News

April 28th 2016, Daily News Digest

  • CFPB plans to regulate marketplace lending in the US.
  • RBI published proposed p2p lending regulation for India.
  • OnDeck is securitizing with S&P and DBRS in a private sale.
  • Yirendai is also securitizing by listing RMB 250m on Shenzhen exchange.
  • More information on Orchard’s secondary market plans.
  • Nordea, large multinational bank, is entering p2p equity crowdfunding.

 

Consumer Finance Watchdog Plans to Supervise Marketplace Lenders, (Wall Street Journal), Rated: AAA

The Consumer Financial Protection Bureau plans to bring the largest online lenders under its supervision as soon as late 2017, the first time the lenders would face federal scrutiny similar to that of banks, according to people familiar with the matter.

The agency aims to unveil a proposal this fall to supervise the largest so-called installment lenders that essentially offer small-dollar loans with set payment periods as well as lenders who tie such loans to car titles.

The CFPB is now considering broadening its definition of “installment” lending to wrap in marketplace lenders, which operate online and offer similar types of small-dollar loans with set payments, these people said.

Marketplace lenders don’t have a direct federal supervisor, though they are subject to consumer-protection laws overseen by the CFPB and the Federal Trade Commission. And some online lenders are subject to reporting requirements with the Securities and Exchange Commission.

LendingClub CEO Renaud Laplanche said in an earnings call Feb. 11 that regulatory developments that were likely to arise “will play to our strength.”

“I’ve seen institutions that thought they had a great compliance-management system” but “they didn’t look at themselves in a sufficiently dispassionate way that a third-party would or to the degree of scrutiny that the CFPB may,” said Anthony Gibbs, a former CFPB regional supervisor who is now a senior director with Alvarez & Marsal Financial Industry Advisory Services in Chicago. “This will be a wake-up call for some marketplace lenders.”

RBI proposes regulatory framework for P2P lending platform, ( Live Mint), Rated: AAA

The Reserve Bank of India (RBI) on Thursday proposed registering of peer-to-peer (P2P) lending platforms as non-banking finance companies (NBFCs) so that they can be brought under the regulatory purview of the central bank.

The banking regulator has suggested regulating the permitted activities of P2P lenders, along with capital requirements, governance and business continuity plans of such entities. The regulator, however, has stayed away from any strictures on the amount of lending that can be done through these platforms and the rate at which this lending is done, which is what the industry had sought during its discussions with the regulator.

Close to 20 new online P2P lending companies have been launched in the last one year. At present, there are around 30 start-up P2P lending companies in India, RBI said, quoting news reports.

“The platforms will be prohibited from giving any assured return either directly or indirectly. The platforms will be allowed to opine on the suitability of a lender and creditworthiness of a borrower. Adequate regulations on advertisements will also be put in place,” said the RBI in the paper.

Given that the lenders may include uninformed individuals, prudential limits on maximum contribution by a lender to a borrower/segment of activity could also be specified, the proposed guidelines noted.

The regulator also proposes that a fit and proper criteria be applied to promoters, directors and chief executive officers (CEO) of P2P platforms.

“It may be noted here that RBI has powers to regulate entities which are in the form of companies or cooperative societies. However, if the P2P platforms are run by individuals, proprietorship, partnership or Limited Liability Partnerships, it would not fall under the purview of RBI,” the regulator said in its paper.

Thus, the regulator suggests that these companies be asked to adopt an organisational structure and no entity other than a company undertake this activity.

Feedback on the RBI consultation paper has been invited till 31 May.

OnDeck Announces Pricing of $250 Million Securitization, (PR Newswire), Rated: AAA

OnDeck announced today that it has priced $250 million initial principal amount of Series 2016-1 Fixed Rate Asset-Backed Notes (the “Notes”) in a private asset-backed securitization transaction. The Notes will be issued in two classes consisting of $211.5 million initial principal amount of Class A Notes and $38.5 million initial principal amount of Class B Notes. The Notes were priced with an annual yield to expected maturity of 4.250% for the Class A Notes and 7.754% for the Class B Notes. It is expected that the Notes will be rated at the closing by both Standard & Poor’s Ratings Services and DBRS, Inc. in satisfaction of one of the closing conditions. The Notes will have a final legal maturity of May 2020.

The transaction is scheduled to close May 17, 2016, subject to customary closing conditions. OnDeck will act as the servicer of the loans securing the Notes.

The Company has deployed over $4 billion to more than 45,000 customers in 700 different industries across the United States, Canada and Australia. OnDeck has an A+ rating with the Better Business Bureau and operates the educational small business financing website

Yirendai Announces Completion of Issuance of Securities Backed by Loan Assets Facilitated Through its Online Marketplace, ( Yahoo Finance), Rated: AAA

Yirendai announced the completion of issuance of RMB 250 million asset-backed securities (“ABS”), the underlying assets of which are loans extended by a trust through Yirendai’s online consumer finance marketplace with a total principal of the same amount.

With the completion of issuance, the ABS products are expected to be listed for trading on the Shenzhen Stock Exchange within four weeks.

LendInvest Acquires £40 Million Warehouse Facility from Macquarie, (Crowdfund Insider), Rated: A

LendInvest, the property marketplace lending platform, has received a £40 million warehouse facility from Macquarie. The financing from Macquarie brings institutional investment for LendInvest to £230 million. Macquarie, based in Sydney Australia, is a global investment bank with offices in 28 different countries.

Christian Faes, co-founder and CEO of LendInvest, said his company was creating the most diverse capital base of any mortgage lender in the UK market.

In June 2015, Beijing Kunlun, the listed Chinese technology company, invested £22 million in LendInvest, followed by VC firm Atomico that invested £17 million in LendInvest in March of 2016.

Ray of sunshine could set off banks, ( The Australian), Rated: A

consumer adoption in the personal lending niche is in line with other disrupted industries

The slide, reproduced today and presented by Renaud Laplanche, founder of industry behemoth Lending Club, shows the rate of consumer adoption in the personal lending niche is right up there with other disrupted industries, including music, video and travel.

Laplanche noted that in those three industries, roughly 44 per cent of customers switched from incumbent providers to disrupters within the first decade.

The first product in marketplace lending, launched eight years ago, was a personal loan.

The average shift in market share since then has been 24 per cent. “So we’re right where we should be in terms of the adoption curve,”

Orchard: There are Two Sides to the Marketplace Lending Slowdown, ( Crowdfund Insider), Rated: A

Snitkof, one of the Orchard co-founders, stated that various originators are having down months or down quarters. But the assets class remains rather robust. “It is not bad, but it is the first time that some of the people in this asset class are like ‘wait,’ sometimes the people don’t pay you back. But that is lending. It is alright as long as you can measure it and as long as you can plan your investment strategy, you build in some buffer.”

“I don’t see things as being crazy but I don’t see stabilization. I think the market is getting more volatile. Again, this is just part of market cycles. I think the election cycle has something to do with it too. There were 10 to 15 people in the primary (that number has since been reduced) who were telling people how terrible things are and why they need to vote for them so things can stop being so terrible and that has an effect on people. If you look at regular macro stats out there things are really quite good.”

Orchard is building the secondary marketplace all in house. With the exception of custodianship and document transfer, all of the data flow and bid matching platform will be created by their development team. While the secondary market is not up and running yet, expectations are for the platform to be operational later this year. Orchard will launch their secondary marketplace with a curated set of partners and then expand from there. This will give them a chance to fully manage the process from end to end.

How alternative finance is making supply chain finance sexy – a Q&A with C2FO’s Colin Sharp, ( City A.M.), Rated: A

Specialist lending products are growing in popularity and some firms are looking at blockchain technology.

Platform C2FO is focused on helping to bring liquidity to business supply chains. It gives companies visibility of their entire chain, enabling them to pay suppliers early, utilising excess cash to generate a return. Suppliers (for whom the scheme is optional) simply register their interest in early payment and, via C2FO’s online marketplace, offer the discount they would be prepared to give in order to be paid early.

Fintech giant Klarna eyes payment deals with Google and Facebook, (DiGital), Rated: A

Comment: Many people consider Klarna to be a payments company. I consider it to be a lending company because it puts clients through underwriting and extends credit to them in the exact same ways as Affirm or Bread. Their term happens to be short, about 1 month. But anybody who puts clients through underwriting and has credit exposure is a lender. 

Swedish fintech giant Klarna is in talks with Google, Apple, and Facebook in pursuit of digital payment partnerships. “They are showing considerable interest”, says Klarna’s co-founder and CEO Sebastian Siemiatkowski.

“One of the major challenges facing Google and Apple is the fact that all banks are local,” “Scratch the surface and you will find that even global banks have different software system and different ways of organizing themselves. When global players cooperate with banks, roll out of their services are inert. That is not how they want to operate, they want to be global from day one,” he says, describing Klarna’s presence in 18 countries as “unique.”

MrSiemiatkowski claims a set up with a partner such as Google would take six to twelve months. The Klarna chief expects Facebook to launch its own payment service and says a partnership with the social network is likely to materialize.

Nordea is entering the p2p equity crowdfunding space, (Breakit), Rated: AAA

Comment: article in Swedish about the Swedish market. 

Nordea Bank AB, commonly referred to as Nordea, is a Swedish financial services group operating in Northern Europe. Nordea currently serves 11 million private[3] and 700,000 active corporate customers. The group also operates an internet bank, which has more than 5.9 million online customers doing more than 260 million payments per year.

Nordea, on Tuesday through a series of Tweets, announced their apparent entering of the p2p equity crowdfunding market. It is a surprising move as one would expect such a bank to enter the p2p lending market and not the equity crowdfunding market. The service will be rolled out first in Finland where the crowdfunding regulation is better defined . Large Bank stated that more information will be released tomorrow , Wednesday, after the quarterly report is released.

Sebastian Wikström, Head of Nordea’s alternative financing, on the new service. “We are constantly approached by companies looking for alternative forms of financing. Equity crowdfunding is still a very immature industry. Where can we as a bank go in with confidence that the industry needs, ”

With this service, the bank takes a share of the amount collected for the companies that manage to have a succesful raise on the platform. The service will  otherwise be completely free for both companies and investors. Sebastian Wikström says that it is also a way for Nordea to reach out to new potential customers.

There are already two Swedish players in the Finnish market, the domestic platform Invesdor and the Swedish Fundedbyme.

Marketplace Lending Power 20 , ( Mayava), Rated: A

Mayava Capital honored the most influential people in small business lending in its Marketplace Lending Power 20 awards.

Some recipients in order of rank:

Lending Club CEO & Founder, Renaud Laplanche
Frank Rotman,Founding Partner, QED Investors
Prosper CEO, Aaron Vermut
OnDeck Capital CEO, Noah Breslow
Kabbage COO & Co-founder, Kathryn Petralia
Credit Karma CEO & Founder, Kenneth Lin
LiftForward President & CEO, Jeffrey Rogers
Patch of Land former CEO* & Co-founder, Jason Fritton
Lendio CEO & founder Brock Blake

Finance Company Kabbage Kicks Off First TV Campaign, ( Media Post), Rated: A

Kabbage is well-known for its social media advertising, but the financial services company is now introducing its first TV campaign with its new creative shop Union.  In addition to two 30-second TV ads, the campaign includes two 15-second YouTube pre-roll spots, customer emails, dashboard banners and social media.

“Loans aren’t always the sexiest things to talk about, but for small businesses they are crucial to survival and growth,” says Lance Martin, ECD and Partner at UNION. “We thought it would be really funny to exaggerate some of the sacrifices business owners are willing to make to get the funding they need.”

The 30-second Family Time spot shows a man using his family as a sweatshop even joking that his dad earned the corner office, which turns out to be the backseat of the family minivan.

PeerStreet Named Innovator of the Year in Lending by Think Realty Magazine, ( Digital Journal), Rated: B

PeerStreet was recognized as the 2016 Innovator of the Year in Lending.

PeerStreet is a marketplace lending platform for real estate debt. Founded by real estate attorney, Brew Johnson and former Google executive, Brett Crosby.

From idea to innovative market leader: A roadmap for sustainable marketplace lending growth, ( PwC), Rated: B

This paper isn’t an instruction manual or a step by step playbook; instead, it aims to provide guideposts to help marketplace lenders, both existing and potential, make more effective strategic decisions, and to highlight potential areas of opportunity – and risks – along the way. We also provide insights on how to take these general guidelines and convert them into specific tactical next steps for an individual company. By applying these guiding principles, platforms can put innovation into action in order to enhance their operations and differentiate their offerings at each stage of their development.

Brief: Luke Lang & Giles Andrews Among the “40 Coolest People in UK Fintech” List, ( Crowdfund Insider), Rated: B

Business Insider announced its 40 Coolest People in UK Fintech list.  Among those featured on the list was Crowdcube co-founder, Luke Lang, and Zopa’s co-founder, Giles Andrews.

 

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.

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