News

April 13th 2016, Daily News Digest

  • Zopa’s default at 0.8% puts P2P risk sits between savings, which are safe, and riskier stocks.
  • Forbes article with great data comparing p2p to standard, and data going back to 1943.
  • Transunion contradicts Forbes, shows an increase in personal loans from all bank and non-banks.
  • Rumor that Goldman will replace Citigroup for Prosper Securitization.
  • Prosper’s Ron Suber view on the p2p market and Youtube video of Lendit Keynote speech.
  • Seizing up of public capital markets means LoandDepot cancel IPO and OnDeck rivals see lower valuations.
  • Fitch: Market reality is higher loan prices, reduced p2p competitiveness, and p2p seeking alternative funding sources.
  • StreetShares unveils bonds for the masses.
  • JP Morgan – OnDeck deal is live with applications taking less time than if they were directly to OnDeck.
  • Affirm raises $100m @ $800m valuation. It raised a total of $425m to date.
  • Morningstar rates Motorcycle Financing securitization A-
  • Afluenta raises $8m series B.

 

‘P2P sits between savings, which are safe, and riskier stocks and shares’, (FT Advisors), Rated: AAA

Zopa’s default rate is 0.8 percent.

Zopa prefers to think of P2P as being less risky than equity investments and more risky than a cash Isa. “You have savings, which are safe and are government-backed, and you don’t earn a return, or you can do more risky things and get a better return, and you do stocks and shares. P2P sits between the two.

The Future of P2P, (Forbes), Rated: AAA

Senior research economist for the Cleveland Fed, Yuliya Demyanyk, published a report, “Peer-to-Peer Lending Is Poised to Grow,” documenting that inflection point:

p2p inflection point

If my reading of this moment in macro-economic history is correct, P2P is the answer to QE. If the banks aren’t lending, someone has to, to keep money circulating. Credit is not a concern of the Fed, only liquidity.

TransUnion Analysis Finds FinTechs Outpacing Traditional Lenders in Personal Loans Issued to Near Prime and Prime Borrowers, (Market Wired), Rated: AAA

FinTech lenders have surpassed banks, credit unions and traditional finance companies in personal loan issuance to near prime and prime consumers.

Transunion issuence data

It is to be noted that Banks, Credit Unions as well as Traditional Finance Companies have also experienced large increases in originations to near prime and prime borrowers. However, FinTech lenders remained well above banks, credit unions, and financial institutions.

Citigroup Said to Stop Securitizing Prosper’s Online Loans, (Bloomberg), Rated: AAA

Citigroup Inc. is no longer buying debt from Prosper Marketplace Inc.’s platform to package into bonds, halting a key alliance in the growing market for securities backed by online consumer loans.

The decision, disclosed by a person familiar with the situation, comes after investors demanded higher yields in Citigroup’s most recent sale of the securities. The average weighted spread for a batch sold in late March almost doubled to roughly 500 basis points, compared with the previous offering in December, according to a report at the time from loan-data firm PeerIQ.

Prosper is in talks with firms including Goldman Sachs Group Inc. on potentially replacing Citigroup, the Wall Street Journal reported Tuesday, citing unidentified people familiar with the matter.

Ron Suber: Marketplace Lending: Evolution of an Asset Class, ( LinkedIn), Rated: AAA

Comment: Following on Ron Suber’s Keynote speech which can be found here Ron published a Linked In article:

Now the industry is at an inflection point.

  • Improving Risk and Underwriting: We must continue to improve our risk models, verifications, and collections practices. This is the most important thing we do and it will continue to be the most important thing we do as our industry matures.
  • Maintaining an Equilibrium in the Marketplace: More balance between what I refer to as the left (investors) and right (borrowers) legs of the stool (the marketplace).
  • Developing New Products: we need to continue to deliver new products and services that make it easier for investors to invest in our loans. Until we increase access to our asset class through new vehicles, we will not be something that people can’t live without.
  • Establishing an Open Ecosystem: Open systems thrive while closed systems become obsolete

As we look towards the future, I encourage the collective marketplace lending industry to embrace the notion that change is inevitable.

A P2P Real Estate Crowdfunding Comparison Guide, ( Investor Junkie), Rated: AAA

Comparison of real estate crowdfunding.

Categories for comparison receiving a grader from 1 to 5 : Website Features, Menus and Options, Website Ease of Use as It Relates to Investing, Customer Service, and Ongoing Communication Regarding Your Investments, Financial Backing,  Fees for Investors,  Diversification or Types of Real Estate Opportunities, Due Diligence and Vetting Process, Average Investment Returns, Inventory or Opportunities to Invest, Performance — Estimated vs. Actual Returns

Ranking :

#1 Realty Shares
#2 Patch of Land
#3 Realty Mogul
#4 Fundrise
#5 Ifunding

 

U.S. On-Line Alternative Finance Market Surges to Over $36B in 2015, KPMG Report, (ABL Advisors), Rated: AAA

Comment: We covered this Cambridge Univerisity / Polsky Center yesterday. These are more comments on the same report.

The report points to several game-changing drivers of transformation that are impacting the banking industry, including the following:

  • Speed: Using algorithmic technology, credit decisions, and underwriting takes minutes, not days.
  • Transparency: Investors and borrowers alike gain visibility into the loan portfolios, including risks and rewards.
  • Customer-centric: Platforms bring the “brick and mortar” branch into the on-demand and mobile application generation.
  • Data: Platforms have re-engineered the definition of creditworthiness. FICO may still be a factor, but it’s no longer the only factor.

The online alternative finance market, including crowdfunding and peer-to-peer lending, is exploding in the U.S., generating more than $36 billion in funding in 2015, up from $11 billion in 2014.

The report found that marketplace/P2P consumer lending is the largest market segment in the U.S., responsible for more than $25 billion in 2015 and a total of $36 billion from 2013-2015. U.S. Businesses are also increasingly tapping into alternative finance to the tune of $6.8 billion in 2015 alone, which is significant when comparing the total for 2013 and 2014 of $10 billion.

During that same time, these platforms facilitated roughly $11 billion of capital into 270,000 small and medium sized enterprises.  In addition to consumer and business funding, the report also found that real estate models are scaling rapidly, generating nearly $1.3 billion in 2015.

Why Web lending is getting shunned by investors, ( CNBC), Rated: AAA

“Public investors are confused at how to value fin-tech companies,” said Anthony Hsieh, CEO of loanDepot, a southern California mortgage lender that’s expanding into personal loans.

Hsieh has some credibility on the topic. LoanDepot filed to go public late last year and even went on its investor roadshow before withdrawing the offering in November on the heels of Square’s troubled debut and LendingClub’s plummeting stock.

The seizing up of the capital markets means some of On Deck’s rivals won’t go public and others will see lower private market valuations, thus spending less on marketing and hiring.

LendingClub is valued at about 25 percent less than it was in a private financing two years ago, even though it’s since quadrupled in size. For prospective employees who are bullish on the market, they can get options at a significant discount, Laplanche said.

“It’s a great argument for hiring people,” he said. “Coming in now, you essentially benefit from a low strike price.”

Fitch: Marketplace Lender Enthusiasm Confronts Market Realities, ( Business Wire) , Rated: AAA

After an extended period of rapid growth and increasing acceptance for marketplace lenders globally, several market dynamics are testing the business model’s long-term viability, Fitch Ratings says. These changes are forcing marketplace lenders to seek alternative funding sources, expand their product offerings, modify their underwriting approaches and address heightened regulatory scrutiny.

A sustained period of historically low-interest rates prompted an increased funding appetite among banks and other institutional investors for marketplace loans. As institutional demand waned in recent months, marketplace lenders began to seek alternative funding sources to sustain loan originations. For example, Social Finance (SoFi) recently launched a quasi-captive hedge fund purposed with investing in loans originated by SoFi as well as other marketplace lenders.

Some marketplace lenders also responded to reduced funding availability by raising loan pricing to attract funding; however, this reduces the competitiveness of marketplace lenders’ lending rate (if the cost is passed to the borrower) or adversely impacts profitability (if the lender absorbs the cost). Passing higher funding costs through to borrowers is also harder to implement for lenders targeting higher quality borrowers.

StreetShares unveils business bonds for the masses at LendIt 2016, ( Yahoo Finance), Rated: AAA

After getting historic approval from the U.S. Securities and Exchange Commission (SEC) in March, StreetShares’ product  will pay a fixed 5% interest (regardless of the performance of a particular underlying loan), is ensured by a provision fund, and provides liquidity as investors can access their funds at a 1% fee.

Investors may initially invest up to $1,000 each.

StreetShares has quickly ballooned to nearly 10,000 small business members. Investor and borrower members on StreetShares are matched by affinity status (e.g., veterans funding loans to veteran-owned businesses). StreetShares technology manages the interaction between investors and borrowers to maximize community loyalty and increase loan repayment rates.

Chase Quietly Launches Its Online Small-Business Loan Platform, ( American Banker), Rated: AAAA

The New York megabank launched its digital lending platform on a limited basis last week, spokeswoman MaryJane Rogers confirmed Monday.

Existing Chase small-business customers are being prescreened, and some of them are being invited to apply for loans of up to $250,000, according to Brian Geary, director of platform solutions at OnDeck. JPMorgan has roughly 4 million small-business customers.

Under the partnership, New York-based OnDeck, which also offers small-business loans through its own website, is providing its technology to JPMorgan. The loans are Chase-branded, and are being held on the bank’s balance sheet. JPMorgan is also setting the underwriting criteria for the loans.

In fact, applying for an online small-business loan from Chase is expected to take less time than applying for a similar loan directly from OnDeck.

For its part, OnDeck is using the integration with Chase as a foundation for additional partnerships with banks. About 70% of the technology that OnDeck has built for Chase is reusable, according to Breslow.

Affirm, Max Levchin’s consumer lending startup, raises $100 million, (Reuters), Rated: A

Comment: See Lending Time’s article on Affirm here.

The funding round, which puts Affirm’s total financing at about $425 million, came from a longtime friend of Levchin’s – Peter Thiel, who co-founded payments company PayPal with Levchin. Thiel’s venture firm Founders Fund led the round. The funding boosts Affirm’s valuation from $576 million to about $800 million.

Even Financial Launches Programmatic Acquisition Tools for Online Lenders, ( Yahoo Finance), Rated: A

Even Financial, the borrower supply side platform for online lending, today announced Even Programmatic Acquisition launch. The main marketing tools are:

PROGRAMMATIC DIRECT MAIL
Delivers intelligent custom mailers in under 48 hours and leverages the most effective acquisition channel using Even’s custom audiences.

FACEBOOK RETARGETING
Enhances traditional Facebook ad campaigns with additional fields specific to lending, and builds custom and lookalike audiences using Even’s proprietary data.

SPONSORED LOAN OFFERS
Features lenders on Even’s proprietary tools across its network of publisher and affiliate partner websites that are educating borrowers about online lending.

Morningstar Credit Ratings Assigns Preliminary Rating to ThunderRoad Motorcycle Trust 2016-1, ( Morningstar), Rated: A

Morningstar Credit Ratings, LLC today assigned a preliminary rating to the asset-backed
securities (ABS) transaction, ThunderRoad Motorcycle Trust 2016-1. The preliminary rating is based on
information disclosed and known to Morningstar as of April 11, 2016.

Preliminary Ratings (as of April 11, 2016)
Class A,  $47,780,000, A- , Hard Credit Enhancement 22%, Soft Credit Enhancement 31.5%
Class B, $11,940,000, Not Rated , Hard Credit Enhancement 0%, Soft Credit Enhancement 9.5%

Closing Date April 15, 2016

Credit  20.0% subordination of Class B

Enhancement to Class A

2.0% reserve account: sized at six months Class A interest

5.5% target over collateralization to be funded through cash flows

4.0% initial excess spread

Thunder Road Financial, based in Reno, Nevada has experienced rapid growth over the last year with the rollout of its new motorcycle finance program. Working closely with a large dealer network, the company provides financing to customers purchasing motorcycles, UTVs, ATVs and other power sports equipment.

Australian Investors Interested in US P2P, (Payment Week), Rated: A

Comment: Lending Times has interviews GCI’s Steven Sher yesterday April 12th, 2016. Stay tuned for our soon to come article.

Global Credit Investments, created by former managing director at Goldman Sachs Steven Sher and former Bain & Co consultant Gavin Solsky, has invested close to AU$10 million in P2P loans in the US so far.

Shanghai Says People Who Fail to Visit Parents Will Have Credit Scores Lowered, ( Caixin Online), Rated: A

The government of Shanghai says that under new rules residents who fail to visit their elderly parents will get black marks on their credit records. If the offspring still refuse to follow through with their obligations after a court tells them to, they will have their credit standing negatively impacted, Luo Peixin, deputy director of the city government’s law office, said at a news conference on April 6.

Beijing enacted a law in July 2013 aimed at compelling the children of parents older than 60 to visit their parents “frequently” and make sure their financial and emotional needs are met.

LendKey Deploys $1 Billion In Capital To Borrowers; Marks New Era For Lenders, ( PR Newswire), Rated: A

LendKey, the financial technology company powering more then 320 credit unions, bank, and other financial institutions, announced today the successful underwriting, origination, and deployment of more than $1 billion in lender capital to borrowers. Private student loan and student refinancing opportunities contributed the lion’s share of deployment;

LendKey was founded in 2009 and offers a white-labeled lending platform.

FinTech Direct Lender Funds More Than $15 Million in Consumer Loans in First Quarter of 2016, ( Business Wire), Rated: A

LendingPoint’s Q1 volume reached $15 mil.  It processed more than 53,000 loan applications since the beginning of 2016.

Currently, LendingPoint is licensed in 13 states, reaching approximately 34% of the U.S. population, with an expectation to reach 80% of total U.S. population by midyear and all 50 states by yearend.

Atlanta-based LendingPoint provides personal unsecured loans to consumers.

Afluenta, the Leading Latin American Peer Lending Network, Receives $8 Million from IFC and Elevar Equity to expand in the region, ( PR Newswire), Rated: A

Afluenta (www.afluenta.com), a Latin America peer-to-peer lending network that brings together investors and creditworthy borrowers, announces today the completion of its $8mil Series B funding round from the International Finance Corporation (IFC), the private-sector institution of the World Bank Group, and Elevar Equity, a leading impact venture capital firm. IFC and Elevar Equity are investing $4 million each.

Shenzhen police gather information on online lenders as China cracks down – newspaper, (Reuters), Rated: A

As of the end of March, 1,490 P2P platforms in China had run into operational problems, and bosses at more than half of them had absconded.

Some P2P companies in Shenzhen have received registration forms from police, requiring them to provide information including details of shareholders and executives, the number of clients and payment accounts, the newspaper reported.

Acquire Real Estate Sells Out Crowdfunding Investment in Atlanta Office and Industrial Portfolio, ( Press Release), Rated: B

Acquire Real Estate (a pre-funded real estate crowdfunding company) just competed for a crowdfunding investment in the Atlanta Diversified Portfolio, a 371,000 SF office and industrial portfolio located throughout the Atlanta metropolitan area.
Acquire pre-funded its $267,500 investment opportunity in the portfolio; it then offered the opportunity for its crowdfunding investors to invest in the deal. Over 20 individuals invested in the property and average annual returns are projected to be between 9 and 11%.

Cloud Lending Solutions Announces First Automated Loan Buyback Option for Online Lenders

  • Cloud Lending Solutions clients can now manage the full buyback process from loan boarding, dispersal, and buyback, automatically with no manual intervention, within CL Loan.
  • CLS manages the calculation of interest service fees and origination splits, and the generation of associated accounting transactions for posting and reconciling to the general ledger.
  • Lenders have complete transparency of the buyback status and a complete view the accounting transactions for each stage of the buyback process.

National Funding Appoints First Female President In Alternative Lending Industry, ( Yahoo Finance), Rated: B

National Funding, one of the largest private lenders of small business loans, today announced that Torrie Inouye has been named the company’s president. Inouye will report directly to Founder and CEO Dave Gilbert.

Founded in 1999, National Funding is one of the country’s leading financial technology companies for small and medium-sized businesses, providing working capital loans, equipment financing, merchant cash advances and credit card processing.  National Funding has provided nearly $1.5 billion in capital for over 20,000 businesses nationwide.

Money360 Continues Corporate Growth With Addition of General Counsel and Loan Development Team, (Market Wired), Rated:B

Money360, a commercial real estate online marketplace lending platform, today announced the hiring of Alexander Vellandi, a legal expert with nearly 20 years of experience in real estate law, as general counsel. The firm also expanded its lending operations with the addition of John Gaz as director of asset management, David Fay as underwriter, Mira Johnson as loan processor, and Cameron Hall as a loan analyst.

Brief: PeerLend Launches On-Demand Software For P2P Lending, (Crowdfund Insider), Rated: B

PeerLend, an India-based peer-to-peer (P2P) lending platform, announced on Monday the launch of its new software service PeerZoom.

Author: George Popescu
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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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