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July 28th 2016, Daily News Digest

News Comments

United States

United Kingdom

  • Article 1 and article 2 on a recent British Chambers of Commerce survey on alternative finance awareness done on 1011 firms in June 2016. Like many statistics you can make the survey results say what ever you want. I find it interesting that “the survey found 54 percent of the firms that secured finance but rejected it said the interest rate offered was too high”. Or that “21 percent of UK firms said availability of finance has declined in last 3 years” which should be read 79% of firms said availability of finance has stayed the same or increased.
  • A quick survey on coming innovations in p2p and crowdfunding in the UK. Worth a read.
  • Folk2Folk open a new office.

European Union

India

United States

With Goldman Sachs’ Entry Into Online Lending Looming, Peer-to-Peer Lending is Deader Than Dead, (Debanked), Rated: AAA

Comment: an article that once again gets people to think. While Goldman’s plan seems good, large companies often have hard time executing for all king of reasons from legacy issues, to regulatory issues, to PR and image , and last but not least internal politics and fighting for resources. I give Goldman a 50% chance of success in their unsecured personal lending effort at this point. 50% are really good odds in fact compared with the odds of a large bank successfully changing their core banking tech system for example. Anyway, you will hear opinions like in this article, be prepared for the discussion that issues. 

When I first started writing about Lending Club and Prosper years ago, I was intrigued by the ability for everyday average Americans to have the opportunity to earn the yield of a credit card company. It was peer-to-peer or close enough anyway, and the allure was that you became the judge, jury and underwriter of people applying for loans, plopping down amounts as small as $25 at a time, hoping it’d come back plus interest.

There was a social movement that latched on to it too. When I attended the 2014 LendIt Conference, for example, I met people who were there for no other reason than to connect with other like-minded peers, whether it was to compare investing strategies, share free tools or just hang out. Those days are over. And with the looming arrival of Goldman Sachs into online consumer lending, people have asked me if I’m excited about what it means for “the industry.”

There’s nothing sexy about a bank making loans to consumers. It’s a 20th century headline masquerading as 21st century innovation because the word “online” is in it.

Cynical I might be in my view here, but the movement that once was, is all but gone.

Cynical I might be in my view here, but the movement that once was, is all but gone. The little guy’s opportunity to earn yield like a Wall Street bank has been replaced with actual Wall Street banks. And companies like Lending Club, who were the marketplaces fueling the flames of social revolution, have been caught engaging in shady Wall Street shenanigans like manipulating loan data. And if that somehow still didn’t mark the end of an era, surely the arrival of the most powerful bank on Wall Street makes it final. [ Comment: I disagree that you can not earn those yields anymore. Until Lending Club and Prosper stop taking retail accounts,we still can. We do rely on Lending Club and Prosper’s protection to make sure retail investors play fairly against their other institutional investors however. And the Lending Club issues were limited to 1 company, at one time. As the new securitization with Jefferies shows they are comfortable enough and they have scrubbed clean enough that they can go to market again. I strongly believe that the space is large enough and if Goldman is successful that only validates the space even more and encourages more competition and investments in it.]

Robo advisers’ next offering: Loans, (Financial Planning), Rated: AAA

Robo adviser Hedgeable says it expects to roll out a peer-to-peer lending product by the end of this year. It will be the first robo wealth manager to do so, according to the company.

According to the Hedgeable’s last ADV, the digital advice provider manages $50.5 million in assets and counts a total of 1,100 accounts. Betterment, the leading independent robo platform, recently announced it is managing over $5 billion in AUM.

Michael Kane, co-founder of Hedgeable, says an official launch date hasn’t been set. “We are going to be offering loans as an asset class,” he says, giving customers the option to “invest in loans directly through a third-party.” The lending partner is yet to be announced. Kane says the company also considered offering peer-to-peer student loans, but decided against it for now, opting for “more mature markets” with clearer performance history.

“My first thought when witnessing an online investment service branching out into peer-to-peer lending is that of concern,” says Bill Winterberg, industry observer and founder of FPPad.com. “One client segment wants low cost automated investing, [while] a completely different segment wants financing from non-traditional lending sources.” [ Comment: I always agree that one should be concerned when investing money, especially in new things. But I don’t see how matching such good offer and demand is the main concern.]

Challenger banks: kick-starting survival mode,  (Banking Tech), Rated: AAA

Comment: this is not a US focused article, neither any particular geography. So I just put it here as I wish I saw more challenger banks in the US as well. Perhaps this will inspire.

Two new challenger banks have received their banking licences in the past week. Berlin-based Number26 renamed itself N26 and received its full banking licence from the European Central Bank and German regulator BaFin after 18 months of operation and with over 200,000 customers on board. UK-based Starling Bankalso received its current account-only banking licence in 18 months and is planning to launch in January 2017. There are five other UK challenger banks currently midway through their application process with the Prudential Regulatory Authority (PRA) and 14 of them engaged in pre-licence talks.

At the same time, the new entrants are keen to set themselves apart with distinctive value propositions – for example, CivilisedBank (currently going through the licence process) plans to offer products specifically for SMEs.

First Global Trust Bank (FGTB), which has recently been granted a restricted licence, describes itself as “a simple, narrow wholesale bank”. Its business model does not cater for retail deposits or current accounts.

Tandem is promising to do away with overdraft fees, by stopping card use completely on reaching the set limit.Fidor offers monetary bonuses to customers who are active on their community pages and social media. Starlingpromises to offer AI-based spending patterns analysis to have better control of customers’ finances. Mondo’s app picks up spending anomalies like abnormal bill amounts and geolocation-based visualisation of spending.

A startup backed by the hero of ‘The Big Short’ is attempting to bring Wall Street to Main Street, (Business Insider), Rated: B

Comment: A pop article with a pop title that profiles Peer Street. Kudos to Peer Street for attracting press and reputable credible investors.

PeerStreet, cofounded by Brett Crosby and Brew Johnson, is applying the peer-to-peer lending model to real estate, giving investors access to high-quality private real-estate loans.

Crosby previously founded the web analytics company Urchin Software, which was sold to Google in 2005. He stayed on at Google for 10 years, building out mobile, advertising, and Chrome, and cofounding Google Analytics.

Collegiate Consolidation Services Enters the Student Loan Marketplace with its Dynamic Loan Product, Refinally, (Press Release Rocket), Rated: B

ollegiate Consolidation Services (CCS), a pioneering lender in the student loan refinancing and consolidation marketplace, today announced the launch of Refinally, its flexible student loan consolidation product designed for working professionals. With an approval rate significantly higher than other lenders’ products, Refinally is broadening access to student loan consolidation, providing college graduates savings in excess of $18,000 over the life of the loan and delivering a more relaxed loan qualification process that enables borrowers to live their lives, not their loans.

United Kingdom

UK SMEs Oblivious To Mountain Of Alt-Lending Choices, (Pymnts), Rated: A

The U.K. alternative lending space is broad, with new entrants frequently stepping in. According to data from the Liberum AltFi Volume Index U.K., marketplace lending in the country hit £286.7 million (about $377.3 million) worth of loan originations in the month of June alone. It represents a 32.4 percent growth from June 2015, the third-largest monthly growth spurt recorded on the index.

Research published by the British Chambers of Commerce and Bibby Financial Services this week said that awareness of all the options to fulfill that appetite is lagging.

Bank overdraft facilities, the traditional kind of lending, was by far the most recognized option for small businesses, with nearly 93 percent of the surveyed small businesses reporting familiarity with this service. Other traditional bank loans, commercial credit cards and leasing/hire purchase financing followed close behind in recognition rankings.

According to the data, only 18.8 percent of businesses were familiar with mezzanine financing, a form of debt financing that enables lenders to take ownership or equity interest in a company if the loan is not repaid.

The conclusions are in stark contrast to a report released last year by Funding Centre, which found that small businesses are buried in alternative lending choices thanks to the “dramatic” growth rate of the industry in the U.K

For the companies that are interested in financing, the process isn’t easy. More than one-fifth of SMEs say the availability of financing had declined in the past year, and of the nearly half of businesses that had applied for financing in the last year, 54 percent said they rejected the terms offered because the interest rate was too high. Further, 39 percent said that the collateral required to secure the financing was too high.

Many UK firms unaware of other finance options, (Market Business News), Rated: AAA

The British Chambers of Commerce and Bibby Financial Services surveyed 1,011 firms across the UK one month before the June referendum voted to leave the European Union.

They found many businesses were unaware of alternative finance options – such as peer-to-peer lending, mezzanine finance, and export or trade finance.

The key findings show that:

– 21 percent of UK firms said availability of finance has declined in last 3 years

– This compares with 23 percent who said routes to finance had improved

– The four finance options firms were most aware of were: overdrafts, bank loans, commercial credit cards, and leasing/hire purchase

– The four finance options they were least aware of were: mezzanine finance, angel finance, peer-to-peer funding, and trade finance.

The survey found 54 percent of the firms that secured finance but rejected it said the interest rate offered was too high, while 39 percent said the collateral required was too high.

From car refinancing to data tools: Five new alternative finance products making life easier for the retail investor, (City A.M.), Rated: AAA

UK-based industry analytics and news firm AltFi has launched a new market data product which enables users to look under the bonnet of platforms’ loan books. With customisable tools, the subscription-only service will give access to over half a billion data points and half a million loans made across the industry.

New platform LendingWell, which is set to launch in September, provides retail investors and independent financial advisers access to, analysis of and the ability to invest across the P2P lending market through a single account. Using AltFi data, and co-founded with Liberum Alternative Finance, in addition to a self-directed option and three pre-selected portfolios, LendingWell will also issue bonds against a portfolio of loans, offering investors a fixed return.

Zopa Car ReFi is the name of Zopa’s new car refinancing service, which aims to give drivers a better deal. The idea is that the P2P platform will help consumers save money by swapping them out of existing agreements and offering a lower-cost secured loan.

SyndicateRoom is the first equity crowdfunding platform to launch a fund. Fund Twenty8 is open until December 2016, with investors required to make a minimum investment of £10,000. The maximum fund size is £25m. “We’re catering to the passive investors who prefer a portfolio approach to investing but don’t want to pay the hefty management fees that usually come with it. This new product offers a diversified portfolio for our investor community, while providing an even stronger route for companies to seek growth capital,” says James Sore, SyndicateRoom’s chief investment officer.

Cracking a secondary market in equity crowdfunding was always going to be a tricky task: Crowdcube, which has already seen two flagship exits, is confident it can help investors find liquidity and increase the level of re-investment post-exit. Having raised £6.2m last month, it plans to create a secondary online market, appealing to its 300,000 existing investors.

Brief: Folk2Folk P2P Lender Opens New National Office to Accommodate Expanding Business, (Crowdfund Insider), Rated: B

Folk2Folk, a regional peer to peer lender, has moved into a new office Launceston to “accommodate their rapidly expanding business”.

The lender is not just online only and is an interesting combination of physical locations and online lending.  The company focuses on lending within local communities: bringing together investors seeking attractive and secured returns, and borrowers looking for access to affordable capital to develop and grow their business. Folk2Folk reports that more than 70% of investors are repeat lenders, a solid testament to the service provided. In June, Folk2Folk passed the £100 million mark of loans funded. Cumulative volume of lending increased 100% in 2015 from £40 million to £80 million.

European Union

Japan’s Crowdcredit to invest in Lithuanian P2P lending platform Savy, (Baltic Course), Rated: A

Vytautas Zabulis, CEO of Bendras Finansavimas, a Lithuanian-owned company that owns the platform, says that Crowdcredit will invest around 15-30% of Savy‘s monthly loan amount on a regular basis.

Some 300,000 euros are loaned via the platform per month on average.

India

Faircent gets voted the ‘Breakthrough Brand in Finance’ by Interbrand, (Economic Times), Rated: A

The P2P lending marketplace won the acclaim on the parameters of innovation and problem solving capabilities and for the growth displayed by it in the segment.

Out of the 200 nominations, only 60 have been featured which included big names like WeChat, MPesa, Xiaomi and Maple. Apart from Faircent, only two other Indian brands found a mention in the report – Zomato and Paytm.

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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