News

April 29th 2016, Daily News Digest

  • Comparing platform’s strategies on timing the loan availability to investors
  • Obama’s changes to the student loan space and their effects
  • ThinCats funds £3.5m SME loan.
  • The 3 best options for banks to enter line lending.
  • Lending Club’s earning call scheduled.

The Timing of Listings, (Orchard Blog), Rated: AAA

Orchard is visualizing the different strategies employed by originators for releasing their whole loan listings.

timing of listings lending club prosper funding circle

There are two main ways that originators have been handling this: making new listings available all at once or slowly releasing them over several minutes.

When listings are released at the same time, investors have more options to choose from and can decide to pass on a listing in favor of another. Additionally, they can decrease overhead processing time by assessing multiple listings simultaneously. Once they decide on the listings that they want, they can submit a batch order request. However, this can disadvantage slower systems or complex models which may still be analyzing listings while other investors snatch up loans.

Conversely, when listings are released gradually, investors have to be more selective as they are unsure whether a more attractive loan will appear later in the release, passing up on otherwise great loans. They will also need to decide quicker as there are fewer available loans at any given time and high demand. Furthermore, due to service-level agreements and API restrictions, investors may not be able to see all of the listings for a given release. However, this is a double-edged sword since that means other investors may not see the same listings that they do, giving the investor more chance to fund the listing.

Here’s What Obama’s New Student Loan Moves Could Mean for You, (Money), Rated: AAA

Nearly 5 million borrowers are already enrolled in  income-driven repayment enrollment.  Still, one in four borrowers are in default or struggling to stay current on their loans, and one government study found 70% of borrowers in default could have qualified for an income plan that would have reduced their monthly bill. King said the department aims to enroll another 2 million borrowers within a year and has partnerships with more than 40 colleges and business groups to help meet that goal.

A simpler way to navigate all your potential repayment plan options. The Department of Education today launched a new landing page for borrowers to help them figure out which repayment plan is best for their personal situation based on five yes or no questions.

One of the major complaints about the student loan servicing industry is that there aren’t any federal standards to ensure that borrowers are treated fairly. But today officials released a set of principles for servicers to follow. They range from broad, vague assurances such as access to “accurate and actionable information” to more specific guidelines, such as automatically applying any payment that exceeds the minimum due to the loan with the highest interest rate.

The CFPB unveiled what it has dubbed the “Payback Playbook,” which would provide individualized repayment information on monthly bills, emails, and loan accounts. The playbook would show a limited number of plans each borrower is eligible for, how much borrowers would pay under each plan, and for how long.

Officials are working with the credit reporting industry to write guidelines to ensure that student debt is reported consistently across borrowers and that it accurately reflects their repayment activity.

Earlier this month, the Education Department announced plans to transition to a new, centralized servicing system. Details are limited, but a one-stop portal for all borrowers to make payments and get information about their loans would be a major change in how borrowers manage their debt month-to-month.

ThinCats Lists Largest Ever Non-Property P2P Loan, (Alt Fi News), Rated: A

The £3.5m loan has been issued to LAMP, an insurance group focusing on International Healthcare, Legal and Special Lines of insurance worldwide.

Last December, ESF Capital – an institutional P2P accelerator business – acquired a 73.4% equity stake in ThinCats. For a number of months prior to the acquisition, the company had been supplying lending capital to the ThinCats platform, with the long-term plan of acquiring a controlling stake in the company.

The LAMP deal seems to have ousted from the top spot a loan issued by ArchOver to the healthcare company Duradiamond Healthcare in March. The loan, worth £2.3m, was then billed as the largest non-property related working capital facility ever raised by any platform anywhere in the world.

LendInvest Clinches Warehouse Funding Line from Macquarie – Securitisation Inbound?, ( Alt Fi News), Rated: A

The smoke signals suggest that LendInvest may be laying the foundations for a securitisation, which would be the platform’s first. Warehouse funding facilities often precede securitisations. The first securitisation in the UK’s marketplace lending space took place earlier this month, a Deutsche Bank deal comprised of £130m of Funding Circle loans.

Brazil online card company Nubank gets $53 mln loans from Goldman Sachs, (Reuters), Rated: A

Brazil’s online credit card provider Nubank secured about $53 million in credit lines from a unit of Goldman Sachs Group Inc, boosting the three-year-old company’s effort to expand a fast-growing client base.

Goldman Sachs Specialty Lending Group arranged the deal, which consists of one revolving credit facility for $25 million and another for 100 million reais ($28 million).

Nubank, one of the biggest names in Brazil’s nascent financial technology sector, had previously raised nearly $100 million in equity fundraising led by Sequoia Capital, Tiger Global, Founders Fund, Kaszek Ventures and QED Investors.

The Three Best Options for Banks to Enter Online Lending, (Orchard Blog), Rated: A

Referrals. Providing referrals is probably the easiest way for banks to get started in an online lending partnership.

Investments. Banks have had access to very cheap capital for many years now. By deploying some of this capital on online lending platforms as Union Bank and many other banks have done banks can earn their investors a significant return on their money.

Lending as a Service. This is the most interesting option in my opinion. One of the true innovations of online lending is this “underwriting in a box” concept. Because the underwriting process is done substantially online platforms can package up this service and make it available to any lender.

Now, I should point out banks have other options when it comes to partnering with online lending platforms. Some banks have bought equity in lending platforms. Prosper’s $165 million funding round in April 2015 had no less than five banks participating. The venture capital arm of Wells Fargo, Norwest Ventures was an early investor in Lending Club and was one of the largest shareholders during their IPO.

Switching Costs, Retail, and the Transformation of Financial Services, ( Linked-In), Rated: A

The Internet has demonstrated its ability to reduce switching costs across a variety of industries, resulting in greater consumer choice, lower costs, and improved customer experience. As customers have more options, providers of products and services have a higher standard for customer acquisition and retention. This incentivizes them to offer better products at better rates and to consistently raise the bar on customer service.  Companies who embrace this thinking will be rewarded with brand recognition, market share, and customer loyalty for years to come.

Brief: Lending Club Schedules Q1 Earnings Release & Call for May 9th ( Crowdfund Insider), Rated: A

The management conference call will take place at 5PM ET (2PM PT).  A live webcast of the call will be available here: http://ir.lendingclub.com

Alternatively, you may dial in at +1 (888) 317-6003, or outside the U.S. +1 (412) 317-6061, with conference ID 1490986, ten minutes prior to 5PM ET.

The CFPB Sets Its Sights On Marketplace Lending, (PYMNTS), Rated: B

Comment: we covered these news with the Wall Street Journal yesterday. However it is important and we will remind our readers here the news.

The new idea being floated involves classifying marketplace lenders, who operate online and also offer smaller loans with set payments, as installment lenders that are under the CFPB’s jurisdiction and regulations.

The CFPB has been pursuing this quietly for some time. Last month, it began soliciting consumer complaints about marketplace lending, writing in a notice to consumers that marketplace lending “does not have the same history of government supervision and oversight as” traditional banks and credit unions.

Among the larger players likely to be effected by this move are Lending Club and Prosper — neither of which had any direct comment on the recent move by the CFPB. However, a previous statement by Lending Club CEO Renaud Laplanche indicates that it is not overly worried and actually thinks a stricter regulatory environment helps its business.

Marketplace lenders often say they already comply with existing consumer protection laws, but former CFPB examiners say some of the nonbank lenders’ own reviews aren’t carried out with the same rigor as a CFPB examination.

“This will be a wake-up call for some marketplace lenders,” he told The Wall Street Journal, noting that lenders often think they are more compliant than they are and are somewhat less likely to hold themselves accountable to the same standards as a third party would, particularly when that third party is the CFPB.

Overfunding on Crowdcube: WiseAlpha CEO Ahmad Discusses Growth and Fintech Disruption, ( Crowdfund Insider), Rated: B

wiseAlpha, an online platform that allows people to invest in secured corporate loans of blue-chip British brand name companies such as Virgin Media, RAC, United Biscuits and Eddie Stobart.

The fintech company is reaping the benefits of partnering with Crowdcube, having raised 120% of its initial £350,000 goal with 12 days remaining on the campaign.  To date, over £421,229 has been raised by over 194 investors for 7.14% equity; £100,000 was the largest investment.

“The secured corporate loan market has been slow to adapt to changes in financial technology and has limited investors of all sizes accessing what we believe is an attractive asset class. WiseAlpha is aiming to change that and bring a wider investment audience to the market.

PledgeMe Receives FMA Approval For Upcoming Peer-to-Peer Lending Platform, ( Crowdfund Insider), Rated: B

The co-founder and CEO of PledgeMeAnna Guenther, announced the New Zealand-based crowdfunding portal has received approved by the Financial Markets Authority (FMA) to launch its very own peer-to-peer (P2P) lending platform, PledgeMe.

In order to participate on PledgeMe.Lend, companies need to be the following:

  • Be a legal entity (i.e. a registered company, charity, society or school)
  • Show an ability to repay the loan.
  • Have a clear dollar figure for the loan.
  • Have a clear reason for the loan.

 

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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