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June 14th 2016, Daily News Digest

US

  • Retail investor’s from online forum’s advice to Lending Club. Worth attention given retail lenders vote with their money.
  • AlphaFlow’, the real estate crowdfunding, Fund 1 data and raising of Fund 2.
  • JPMorgan rolls out p2p payments platform.

UK

  • RateSetter’s entering SME lending market confirmed.

Australia

  • Ex-EagelWood CEO investing $1mil in receivable backed SME lender Marketlend.
  • Westpac Bank invests $800,000 in SME lender aggregator Valiant Finance.

China

  • Government stuck playing whack-a-bubble.

India

  • P2P lenders contemplating using blockchain tech to improve transparency and to automate and record transactions.
United States

How LendingClub Can Win Back The Trust Of Investors, (Seeking Alpha), Rated: AAA

LendingClub recently suffered a major blow in investor confidence after Renaud Laplanche, CEO and founder of LC, was forced out by the board.

This article provides eight steps that LC should consider for winning back the trust of investors.

The author composed these steps, but drew heavily from investor feedback on P2P lending forums such as Lend Academy as well as articles from the WSJ and SA.

How to win back the trust of stock investors

  1. Convince them that growth in loan originations going forward will be sustainable.
  2. Segregate growth in loans that are potentially in violation of state usury laws in financial statements.
  3. Convince them that LC’s underwriting model is consistent with Fair Lending laws.
  4. Finally, stock investors will need to see LC win back the trust of retail investors.

How to win back the trust of retail loan investors

  1. Reach out directly to P2P lenders via lending blogs like lendacademy.com and address their concerns.
  2. Construct a Bankruptcy Remote Vehicle (BRV) for all issued notes and more robust backup servicing.
  3. Convince them that institutional investors and insiders will not receive preferential treatment over retail investors.
  4. Show how loan performance would likely be affected by a recession.

AlphaFlow Fund 1 intermediary results and AlphaFlow Diversification Fund 2 is Now Live for Investment! (Email), Rated: AAA

You make 1 investment in the Diversification Fund. AlphaFlow invests in 75-100 loans across the real estate crowdfunding industry. Receive monthly distributions from your diversified portfolio of loans.

real estate price vs income chart

AlphaFlow Fund 1 contents (found here) vary in Rate between 10% and 12.6% with no defaults:

alpha flow 1 results

JPMorgan Chase & Co. Rolls Out Real-Time P2P Payment Service, (Bidness Etc), Rated: AAA

In March, JPMorgan, Bank of America Corp., US Bancorp, and Wells Fargo & Co. jointly announced the acquisition of US’ largest real-time money transfer network, clearXchange. Bank of America and US Bancorp have already rolled out their real-time P2P transaction service. JPMorgan Chase, according to Reuters, intends to launch the service later this year, while Wells Fargo is due to introduce it by mid-2016.

Instead of succumbing to the threat of financial disruption in the industry, banks moved to integrate technology in their existing traditional financial services. Banks can either collaborate with fintechs and other banks or develop their own fintech capability. As fintechs have made payment and lending convenient, fast, and cheaper, customer inclination to use cashless financial services has kept growing.

Venmo, one of PayPal Holdings Inc. digital wallets, managed P2P transactions worth $7.5 billion last year, as per Reuters. Its rapid growth and popularity could have been a threat to banks, were the service not dependent on the latter for completion of the P2P transactions. Therefore, the risk of competition gets subdued since banks control the processing time.

In March, PayPal’s global head of product and engineering Bill Ready expressed skepticism about the potential of clearXchange. “The banks have a hard time working with one another.” He said that the banks will not be able to “recreate the viral nature of Venmo.” The company however has welcomed JPMorgan’s introduction of real-time P2P payment services. “We are a major partner to the banks to make that happen.”

Traders Are Bearish Lendingtree Inc After Today’s Gap Down, (Franklin Independent), Rated: A

Out of 10 analysts covering LendingTree (NASDAQ:TREE), 10 rate it a “Buy”, 0 “Sell”, while 0 “Hold”. This means 100% are positive. LendingTree has been the topic of 11 analyst reports since August 4, 2015 according to StockzIntelligence Inc.

LendingClub could teach Theranos a thing or two about crisis management, (Compliance Week), Rated: A

In business, everyone knows the first rule of crisis management is swift action to reassure stakeholders that the company is addressing risks that have been uncovered or alleged. When the underlying business model has been called into question, as it has at two relatively young technology-based companies, abiding by that rule is that much more critical.

Then how to explain why one of the two companies, LendingClub, has followed the textbook crisis management plan while the other, Theranos, has failed to communicate thoroughly and effectively?

On the surface, the answer might be that as a publicly listed company whose board members clearly understand their fiduciary responsibilities to a broad range of shareholders, LendingClub knows what’s required of it to halt a declining stock price. Is it possible that without a stock price to defend and a commensurate sense of what shareholder value there is to preserve, Theranos may have been less aware of how dire the situation is.

Despite Funding Issues, The Long-Term Bull Case For OnDeck Is Still Valid, (Seeking Alpha), Rated: A

OnDeck Capital has had difficulties meeting its origination and profitability targets due to tightness in the credit markets.

Consequently, the stock trades around book value, limiting downside.

With a valuable proposition for SMBs and a massive runway for growth, OnDeck can be worth substantially more than just its book value.

Near current levels, it represents a growth company at a value price.

United Kingdom

RateSetter’s SME Lending Entrance Confirmed, (PYMNTS), Rated: AAA

Reports on Sunday (June 12) said RateSetter has already hired a team of specialists to help it enter into the SME lending competition, which is dominated by top players, like Funding Circle. The British Business Bank is said to be funneling more than $14 million in small business loans through the RateSetter platform.

The executive said RateSetter will aim to provide up to $1.4 million worth of financing to small business borrowers, with terms lasting up to five years, according to reports. Last month, reports said RateSetter secured a license to loan to businesses.

Australia

Australian P2P platform Marketlend closes $1m investment round led by ex-EagleWood CEO Barlow, (AltFi), Rated: AAA

One of Australia’s leading peer-to-peer/marketplace lending platforms Marketlend has closed a $1m investment round led by ex-chief executive of Eaglewood Capital Jon Barlow.

Marketlend was founded in 2014 by Leo Tyndall. The platform allows investors to put their cash to work in chain or debtor lending facilities secured by short-term receivables. These are mostly from mid and large sized Australian businesses. The investment round represents the first injection of of external cash for Marketlend, which was previously funded by Tyndall since its launch.

Barlow has also been appointed as a non-executive member of Marketlend’s board of directors. Mati Szeszkowski, the former leader of private equity power house KKR’s European technology team, in addition to two Australian investors also participated in the round. Barlow and Szeszkowski have also committed to fund debt investments on the Marketlend platform.

He is the founder and former CEO of Eaglewood Capital Management, one of the world’s leading P2P asset-management firms with approximately $2bn of assets under management. Under Barlow’s leadership, the firm completed the first-ever securitisation of P2P loans and launched the first and largest P2P Global Investments trust, listed on the London Stock Exchange.

Barlow says he is bullish on the Australian market as a whole but also believes Marketlend’s model, which includes insurance against borrower defaults for investors and debtors, is strong.

Sydney startup Valiant Finance closes $800,000 seed round led by Westpac, (Startup Smart), Rated: AAA

Valiant Finance is an online platform aiming to help SMEs secure loans with “unprecedented transparency”, matching users with lending partners through an algorithm.

“We went through a lot of different routes to have conversations with a lot of people, both institutional and private investors,” Molloy tells StartupSmart.

“We had a conversation with Reinventure relatively early in the piece and it became clear pretty quickly that they gelled strongly on the strategic proposition and could see the gap in the market in serving this pain point for small businesses.”

The first eight months of Valiant Finance’s operations have focused on working closely with the startup’s early adopters and fine-tuning the lending process, Molloy says.

“Valiant is different to a lot of other online lead generator platforms because we’ll always have that human touch element to support customers when they need it,” Molloy says.

P2P lender Bigstone confident of success, (The Australian), Rated: A

Bigstone, a fintech peer-to-peer lender, believes the increasingly crowded online small-business lending market is far from saturated and that being a latecomer will bring competitive advantages.

In February, ThinCats revealed that after 12 months of operations it had originated $2m of loans from 18 transactions and forecast hitting $20m this year and $100m next year. The platform has attracted about 300 registered investors to fund the loans, typically $200,000 from 20-25 lenders.

Bigstone is targeting the $10,000 to $250,000 loan space at interest rates of 8-24 per cent, based on the riskiness of a borrower, who receive funds in up to two weeks.

China

China stuck playing whack-a-bubble, (Nikkei), Rated: AAA

Comment: I really love the title of this article. Well put.

Chinese authorities are scurrying to curb bubbles in the commodity market and other segments of the economy, as liquidity swells and investors find themselves in over their heads.

The People’s Bank of China, the country’s central bank, got an earful about this in mid-May, when some 50 investors claiming to be fraud victims held a demonstration in front of its headquarters. Such demonstrations are rare in central Beijing, where security is tight. Plain-clothes police officers, wearing sunglasses, soon moved in to disperse the crowd, resulting in scuffles.

The liquidity glut has worsened as banks have continued to boost lending despite the slowdown in gross domestic product growth.

According to estimates by Nikkei, China’s nongovernment debt — that held by companies and households — totaled 159 trillion yuan at the end of 2015. The ratio of such debt to GDP stood at 236%, up as many as 100 percentage points from the end of 2008 and higher than the comparable figure in Japan during the bubble period of the late 1980s.

“Authoritative” warning

In the midst of all this, the People’s Daily newspaper — a Communist Party mouthpiece — on May 9 published a front-page interview on the economy with an unnamed “authoritative figure.”

The interviewee is widely believed to have been someone close to President Xi Jinping — perhaps someone like Liu He, Xi’s top economic adviser and director of the party’s Office of the Central Leading Group for Financial and Economic Affairs. At any rate, the individual repeatedly warned of excess debt and a possible financial crisis.

“Risks are rising in the foreign-exchange market, stocks, bonds, real estate and bank credit because of high leverage,” the interviewee stressed, noting that if it is not controlled, the leverage “will lead to systemic financial crisis and negative growth.”

Internationally, many have the impression that China’s authorities are confident in their ability to control the bubbles. Comments like that suggest the country’s economic bureaucrats may not be quite so sure of themselves.

India

Peer-to-peer lending startups such as Faircent eye blockchain technology, (The Economic Times), Rated: A

Peer-to-peer lending startups such as Faircent, Micrograam and i-lend are increasingly examining the potential of integrating blockchain technology into their systems to improve transparency levels, and act as a ledger system to automate and record transaction on their platforms.

“Blockchain technology could act as an automated ledger system in recording transactions between the buyer and seller,” said Rangan Varadan, founder of Micrograam.

“This can be done without the use of cryptocurrency. This could be a transformational tool in doing payment transactions,” he said. A technical innovation of bitcoin, blockchain serves as the public ledger for all bitcoin transactions.

VVSSB Shankar, cofounder of ilend, said: “Cryptocurreny being introduced in India is highly unlikely and blockchain needs a cryptocurrency in the back end. However, since blockchain is an open source, several people are working on it. It could be a matter of time before the technology evolves and we could integrate it into our system, making automated records of peer-to-peer transactions.”

Rupaiya Exchange, Taking Fintech by Storm, (PR Newswire), Rated: B

Over the last 6 months the platform has facilitated a loan origination in excess of INR 40 Crore and given offers in excess of INR20 Crore – of this an amount in excess of INR 6 Crore has been successfully disbursed.

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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