News

April 5th 2016, Daily News Digest

  • Orchard making slow progress towards a secondary-market trading platform for marketplace lending.
  • Analysis of 1st CFPB complaints against SoFi, Prosper and Lending Club.
  • There are 55 known hedge funds investing in marketplace lending products.
  • Klarna and Modo announce a partnership to speed up Klarna customer integration.
  • RBI to regulate p2p lending. Article covering Indian market.

 

 

Orchard Will Launch Electronic Trading Platform for Marketplace Lending Assets, (Crowdfund Insider), Rated: AAA

Orchard held a gathering of many well-known lenders this past March. During their inaugural partner forum, Orchard published results of their stress-test research thus addressing a point of concern for the industry.

Following the gathering, Orchard posted some of their findings from the discussion. These included;

  • Both investors and originators agree that the standardization of that data will allow for continued growth and an increased influx of capital.
  • Lack of liquidity in the space with no established secondary market leaves investors with little flexibility and limits rate of capital deployment.
  • The leading participants in the marketplace lending sector are built to withstand downturns and expectations are for the asset class to “prove durable” during times of economic stress.
  • Consolidation of platforms will occur during unfavorable economic conditions during which platforms will diversify product lines
  • The industry will continue to see evolving business models for funding
  • Lenders must be able to access larger and more diversified pools of capital to scale to capitalize on the demand that banks cannot satisfy.
  • Despite the recent concerns around increasing delinquencies and where we stand in the credit cycle, all are certain that the leading participants in the space are built to withstand downturns and, further, that the asset class will prove durable in times of economic stress.

What personal loan complaints reveal, (Bankrate), Rated: AAA

Comment: first analysis of complaints collected by CFPB on marketplace lending. In summary: no real complaints.

So far, complaints range from getting turned down for a loan despite good credit to qualifying for a better loan than was offered to running into trouble when negotiating a delinquent debt.

A few dozen complaints against Social Finance, or SoFi. There’s nothing here to suggest SoFi did anything wrong; the borrower just didn’t like the answer he or she received or how the underwriting process played out.

The few complaints against Prosper that included an explanation were about debt collection issues.

Problems working with the lender on a delinquent account were the main complaints leveled against Lending Club.

Opus Fund Services – Best Global Hedge Fund Administrator, (Hedge Week), Rated: AAA

Comment : The main information in this article is that there are 55 known hedge funds in Marketplace Lending per Opus.

Opus Fund Services is listed as one of only two administrators in Marketplace Lending by Orchard. They got into this space very early (2011), and today they service 55 funds in this sector; as a percentage of our overall client book it is quite small, but it is quite a significant percentage of the marketplace lending ecosystem.

Part of the reason why marketplace lending has become so popular is that some institutional investors have been disappointed by the level of returns they’ve been getting from their hedge fund allocations for the fees they’ve been paying.

Santander soft launches Kabbage in UK, ( Finextra), Rated: A

Comment: follow-up on yesterday’s news.

Banco Santander is to leverage its recent multi-million dollar investment in Kabbage to offer working capital loans to UK small businesses through the online lender’s platform.

“The strengths of the Kabbage platform lies in terms of real-time risk modelling and its extensive capabilities to cross reference data against multiple sources. When added to our own customer base, trusted reputation, UK payments infrastructure and understanding of the requirements of UK businesses, this creates a powerful proposition.”

The service will be rolled out more widely after an initial trial period which will be used to fine-tune the platform’s lending algorithms, he adds.

Santander InnoVentures, along with ING and Scotiabank joined in a $135 million funding round in the US-based company in October last year.

Morey Publishing Announces “The Power 20” of Marketplace Lending, (PR Newswire), Rated: A

Morey Publishing, a New York-based media and marketing firm, in conjunction with Mayava Capital, Inc., a small business advisory, has published “The Power 20,” a list of the twenty most influential people in marketplace lending. The list, referred to as “The Power 20,” is comprised of men and women who are leading the charge in the online lending frontier.

The Power 20 will be published on April 4, 2016 at https://www.mayavacapitalfunding.com/power20

Klarna and Modo announce a new strategic partnership at Money20/20 Europe, ( Tech Crunch), Rated: A

Modo will provide Klarna with its Digital Payments Hub product to speed up implementation of Klarna’s checkout solution for their worldwide e-retail partners.

Backed Review: Co-Signers Make Personal Loans Cheaper, (Nerd Wallet), Rated: A

Backed wants to give low-interest loans to millennials with unestablished credit.

The online lender uses a simple co-signer model. It allows someone with stellar credit (typically a family member or friend) to “back” a borrower.

What makes Backed different
Backed’s starting APR of 2.9% (only for well-qualified borrowers and backers) is the lowest among the online lenders NerdWallet has reviewed.

Startups Aim to Bring Transparency to P2P Loans, (Bloomberg), Rated: A

Comment: this is a video interview. The main story is about dv01, Orchard, PeerIQ, and MonJa

“Investors looking for a clear view on the online marketplace lending risk. Startups found niche selling software giving investors the data they are seeking.”

Lendio CEO Block Blake interview. Work with 75 lenders. Software providers standardize data and provide transparency.  Average loan size is $30-$40k.

Ryan Randall , former Upstart CFO : Typical large purchases are $50m to $100m. In fall credit market shut down.

Difference between p2p data software providers : some want to be involved in securitization. Some just want to provide data.

The Essential Guide to Crowdfunding, (Inc.com), Rated: A

Reviewing when to use what crowdfunding platform:

CrowdRiseUse it if… You have a charity-minded idea–especially if you can swing some sort of a celebrity endorsement.

GoFundMeUse it if… You’re rebuilding after a disaster or creating a product with a charitable impact, and you want to tap a very wide audience.

CircleUpUse it if… You have an established consumer-product company and you’re looking to fund a new project.

AngelListUse it if… “You pretty much need to list here” if you’re expanding, especially tech companies, says Richard Swart, a crowdfunding researcher with the University of California, Berkeley. AngelList now boasts 200,000 startups and 30,000 investors.

IndiegogoUse it if… You want to keep the money you raise even if you don’t meet your goal, or you have a social component to your business.

KickstarterUse it if… You have a cool technology product or arts project to test on the crowd.

Fintech 2016: Landbay brings P2P to buy-to-let, ( Euromoney), Rated: A

Landbay focuses on loans secured against rental property.

The £30 billion a year buy-to-let mortgage market was the starting point for Landbay. Though a big market, it is still not a core one for the big UK banks.

Landbay, which is regulated by the FCA but where investments are not protected by the UK’s deposit insurance scheme, promises investors compound fixed returns of 4.5% on a three-year deal or 3.35% above Libor on a floating-rate product.

The platform works closely with a number of specialist buy-to-let mortgage brokers intermediating for professional and semi-professional landlords seeking bridging loans, development loans and mortgages.

“The vast majority of loans are below 75% loan-to-vale with the average at around 60%, which is in line with most lenders that work at around 65% to 70% LTV. We also work on a fairly standard 125% rental income-to-debt service coverage ratio, and we’re quite focused on that income piece. Your loss-given-default isn’t going to be that much different if you are lending at 70% loan to value or at 75% loan to value. The key thing in our mind is to minimize the risk of borrowers defaulting at all, which is likely to increase if people can’t service debts out of rent. So our credit underwriting tends to focus on cash flow.”

RBI to regulate peer-to-peer lending; to issue norms with SEBI, ( The Financial Express), Rated: AAA

Comment: Article covering the Indian market.

In the credit policy, RBI Governor, Raghuram Rajan said that the central bank will prepare a Concept Note on P2P lending will be put up on the Reserve Bank’s website for public comments by April 30, 2016. Based on the feedback, the contours of regulating P2P lending will be decided in consultation with SEBI.

Reacting to the announcement, Bhuvan Rustagi, co-founder and COO, Lendbox, one of the leading P2P lenders welcomed the RBI’s move to regulate the market. “We welcome the announcement. It will create a level-playing field with conventional lenders. We need guidance from RBI on underwriting methods.”

The Future of Money, ( Wired.com – BNY Mellon), Rated: A

A sponsored series with WIRED on money’s progressively digital future. From alternative currency to big data, the future of money is changing. Learn more about the next generation of the financial industry.
2 articles so far : Big Data and The Next Generation of Currency. They are actually referring to this as “instant integration.”

Klarna North American CEO Brian Billingsley said as much about the process and partnership:

“I’ve been following Modo for a few years, and knew that their platform could help us accelerate getting new customers on board, and getting new products into the market. So I was glad to be able to put together this opportunity to work with them. Modo’s secret sauce is their COIN transaction, which allows Klarna to connect different payments systems together, without making any changes. Klarna can focus on delivering even simpler ways to buy, and Modo makes the connections work, flawlessly. “

Microsoft Strikes Partnership With Banks on Blockchain Tech, ( Bloomberg Technology), Rated: A

Microsoft Inc. has pulled ahead of Alphabet Inc.’s Google, International Business Machines Corp., and Amazon.com Inc. in the race for supremacy in operating other companies’ blockchains. Blockchains — basically online ledgers for recording transactions — first gained popularity with the digital currency bitcoin.

The first commercial deployments of the blockchain could go live in about a year, David Rutter, CEO of R3, said in an interview, adding that it’s “three to five years until significant commercial adoption.”

Microsoft will first provide its cloud services and tools to R3 labs worldwide. And as R3 member companies — which include Barclays Plc, Credit Suisse Group AG, Wells Fargo Securities LLC and UBS Group AG — begin their blockchain deployments, Microsoft hopes to win their business, too.

Rivals like IBM aren’t asleep at the wheel, either. IBM is a part of the Hyperledger Project, an effort to standardize the blockchain technology for various industries.

“It’s certainly a feather in Microsoft’s cap, marquee banks lining up to run their blockchain projects on Azure,” said Roger Kay, president of Endpoint Technologies Associates Inc. “It’s probably more important from a prestige than from a revenue point of view, at least in the near term.”

Sweden’s Klarna stalked legendary Silicon Valley VC Sequoia on Google Street View before bagging it as an investor, (Business Insider), Rated: B

When Swedish payments startup Klarna was starting out, CEO and co-founder Sebastian Siemiatkowski was desperate to land the firm as an investor.

Sequoia led a $9 million investment in Klarna back in 2010 and has taken part in follow-on rounds since. To date the company has raised over $290 million and is worth $2.25 billion, making it one of Europe’s few unicorns.

 

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.

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