- A lot of news today, and today we have an especially good international section. Please do pay attention to the Australian, Singapore and China sections in particular.
- (And Lending Times technical team reports that yes, Mailchimp has not answered any of the multiple requests for support from a paying client in 17 hours. We will send today’s newsletter by hand again using the older design template.)
- A PeerIQ update showing that the ABS market is getting hot on the tail of a few good news. “Repeat ABS investors are now looking upstream to capture additional whole loan economics.”
- A great article studying the impact of Madden vs Midland decision on Lending Club’s numbers in 2nd circuit vs other regions. Result: no impact. The article also shows Prosper data and references an interesting 2009 FED paper that claims ” loans sold into the secondary market through originate-to-distribute underperformed other loans by 9 percent”.
- Jefferies officially revives the Lending Club bond. Goldman Sachs is ready to follow suit depending on the results of this sale.
- A reminder that Goldman Sachs got 20,000 new customers in 3 months for their internet banking by offering online savings accounts was 1.05% while its interest rate on a 5-year CD was 1.85%.
- A reminder that regulators are thinking of treating SME loans under $100,000 like personal loans which will completely change the industry.
- Marlette closes easily on their 2nd securitization. “Marlette’s busines model ensures an alignment of interests among the company, the originating bank and institutional loan buyers,” Kroll Bond Ratings wrote in its presale report.
- Oxford economist claims that fintech opportunities are still enormous.
- A reminder that the FCA is investigating the p2p space.
- Peter Thiel invest in €15 million round in Deposit Solutions GmbH, a fast growing fintech innovator operating in the €9 trillion market for retail deposits in Europe. An interesting article on our recent articles about “deposit tech” startups for banking, a source of partners and perhaps capital for the real money making side, lending.
- ECrowd! obtains Spanish license to operate.
- The crowdlending market in Switzerland is booming and has opened new opportunities for entrepreneurs. Today, there are 7 crowdlending platforms. There should be plenty of capital available in Switzerland and I expect Switzerland to become a hotbed of fintech together with the rest of the financial capitals of the world.
- As we previously shared Deal4Loans, owned by Mywish, raised $15m. The interesting part is that Mywish Marketplaces was profitable from day 1, but raised the funds to expand into more verticals with new financing products for Indian consumers.
- Faircent appointment of Shivam Gupta, who was a part of the global risk management team of Standard Chartered Bank based in Singapore, as chief risk officer.
- A good article with a survey of the different alt lenders in Singapore and explaining Validus Capital’s approach to offering investors insurance in their investments from an insurance company.
- After launching in August 2015, HashChing already surpassed $1bil in home loans. The company applied the fintech approach to traditional mortgages. The numbers are staggering because 1200 mortgages in expensive cities do add to $1bil in origination.
- An interesting article explaining how Baidu, the Google of China ,is entering the finance space in partnership with Citi Group. We covered the ZestFinance investment. Here is a little bit more information.
- United States
- The marketplace lending market has received an influx of positive news recently, (Peer IQ), Rated: AAA
- Little Change in LendingClub Loans Since Madden Decision, (BNA), Rated: A
- Jefferies revives stalled Lending Club bond: sources, (Reuters), Rated: AAA
- Goldman Sachs Sets Its Eyes on Retail Banking (GS), (Investopedia), Rated: AAA
- The Realities Of Alt-Lending Regulation Begin To Set In, (Pymnts), Rated: A
- REFILE-Marlette gets second ever online loan ABS over the line, (Reuters), Rated: AAA
- United Kingdom
- Oxford economist John Kay: Where the opportunities are for fintech, (Alt Fi Credit), Rated: A
- City regulator warns on peer-to-peer lending, (Financial Times), Rated: A
- European Union
- Renowned investor Peter Thiel increases investment in leading European fintech, Deposit Solutions, (Press Release), Rated: AAA
- ECrowd! Spanish Crowdlending Platform Receives License by the CNMV, (Crowdfunding Insider), Rated: A
- The era of Crowlending opens new market for startups, (Startup Ticker), Rated: AAA
- India’s Mywish Marketplaces raises $ 15 M to expand to new financial products, (Tech Crunch), Rated: AAA
- P2P lender Faircent makes strategic C-suite appointments, (Economic Times), Rated: B
- Online lending platform to offer investor insurance, (Straits Business), Rated: AAA
- Online home loan marketplace exceeds $1 billion in loans, (Broker News), Rated: AAA
- How Chinese Search Giant Baidu Is Getting Deeper Into Banking, (Fortune), Rated: AAA
The marketplace lending market has received an influx of positive news recently, (Peer IQ), Rated: AAA
The WSJ reports that Moody’s removed Class C mezzanine bonds issued by CHAI 2015-PM1, 2015-PM2, and 2015-PM3 from downgrade review and confirmed Ba3 rating.
Little Change in LendingClub Loans Since Madden Decision, (BNA), Rated: A
So far, LendingClub loans haven’t changed in average interest rate or risk, either in the 2nd Circuit or nationwide.
Both the total number and value of loans and the amounts arranged through the company have only grown, not diminished, while average FICO scores measuring a borrower’s credit rating remain consistent, and internal loan grades have remained the same. One exception is that the average value of borrowers’ previously requested FICO score did increase steadily since the decision, even though FICO scores at the time of loan issuance did not.
LendingClub has also continued to arrange loans to borrowers in the 2nd Circuit that surpass the interest rate caps in those states. The Madden decision does not prevent national banks from providing loans above a state’s interest rate cap. Instead, it applies to debt collection agencies that purchase those loans.
As a result of the court’s decision, LendingClub in February renegotiated terms with WebBank—the Utah bank that originates all of the loans through the online service (40 BBD, 3/1/16)
Under the new arrangement, WebBank maintains ongoing accounts for the borrowers and receives regular payments from LendingClub—called “loan-trailing fees”—rather than a single lump sum fee on every loan it originates. The loan trailing fee is based on the total amount serviced by the bank and a “loan fee factor.” A LendingClub representative told Bloomberg BNA that the company does not publicly disclose the amount of the loan fee agreement with WebBank.
Different picture for Prosper
Representative for Prosper attributed any changes in lending to general market fluctuations but would not comment further for this story.
A 2009 paper from the Federal Reserve Bank of Atlanta said that loans sold into the secondary market through originate-to-distribute underperformed other loans by 9 percent. A 2010 academic paper funded by the FDIC’s Center for Financial Research also implicated the originate-to-distribute model in the subprime crisis.
Author and University of Michigan Finance Professor Amiyatosh Purnanandam told Bloomberg BNA that part of the problem with the originate-to-distribute model is that once the debt is sold, the originating bank has nothing at risk and the debt buyers don’t always have the skill in evaluating good borrowers as national banks do.
Jefferies revives stalled Lending Club bond: sources, (Reuters), Rated: AAA
Comment: We covered these news last week as well. At that time it was more of rumor. It seems it’s real news now.
Jefferies has revived its stalled Lending Club loan securitization in a club-style deal it has begun to pre-market to only a few select investors, two buyside sources with knowledge of the trade told IFR.
The bank is now looking to sell a two-tranche trade that could offer yields in the 4.25%-7% range, one of the investors said.
The top class of notes of slightly less than one-year were about 60% subscribed, while a longer 2-year tranche was already fully covered, the investor said.
The near-prime loan securitization was shelved after Lending Club said it had repurchased a US$22m pool of loans sold to Jefferies under Laplanche’s watch that included falsified documentation.
Goldman Sachs also hit pause on its potential bond sale of prime Lending Club loans.
But bankers told IFR that Goldman could now look to revive its bond deal, if the Jefferies trade finds favor with investors.
Goldman Sachs Sets Its Eyes on Retail Banking (GS), (Investopedia), Rated: AAA
According to the Wall Street Journal, more than 20,000 new customers have opened internet bank accounts with the Goldman unit since it launched three months ago. Unlike other Internet-only retail banks that tend to offer a wide range of services, Goldman’s products are geared towards long-term savings, and it solely offers its customers the option to open traditional savings and certificate of deposit (CD) accounts. As of July 20, 2016, the bank’s interest rate on online savings accounts was 1.05% while its interest rate on a 5-year CD was 1.85%. In many cases, these rates are a lot higher than what traditional banks pay their customers. For example, Wells Fargo (WFC), Citibank (C), Bank of America (BAC) and Chase (JPM) all pay less than 0.03% APY on regular savings accounts. GS Bank can offer above-average interest rates to its depositors because they do not have the overhead expenses of a typical brick and mortar bank. (See also, The Pros And Cons Of Internet Banks.)
For Goldman Sachs, savings accounts may not be as exciting as the main investment banking business. Yet, the company still benefits from expanding into retail banking, enabling Goldman Sachs to diversify its customer base and tap into a segment of the market, retail investors, that they have been unable to serve in the past. GS Bank will also help boost Goldman’s overall liquidity, and keep the company compliant with new regulations calling for more liquidity from financial institutions. Around the same time GS Bank was launched, the Federal Deposit Insurance Corporation (FDIC) proposed new rules that would require banks to own sufficient ‘‘easy-to-sell’’ assets that would be able to cover any and all liabilities coming due within a one year period. (See also: The History Of The FDIC.)
The Realities Of Alt-Lending Regulation Begin To Set In, (Pymnts), Rated: A
Comment: we covered this yesterday as head news. However it is so important that we would like to remind our readers just in case.
“I suspect more regulation will come to the space, and I think that will suit us well,” said PayPal VP and General Manager of Small Business Lending Darrell Esch in an interview with Forbes last year.
When asked by PYMNTS whether he was concerned about incoming regulation on the space, OnDeck Vice President of External Affairs and Associate General Counsel Daniel Gorfine simply stated, “No, not concerned.”
Reports from Bloomberg BNA this week, however, could signal a shift in how alternative lending players are reacting to the incoming threat of regulation.
“Strong evidence indicates that small business loans under $100,000 share common characteristics with consumer loans yet do not enjoy the same consumer protections,” the Treasury stated in its May report. “Treasury is willing to work with members of Congress to consider legislation that addresses both oversight and borrower protections.”
“I would have to do everything differently,” said CAN Capital Chief Legal Officer Parris Sanz in an interview with the publication. “I can’t give you a rundown of all the various moving parts that would be affected, but I can tell you for sure that it would be significant.”
In a separate interview with Bloomberg BNA, Richard Eckman, a partner at Delaware-based Pepper Hamilton LLP, said alternative lenders are probably wise to pay attention to this possibility.
REFILE-Marlette gets second ever online loan ABS over the line, (Reuters), Rated: AAA
Marlette Funding got its second-ever bond backed by personal loans easily over the line on Wednesday, but investors said the primary market was still wary of deals from the online lending industry.
Marlette’s deal narrowed its pricing from guidance, but investors said global low rates had turned all types of US consumer debt-related assets with yield into a hot commodity.
And similar deals from a year ago were pricing far tighter.
Marlette priced its top US$149m of 1-year Single A (rated by Kroll) notes at 225bp over EDSF, tighter than a 235bp-250bp area guidance, two investors said.
Last July, Citigroup cleared its top class of A3 (rated by Moody’s) bonds – one notch lower – of Prosper Marketplace loans at 140bp over EDSF, according to IFR data.
Riskier Ba3 notes from Citigroup priced at 385bp over interpolated swaps, whereas Marlette’s BBs Wednesday printed at a whopping 825bp over swaps.
By another measure, the BBs were about 75bp more than a deep subprime auto ABS sold this week by lender Consumer Portfolio Services, according to IFR data.
“Marlette’s business model ensures an alignment of interests among the company, the originating bank and institutional loan buyers,” Kroll Bond Ratings wrote in its presale report.
The hunt for yield, meanwhile, has prompted two banks with exposure to online loans to revive postponed deals in the primary market, buyside sources said.
Non-bank Jefferies has rekindled a roughly US$140m bond deal of near-prime Lending Club loans, which was shelved for two months after Laplanche stepped down from Lending Club.
Bankers said that Goldman Sachs could also look to bring out its paused prime-quality Lending Club deal after Jefferies.
Oxford economist John Kay: Where the opportunities are for fintech, (Alt Fi Credit), Rated: A
Large scale financial services firms are still ripe for disruption, according to the economist John Kay, who believes the City of London and other major financial centres have taken a wrong turn.
Kay explains that he sees four main ways that fintech can be successful and help the real economy by disrupting financial services.
These are firstly; the payments system This is the system that enables the payment of wages and salaries as well as bills. Secondly; capital allocation. This how peoples’ savings become invested in the physical assets and infrastructure of a country. Risk management is third, i.e mitigating the risks of everyday life such as insurance. Lastly is wealth management in a broader sense.
Technology will take over a lot this spectrum and he argues wealth management “is an area of major disruption”, encompassing P2P lending/investing, robo-advice and other discretionary investment services. However, he says payments is the one that will most clearly disrupt things and change our lives. He thinks cash will “seem crazy” in 20 years’ time.
Kay has a sizeable investment in online investment management firm Nutmeg, however, which is one of the dominant players seeking to disrupt the fund management and wealth management industries although they have yet to announce a P2P/market place lending function.
City regulator warns on peer-to-peer lending, (Financial Times), Rated: A
Chris Philp, a Conservative MP on the Treasury committee, said many consumers do not understand the dangers they are exposed to through P2P.
He said the way P2P sites are paid fees without taking on the risk of loans on a balance sheet is akin to the securitisation of subprime loans before the financial crisis.
Mr Bailey said in response, “I agree with you on the risks”.
Mr Bailey noted that although some platforms have so-called reserve funds to pay out to investors in the event that borrowers default, there is “no guarantee in that fund”.
Renowned investor Peter Thiel increases investment in leading European fintech, Deposit Solutions, (Press Release), Rated: AAA
Prominent venture capital firms today announce they have invested €15 million in European fintech company Deposit Solutions GmbH, a fast growing fintech innovator operating in the €9 trillion market for retail deposits in Europe.
The key highlights include: PayPal co-founder and Facebook’s first outside investor, Peter Thiel, and German leading fintech investor FinLab jointly increase their share in the company US investor Greycroft Partners, the global growth fund of e.ventures as well as Valar Ventures come on board as three new partners The funding round increases the valuation of Deposit Solutions to €110 million. This is the second successful investment round for Deposit Solutions within a year, following last year´s investment into the Company of €6.5 million. Since then the valuation of the company more than quadrupled. The funds raised will be used to further develop the proprietary technology platform and continue Deposit Solutions´ international expansion, having already recently expanded to the UK and Switzerland. Deposit Solutions will increase the number of employees at its UK HQ in the City of London and is expected to launch its retail platform in the UK in 2017.
“We are seeing substantial demand from banks looking to offer their clients attractive deposit products under the existing account relationship. As a result we have gained access to millions of clients and billions of deposit appetite in a very short amount of time. This in turn is very attractive to banks wanting to raise deposits through our platform.”
Max von Bismarck, Chief Business Officer and Managing Director of Deposit Solutions, said: “We address an important structural problem in European banking today for banks and retail customers: Many banks are unable to offer attractive interest rates to their clients. At the same time other banks find it difficult and costly to gain access to retail deposit funding. Our platform provides a solution for both while savers find it easier to get access to better rates.”
ECrowd! Spanish Crowdlending Platform Receives License by the CNMV, (Crowdfunding Insider), Rated: A
Debt-based crowdfunding platform ECrowd! is one of the first Spanish sites to receive a formal operating license from the Comision del Mercado de Valores (CNMV), the securities regulatory agency in Spain. ECrowd!, based in Barcelona, has joined Crowdcube Spain, Lendix and MyTripleA in receiving official approval as a Collaborative Finance Platform under regulations enacted in 2015.
They were on track to achieve 100% growth during 2016. [Comment: Some authors have issues with important verb tenses, it is unclear if the author meant they are or they were.]
The era of Crowlending opens new market for startups, (Startup Ticker), Rated: AAA
In Switzerland significant growth in Crowdlending was achieved in the previous year. The Crowdfunding monitoring report 2016 published by theUniversity of Applied Sciences Luzern early this year reported a significant increase in the total amount of money raised through Crowdlending in the year 2015. A total sum of CHF 7.9 Million was collected through crowdlending with a growth rate of +126%. 266 campaigns were financed. Crowdlending has continued to become more popular not only among start-ups but also among investors.
The crowdlending market in Switzerland is booming and has opened new opportunities for entrepreneurs. New startups operating crowdlending platforms are been established and many projects have been successfully financed. Today, there are 7 crowdlending platforms: the pioneer Cashare for both SMEs and private ventures, CreditGate24 for private and institutional investors, creditworld for both private and on SME loan, Lend, splendid that is specifically focusing on education loans,swisspeers for SMEs and Wecan.fund for SMEs. Other platforms – such as Miteinander-Erfolgreich and Raizers – also operate alongside other models as crowdlending platforms.
India’s Mywish Marketplaces raises $ 15 M to expand to new financial products, (Tech Crunch), Rated: AAA
This isn’t a huge round compared to what other companies have closed, but it is entirely strategic. The capital was proved by Franklin Templeton, the U.S. banking giant with more than $700 billion in assets under management. Puru Vashishtha, who is board director at Mywish Marketplaces, told me in an interview that the company didn’t need to raise the funds and it wasn’t short of interest, but it did so for growth opportunities and was very deliberate with the capital that it did close.
“We were chased by a lot of venture capitalists and investors globally,” Vashishtha said. “Because we were profitable, we did not need to raise a lot and didn’t want to dilute too much too soon — that’s one of the reasons we chose Franklin Templeton. Also, Franklin Templeton has built a very big emerging market business, we want to leverage the experience and leadership of their team.”
To backtrack a little, Mywish Marketplaces operates Deal4Loans, a price comparison and loan aggregation website in India. Its products include credit cards, home loans, business loans and personal loans.
Like Credit Karma in the U.S. and countless others worldwide, it works with banks, credit card companies and other financial institutes to help drive customers, while for its users, it tries to provide a holistic look at financing option and which one suits best for each case. The Deal4Loans site claims to have served more than 6.3 million “satisfied” customers, while the company says it has dispersed a total of $2 billion loans in the last six years at a current rate of $400-$450 million per year.
So why is this profitable company — profitable from day one, it claims — raising money?
I hinted at it earlier, but Mywish Marketplaces wants to expand into more verticals with new financing products for Indian consumers.
P2P lender Faircent makes strategic C-suite appointments, (Economic Times), Rated: B
India’s largest peer- to- peer (P2P) lending marketplace, Faircent.com, on Wednesday announced the appointment of Shivam Gupta, who was a part of the global risk management team of Standard Chartered Bank based in Singapore, as chief risk officer and Karun Thareja, who was a part of the leadership at an analytics startup called WyzMindz, as head of marketing.
Thareja, on the other hand has extensive experience in Marketing, Sales and Business Management spanning more than 20 years. His domain expertise includes Analytics, Enterprise Systems, Contact Center Management and Process Management. In his prior roles he has led multi-fold growth in business units at companies like IBM, Microsoft, Oracle, Dassault Systems and NIIT.
Online lending platform to offer investor insurance, (Straits Business), Rated: AAA
Online peer-to-peer funding platform Validus Capital has partnered home-grown insurance provider EQ Insurance to offer investor protection on some of the financing it provides to small and medium-sized enterprises (SMEs).
It will be the first platform in Singapore to provide investor insurance on its invoice financing services, the company said.
The platform, which was founded last year, has had a zero-per-cent default rate to date thanks to its “rigorous due diligence”, the company said. In the last few months, the company has had 27 SMEs approved for invoice financing services, each with an average revenue of $5 million.
Mr Prakash Somosundram, co-founder of Pealo – an aggregated marketplace for SMEs to access working capital – said the firm is looking into investor protection products. “This will definitely help us to attract more investors, and more people will see this form of investing as an asset class,” he added.
Pealo’s platform was launched in January – 300 SMEs have signed up and there are 46 live campaigns under way.
Mr Brian Teng, chief executive of InvoiceInterchange – which allows SMEs to put up their unpaid invoices for auction – also said the platform hopes to eventually make insurance available to investors.
Mr Teng declined to reveal how many SMEs have used the platform, but said there is significant room for invoice financing to grow as a source of funds for SMEs here.
“The penetration rate of invoice financing in Singapore is still low when compared with nations like Britain and the United States,” he noted. The company has funded $4 million of invoices since its launch in 2015.
Mr Roger Crook, chief executive of Capital Springboard – which runs a crowdfunding platform for invoice financing – said more than 100 SMEs have used the service.
The platform has funded over $85 million worth of invoices over the past year, with over 50 accredited and institutional investors taking part.
Online home loan marketplace exceeds billion in loans, (Broker News), Rated: AAA
HashChing, an online home loan marketplace, has surpassed $1 billion of home loans as momentum builds for the Sydney fintech company. The platform officially launched in August 2015 with just a few brokers on board across Australia. Now, more than a billion dollars’ worth of loans have been received and more than 1,200 mortgage brokers across the country have signed up. The platform works as an online marketplace connecting consumers to mortgage brokers.
“Customers aren’t just looking to save time. The key to our success is that our offer extends far beyond convenience. We’re able to offer pre-negotiated home loan deals from different lenders with equal features, the same products, but with an even better rate,” Sodhi, co-founder and CEO said.
Narang, co-founder and CIO added: “Our broker registration process has been automated to make it really easy and quick by allowing them to digitally sign the contract which instantly activates their account and saves the paper clutter at both ends.”
As the platform continues to build momentum, Sodhi and Narang have welcomed Claire Wivell Plater of The Fold Legal to their advisory board. Wivell Plater is a long standing member of the Business Advisory Committee to ASIC’s Licensing Division and was recently appointed to the Treasurer’s Fintech Advisory Group.
Narang explains HashChing 2.0 will involve more intelligent use of analytics for a better consumer experience.
How Chinese Search Giant Baidu Is Getting Deeper Into Banking, (Fortune), Rated: AAA
Chinese search giant Baidu is investing more deeply in financial technology startups as it seeks to expand its own lending efforts.
On Monday, Baidu announced an investment in ZestFinance, a startup taking on the credit scoring industry by using machine learning and a wide variety of data about borrowers to rate their ability to repay loans.
While the amount of the backing was not disclosed, Baidu also invested Bitcoin payments startup Circle Internet Financial last month, the Nikkei Asian Review reported on Wednesday.
Both investments followed Baidu’s decision last year to form an online bank in partnership with Citic Group’s banking unit. The new bank would be the first in China that “truly understands both the Internet and financial services,” Baidu CEO Robin Li said at the time.
Baidu had also made several notable hires from the finance sector, the Nikkei paper reported, including executives with experience from American Express , online financial marketplace Lufax, and Everbright Bank in China.
While online lending sites like Lending Club LC -0.22% have faltered in the United States, the market is strong in China. The peer-to-peer lending market reached almost $67 billion last year, the largest in the world, Nikkei reported citing data from Citigroup.
Baidu will use ZestFinance’s credit rating technology to assess the creditworthiness of its own users. Unlike the U.S., China lacks centralized credit bureaus, and only a small portion of the population has a credit card.