and traditional banks.
  • Very interesting report on SME lending small, large banks and credit unions vs online lender.
  • The Economist summarizes the last 2 months in marketplace lending.
  • Long list of latest positive p2p news on p2p from Business Insider.
  • Views from CrossLend, FundingXChange, Funding Circle and Auxmoney.
  • 1st Taiwanese p2p lender.
  • 12% interest from asset-backed lender MoneyThing.

Ancient and modern: new  platforms eye old financing tricks, (Global Capital), Rated: AAA

These so-called “challenger” banks have been growing rapidly in recent years while established UK banks have seen their profits suffer amid restricted lending activity and costly conduct issues.

Examples: Shawbrook Bank posted a 63%  rise in its full-year underlying pre-tax profits. Virgin Money has raised £803m through a three-tranche securitization deal this year.

Indeed, the UK’s challenger banks are not without challenges themselves. In particular, they have found themselves at a structural disadvantage when it comes to capital requirements. Unlike the larger institutions, most don’t have internal models to calculate risk-weighted assets.

“They have to rely on the standardised models, which implies having to hold more capital per exposures they put on the books,” says Suarez Duarte. “The Prudential Regulation Authority has said it is looking into intermediate positions between the two models, which indicates that we are approaching a better solution for newer players. “But one thing that is also clear is that regulators do not want these banks to be more exposed to failure. Many of them have not gone through a full credit cycle, so it is very important for regulators to see that they have adequate capital ratios.”

Barclays, for example, has plugged £3.1bn into online unsecured lending, which it says has a cost to income ratio in the low 20% area, against a company-wide ratio of 60%. In fact, it says digital has now become it’s “biggest branch”.

Marketplace Lenders Win 20% of Small Business Loan Apps, Fed Says, (Bank Innovation), Rated: AAA

According to a little-noticed report from the Federal Reserve Bank of Richmond, fully 20% of all small business loan applications are now being originated by marketplace lenders.credit sources

Traditional bank lending continues to be the primary source of financing for small businesses. Credit applicants were most successful and most satisfied with their borrowing experience at small banks. Small banks approved, at least, some of the amount requested for 76% of applicants, while large banks approved 58% of applicants. Further, small banks earned a satisfaction score (the net percent satisfied with their overall experience) of 75 among approved firms compared to a score of 51 for large banks.

lender satisfaction

 

A ripple of fear, (The Economist), Rated: AAA

On the face of things, it is business as usual. Lending Club, the biggest P2P firm, doubled its loan book last year. This year it expects it to grow by 72%, to over $14 billion. Prosper, the second-biggest P2P lender, has said that delinquencies are indeed rising on its riskier loans, although it emphasised that only a tiny subset of its portfolio had been affected and that the deterioration was trivial.

Lending Club has also raised its interest rates. The primary motivation for these increases may have been to reflect the risk of credit losses, but it is also possible that raising funds have become tougher. Borrowing costs in other risky markets have risen sharply recently. The volume of loans that P2P firms have sold in securitized packages has halved since the end of last year.

The market that P2P lending is catering to clearly has not been saturated. As long as that remains the case, growth may slow, but it is unlikely to stop.

Google Adwords partnership with Lending Club, (Business 2 Community), Rated: A

Lending Club to offers  AdWords users a special deal for loans to spend on Google’s AdWords programs.

lending club adwords

Corporate China grubbing for cash as liquidity tightens, ( Reuters), Rated: A

* Chinese firms take 170 days to turn working capital to cash
* Companies owe and are owed more than any time since 2006
* Firms complain of difficulties getting bank loans
* P2P lending more than tripled in first two months of 2016
* Companies increasingly selling receivables to discounters

Patch of Land Announces $100m in Origination, Over $25m Returned to Investors, Introduces New Products, (PR Newswire), Rated: A

In Q1 2016 company announced: $100m in origination, over $25m returned to investors and a new 24-36 month ‘mid-term’ product. “In 2013, we launched with the short-term, 12-month loan, which served to fill a huge gap left by banks and traditional lenders,” said Jason Fritton, CEO and co-founder at Patch of Land, “and we’re now launching a 24-36 month

“In 2013, we launched with the short-term, 12-month loan, which served to fill a huge gap left by banks and traditional lenders,” said Jason Fritton, CEO and co-founder at Patch of Land, “and we’re now launching a 24-36 month ‘mid-term’ product, which fulfills a growing need for medium-term lending options.”

FINTECH BRIEFING: The future of P2P lending — Ripple opens European headquarters — Digital-only bank to launch in Hong Kong, (Business Insider), Rated: AAA

P2P lending is entering a “golden age” according to Samir Desai of Funding Circle. “you need to be doing billions of dollars of loans to get the data to make it work.”
The Innovative Finance Individual Savings Account (IFISA) is key to making P2P lending mainstream in the UK. Lenders hope that the IFISA — which allows UK citizens to invest through P2P lending platforms tax-free — will attract the general public to P2P lending.

The FCA’s authorisation examination may delay launches for some lenders. Major P2P platforms like RateSetter and Funding Circle have products ready for launch on April 6th when the IFISA officially becomes available to consumers — but the firms are still waiting for authorisation from the FCA.

Premature regulation will hinder the growth of the P2P industry in Europe — according to Niall Bohan, Head of the Capital Markets Union at the European Commission.

Only 1% of P2P loans are cross-border. That may be an effect of the complexity of cross-border regulation. It’s worth noting, however, that 12% of money invested in UK platforms comes from other EU member states.

Continental Europe has hurdles to overcome to catch up with the UK.

Ripple, a distributed ledger technology, which underlies Bitcoin and other cryptocurrencies, announced it would open a European headquarters in London. European banks are interested in the technology because it could potentially reduce the cost of making transfers, among other advantages.

Banks are starting to use software that can “learn” to provide better customer service. Digital-only bank Atom and RBS both recently announced they will start to use this technology. Neat, a Hong Kong-based mobile-bank that plans to launch in the second quarter, will use similar technology, but apply it to a user’s payment data in order to provide spending tracking and personalised offers, according to Finextra.

The Australian government recently announced an investigation into whether banks should be forced to share consumer data with third parties, according to the Sydney Morning Herald.

P2P lending platform Bondora received a license to operate in Estonia this week.

The Many Faces of Marketplace Lending : Auxmoney, Funding Circle, FundingXChange & CrossLend, (Crowdfund Insider), Rated: AAA

 CrossLend opened 2 months ago. CrossLend is a cross-border marketplace lending platform. Its business consists in sourcing directly or purchasing consumer loans from traditional consumer lenders, scoring them using their original scoring model, and securitizing them by issuing a series of €25 notes which are then sold to international retail and institutional investors across Europe. The very specific form securitization elected by CrossLend has the benefit of creating fully tradable securities (each note has its own ISIN number) while keeping thetraceability to the risk of each single original loan, identified through the notes series. CrossLend is afully regulated securitization company, licensed in the Luxemburg under the Securitization Law 2004.

Auxmoney originated €99.9 million worth of consumer loans in the year 2015, a 202% increase from the €33 million originated in 2014. The company also set a record among European FinTech startups by raising more than €200 million in venture capital, including €150 million from Dutch insurance company Aegon in 2015 and this year an unknown amount from Seven Ventures.

Zencap has merged into Funding Circle, creating a global crowdlender with a presence in the UK, the US, Germany, Spain and the Netherlands. Funding Circle has originated more than €2 billion worth of loans to SMBs.  “Everybody is raising funds to be ready for the drying up in 2017-2018”.

FundingXchange itself is a marketplace more akin to a loan supermarket or a loan comparison site in that it allows businesses owners looking for a loan to request a quotation from more than 200 lenders.

Comment: CrossLend is the most interesting part here.

Taiwan’s ‘first’ P2P lending service launched, (Focus Taiwan), Rated: A

Taiwan P2P, also called Xiangmindai (http://www.lend.com.tw)

According to Tony Huang (黃智康), CEO of the online service, the maximum amount of each loan is currently set at NT$300,000 (US$9,232.19), and borrowers will be charged a 3 percent fee by the service, apart from the interest paid to the lender.

People seeking to lend funds through the platform will have to go through a review process, and the minimum loan amount is NT$1,000.

 

Peer-to-peer lending potential huge in India: VVSSB Shankar, I-lend, (The Financial Express), Rated: A

In Hyderabad, from where we started, a little over R1 crore has been disbursed so far. And this has led to a default of just Rs 74,000, which is less than 1%.

We have set a certain minimum qualification for lenders. Firstly, they have to be at least graduates. Secondly, their annual income has to be at least R8 lakh. So, the age of our lenders ranges from about 27 to as high as 60.

On the other hand, our typical borrower is someone with an annual salary ranging from anywhere between Rs 3-4 lakh and Rs 15 lakh.

Since the cost of servicing a loan is the same, banks mostly prefer personal loans of R3 lakh or higher. But on our platform, one can get a loan for R50,000 or even lower.

We charge 3% of the disbursed amount from the borrower and 1% from the lender.

Will ‘Peer to Peer’ Lending Really Harm Our Lumbering Banks?, ( Money Morning), Rated: B

If the peer to peer concept really does take off, as those in this industry firmly believe, the money will be made from those that set up P2Ps and later offload them through IPOs. And who do you think will be the buyer? The banks, of course, as they take control of yet another channel of distribution.

I Opened a MoneyThing Account, ( P2P-Banking.com), Rated: A

MoneyThing: all loans on the platform are secured by assets, which consist of a mix of property and other items like cars.

The key aspects for investors:

  • 12% interest rate p.a.
  • interest paid from the day the bid is made into a loan
  • no fees for investors
  • all loans secured by assets
  • bridge loans with a term of 3 to 24 months
  • there is a secondary market
  • minimum deposit is 100 GBP, minimum bid is 1 GBP

Goldberg Law PC announces that a class action lawsuit has been filed against LendingClub Corp (NYSE:LC), (Inside Trade), Rated: B

Goldberg Law PC announces that a class action lawsuit has been filed against LendingClub Corporation (“LendingClub” or the “Company”) (LC). Investors who purchased or otherwise acquired shares traceable to the Company’s December 11, 2014 Initial Public Offering should contact the firm.

Comment: this is very standard for companies who’s stock value goes down significantly after the IPO. 

Author: George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

Add Comment

Click here to post a comment

Your email address will not be published. Required fields are marked *

Testimonials

default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest

Daily News Summary Digest Sent Daily To Your Inbox