News

April 22nd 2016, Daily News Digest

  • Great article on lessons from the 1st consolidation in p2p in France.
  • New regulation for bank Real-Estate lending will boost even more Real-Estate Crowdfunding.
  • How Alt-Lending 3.0 successful companies look like.
  • Regulation is moving in Illinois with high impact on SME lending.

What the First Consolidation Among French Lending Marketplaces, Lendix’s Acquisition of Finsquare, Tells Us, (Crowdfund Insider), Rated: AAA

Comment: Article covering the French market and its 74 crowdlenders.

Lendix, the lending marketplace that recently become number 1 in SME marketplace lending in France, announced that it has acquired crowdlending platform Finsquare.

The French market numbers no less than 74 firms officially registered as “Intermédiaire en Financement Participatif (IFP)”, the legal status of accredited crowdlenders. After favorable regulations were issued in October 2014, many entrepreneurs rushed to join the crowdfunding fray, most of them with the intention to launch a crowdlending platform targeting small and medium enterprises (SME) as borrowers.

Quite a few platforms have given up before becoming active, and around 10 gave up their license. The market remains almost exclusively concentrated on fewer than 10 players: Lendix, Unilend, Lendopolis, (formerly) Finsquare, Lendosphere, Credit.fr, Prexem, Bolden and PretUp. Even for those, building a critical mass of business is far from easy.

The Finsquare platform, run by a team specialized in marketing, eCommerce and sales was running out of cash. The founders decided to give up and refocus on a somewhat more classical, marketing and sales-oriented loan broker business GoCreditPro.

Lendix, by contrast, was founded and is now managed by veterans of the finance world with decades of experience in multiple areas of finance including venture capital and private equity (Olivier Goy, founder and CEO), trading and investment banking (Patrick de Nonneville, COO) and retail banking (Pascal Ouvrard, Bus. Dev.).

Lendix, by contrast, has built its rapid success on designing a marketplace suited to meet the needs of institutional investors, family offices and accredited investors. The crowd plays no role in vetting SME candidates or in setting the loan’s interest rate. Neither the bidding nor the “all or nothing” rule apply.

For that reason, the French crowdfunding regulation requires a very strict segregation between the clients’ payment accounts and the platform’s own accounts and it foresees a run-off management process in case of a platform shutdown.

The Benefits and Risks of Online CRE Lending,( National Real Estate Investor), Rated: AAA

Over the past several years, the commercial real estate finance industry has seen increased regulatory oversight. The risk retention rules and increased reserve requirements, which go into effect at the end of 2016, will put even more pressure on traditional lending sources, limiting their capability to provide clients with construction loans for new properties and refinancing of existing loans. With nearly $300 billion in loans coming due in the next 18 months, non-traditional lenders, including online marketplace lending platforms, will have an opportunity to fill the void and provide borrowers with access to alternative forms of capital.

Due to the growth of alternative lenders, products offered via these online platforms can make up the bulk of the capital stack, from permanent, to bridge, to mezzanine on the debt side, and equity and preferred equity on the equity side.

For the online lenders, commercial real estate creates a $3.3 trillion opportunity, the surface of which has yet to be scratched.

Loans for Weddings: Fintech Learns to Focus, (Wall Street Journal), Rated:AAA

Silicon Valley once threw money at startups that aimed to disrupt broad swaths of finance. Now it is rewarding those that have sharpened their focus.

Venture funding for U.S. lending startups dropped to $298 million in the first quarter from $832 million in the last three months of 2015, according to Dow Jones VentureSource.

“You have a lot of established players in areas like credit-card refinancing,” said Joshua Jersey, chief executive of Promise Financial, which focuses on loans for weddings. “It’s a strategic imperative of younger platforms to have a narrower focus.” Mr. Jersey is seeking financing to expand lending by his company, which teams up with roughly 100 wedding venues and other vendors to offer loans at the point of purchase.

Pave started in 2012 seeking to create income-sharing agreements with borrowers. It narrowed its focus last year to consumers who lack credit history, such as expatriates or people just out of college. This month, it closed $8 million in an early-stage financing from Maxfield Capital, a venture-capital fund.

Murphy backs P2P in UK income fund, (FT Adviser), Rated: A

In line with other UK equity income managers, such as Neil Woodford and Invesco Perpetual’s Mark Barnett, Mr Murphy has gained exposure to the sector via the P2P Global Investments trust.

The trust lends money to various P2P businesses through a number of platforms, and can also hold small equity stakes in these platforms.

However, shares in the trust have sold-off sharply as investors show signs of turning against more esoteric lending offerings. The trust’s share price has fallen 16.3 per cent over the past year, according to FE Analytics. Mr Murphy is continuing to back the sector via his £918m fund.

By contrast, the manager is underweight the banking sector, a strategy he said stemmed from his belief the sector is feeling the pain of regulatory pressure and loose monetary policy.

“You’ve got to be more selective of where you’re investing, you can’t just benefit from being overweight the FTSE 250. The domestic economy has done well but [the referendum] will create uncertainty – particularly if the vote goes that we exit.

Fintech 2016: OnDeck seeks scale through international expansion, (Euromoney), Rated: A

Its total lending to date is, for example, more than twice that of the two biggest UK marketplace lenders, Funding Circle and Zopa, combined. At the Innovate Finance Global Summit in London in April, there was much rumour and gossip about OnDeck’s ambitions to establish itself in Europe.
At OnDeck, loss rates look quite high already at around 6%. “That loss rate has remained stable since 2007 over a period in which we have grown and expanded rapidly,” says Young.

Sharks don’t like shark cages, ( Illinois Times), Rated: AAA

A bill to regulate online lenders that target small businesses with loans that can carry more than 100-percent annual interest rates is moving, albeit slowly, through the Illinois General Assembly.

Critics say that regulation as proposed could reduce access to capital for small businesses if rules are so onerous that lenders won’t do business in Illinois. As written, the bill would not allow loans to be pledged, sold or otherwise transferred except between lenders licensed by the state Department of Financial and Professional Regulation or traditional financial institutions such as banks or credit unions that are already licensed and regulated.

The bill would also bar online lenders from requiring that borrowers pre-authorize electronic withdrawals from bank accounts, which is common in the industry. If a loan is personally guaranteed by a borrower, the bill would require lenders to obtain credit reports and consider those reports in making loan decisions. Lenders would have to obtain $500,000 surety bonds that would be used to help consumers harmed by lenders who violate the law.

Asked by Sen. Emil Jones III, D-Chicago, the amount of OnDeck’s highest interest rate, Martha Dreiling, OnDeck’s vice president of operations, answered 99 percent during last week’s hearing.

“Our concern is, in typical Illinois fashion, we dive into the pool without testing its temperature,” Maisch said. “We certainly don’t want Illinois to be the first with so many burdensome regulations. There may be one or two bad actors, and we have folks rush in and try to regulate, and they go overboard.”

LendingArch Launches, Offering Canadians Personalized Loans, (Tech Vibes), Rated: A

Comment : article covering the Canadian market.

Arti Modi, CEO of Lending Arch launched the Vancouver-based company acts as a marketplace lending platform that rewards financially responsible Canadians with personalized, affordable loan options.

Lending Club Names Operations Chief, President, (American Banker), Rated: A

Lending Club said Thursday that it has hired Sameer Gulati, formerly of McKinsey & Co., to be its chief operations officer and promoted another executive, Scott Sanborn, to president. Both are newly created positions at the nonbank lender.

Gulati, who was a partner at McKinsey and led its digital banking practice, “has more than a decade of experience advising global and emerging financial services institutions on topics in retail banking, consumer credit, digital payments, and risk management,” Lending Club said in a press release.

Sanborn joined Lending Club as chief marketing officer in 2010 and was promoted to marketing and operating chief in 2013. He will now manage the company’s product lines, including personal loans, small-business financing and patient and education financing. He will also be in charge of marketing and product development.

 

P2P lending: will ‘light touch’ regulation work in India?, (Live Mint), Rated: A

Comment: Article covering the Indian market.

he first paper on the issue was released by the Securities and Exchange Board of India (Sebi) back in June 2014, but guidelines are yet to be finalized. The Reserve Bank of India (RBI) has also been examining P2P lending for some time now and is finally set to put out a concept note for public comments by the end of April.

The industry would like a minimal net capital requirement of Rs.1-5 crore since the platform is essentially a facilitator.

The experience of the microfinance sector may also be a useful guide on deciding whether interest rates charged on these platforms should be regulated in any way. The industry is opposed to any regulation of interest rates, but again the regulator may and should see this differently.

After staying away from regulating interest rates in the early years of microfinance, it took a crisis for the regulators to realise that some guidelines are indeed required. RBI now mandates a maximum margin over cost of funds that microfinance lenders can charge.

 

What’s in a Name? If It’s ‘P2P Lender,’ Gov’t Says Don’t Open, (Caixin), Rated: A

Comment: article covering the Chinese market.

China has halted the launch of companies with names suggesting they provide financial services, as regulators examine existing firms to make sure they follow new requirements for conducting operations online.

Policymakers aim to finish the check and establish a “negative list” approach to regulating Internet finance activity by the end of January, people close to the matter said.

 

Author: George Popescu

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