- Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months.
- July 2016 volume numbers are in. We made a list of companies who stand out either for good growth or major decrease. Notice : we can not guarantee the accuracy of the volume numbers.
- An article discussing the pros and cons of a hypothetical national lender charter regulated by the OCC. Personally, I think that the pros out weight the cons.
- A quick analysis article on treasuries, negative yields and the implication on the global economy. An interesting train of thoughts.
- Medallion , a public bank, announces interest in partnering with marketplace lenders. They originate already $45m per month in personal loans. Perhaps you should give them a call ?
- Man in West Virginia files case against Marlette for debt collection rules. No comment from Marlette yet. We look forward to Marlette’s answer. Most likely Marlette outsourced the debt collection and the outsourcing company made a mistake.
- An interesting article, following up on last week’s series, showing how banks are rolling out new technology which is helping improve customer experience.
- And some more interesting data showing that focusing on mobile makes sense: stickier customers, return customers, and longer customer interactions.
- The 1st decrease in crowdfunding volumes. Is there a coincidence with Brexit or a relation of cause to effect ? This article claims it’s caused by Brexit. The trend is very interesting regardless of the cause. Worth a read.
- RateSetter to stop doing 3-year loans. I find this extremely interesting. I think all platforms should read this article and think about it.
- The Tax Incentivised Savings Association launches a discussion forum around P2P.
- Accel Partners, in London, looking for Fintech investments.
- GLI finance hires a new head of group IT and a Chief Operating Officer.
- ThinCats Australia and DomaCom partner. Unusual for platforms to partner , but I see only good reasons to partner and no reasons not to. Perhaps worth thinking about.
- Apparently, regulation forces all p2p sites need a bank relationship to operate. I, therefore, assume that the large majority of p2p platforms in China don’t use banks for payments. Out of all the p2p platforms in China ( thousands), only 48 have such a relationship in place. Does this mean a 95% shut down rate of p2p platforms in China in 18 months ?
- An interesting overview published in Wharton’s Newspaper on Chinese P2P market through an interview with the CEO of Kaixindai Financing Services Jiangsu Co., a Nanjing-based, state-owned P2P online finance company.
- International P2P Lending Marketplaces – Loan Volumes July 2016, (P2P-Banking), Rated: AAA
- United States
- National Charter May Be the Devil Marketplace Lenders Don’t Know, (Bloomberg BNA), Rated: A
- Negative interest rates creating increased anxiety, (Bloomberg), Rated: AAA
- Medallion Financial Corp. Reports 2016 Second Quarter Results, (Business Wire), Rated: AAA
- Man claims Marlette Funding LLC made harassing phone calls to collect alleged debt, (West Virginia Record), Rated: A
- Banks are rolling out personalized customer experiences, (Tradestreaming), Rated: A
- What brokers lost by focusing so much on the desktop experience, ( TradeStreaming), Rated: A
- United Kingdom
- Brexit blamed for fall in crowdfunding deals, (FT), Rated: AAA
- RateSetter to close 3-year market, (Alt Fi News), Rated: AAA
- TISA launches P2P forum, (Mortgage Finance Gazette), Rated: A
- Fintech investor joins Fidelity’s venture push, (Financial News), Rated: A
- GLI Finance Hires Two Senior Executives, (Crowdfund Insider), Rated: B
- Disruptive partnership forms between two Australian platforms, (Alt Fi), Rated: A
- New Zealand
- Profiling the typical ‘peer-to-peer’ investor, (Stuff), Rated: A
- Failing Grade: Many Chinese P2P Lenders Do Not Meet Government Requirements, (Crowdfund Insider), Rated: A
- P2P Finance in China: Why Firms Need Better Risk Controls, (Knowledge @ Wharton, UPenn), Rated: AAA
International P2P Lending Marketplaces – Loan Volumes July 2016, (P2P-Banking), Rated: AAA
P2P Banking publishes monthly volumes for p2p lenders. Please note that the information is not guaranteed and P2P Banking has made relatively large mistakes in the past. Example: LendInvest in May 2016 was reported as a 80% decrease from April while as it was not the case.
For July 2016: Zopa leads ahead of Funding Circle and Ratesetter. Assetz Capital and Lendinvest achieved a big surge in volume. The total volume for the reported marketplaces adds up to 341 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.
Negative stand out:
- LandBay decreased 62%
- Folk2Folk 38%
- Kokos -90%
- ThinCats -37%
- Wellesley -33%
Positive stand out:
- Assetz Capital +460% , 13.9m EUR/month origination last month.
- Funding Circle +1% vs same month last year.
- LendInvest +14% vs last year’s month.
- Mintos +523% vs last year’s month and last month volume of 6.9m EUR
- MoneyThing +462% and last month volume of 3.6m EUR
- Twino 7.2m EUR last month and huge growth
National Charter May Be the Devil Marketplace Lenders Don’t Know, (Bloomberg BNA), Rated: A
For some online marketplace lenders, the devil they know might look better than the devil they don’t when it comes to proposals for federal bank regulators to issue national charters to financial technology companies.
The issue surfaced in March, when Amy Friend, senior counsel for the Office of the Comptroller of the Currency (OCC), said at a conference in Washington that the agency had fielded inquiries from fintech companies about obtaining a national charter tailored to their needs. Since then, the concept has come up repeatedly at industry conferences and elsewhere. At an OCC-sponsored event in Washington June 23, for example, Maryann Kennedy, deputy controller for large bank supervision, said the agency was forming a committee to examine the question.
A charter for a non-bank fintech company that provides financial services would be modeled to some degree on the charters the OCC issues to banks. A key feature of the bank charters that a marketplace lender potentially would value is “pre-emption:” A national charter would establish a single set of nationwide standards that a company would have to meet, overriding the necessity of complying with an array of state standards.
The danger in a national charter is that it would effectively represent the law of the land, with little or no room for maneuvering by the lenders.
Much of the testimony at the July 12 hearing involved a separate issue agitating marketplace lenders: whether federal regulators should continue to treat loans of $100,000 or less to small businesses — loans that make up the overwhelming majority of small-business borrowing — as business loans, or to treat them as consumer loans, which are subject to many more rules on disclosure and other factors.
The OCC has not disclosed what might be regulated by a national fintech charter, nor little else about its ongoing evaluation. The agency also has not said if it will decide to offer the charters, or when it might make that decision.
Negative interest rates creating increased anxiety, (Bloomberg), Rated: AAA
Sovereign bonds are supposed to be the safest investments in the world, but according to Bill Gross, one of the best-known investors in the world, sovereign bonds are now too risky:
[Begin quote]”Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky. Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”[End quote]
This was supported by a release from Fitch Ratings:
[Begin quote]”This year’s dramatic fall in yields on bonds issued by investment grade sovereigns has again raised the risk that a sudden interest rate rise could impose large market losses on fixed-income investors around the world, Fitch Ratings says. A hypothetical rapid reversion of rates to 2011 levels for $37.7 trillion worth of investment-grade sovereign bonds could drive market losses of as much as $3.8 trillion, according to our analysis.”[End quote]
Most people look at the stock market, and think that everything is rosy, but there’s a lot going on that isn’t reflected in the stock market. In 2007, it was the collapse of the real estate bubble and, more importantly, the disastrous collapse of collateralized debt obligations (CDOs) backed by subprime mortgages. The disaster had already occurred before the stock market started falling.
Bloomberg columnist Lisa Abramowicz on TV on Wednesday commented on the warnings from Bill Gross and Fitch (my transcription):
[Begin quote]”There’s a high level of concern about how sustainable all of this is – when profits are declining, when you have growth slowing, when you have stimulus efforts that are not working and that are running out of steam — how long can this last? But at the same time, it’s very hard to see what could reverse it. The only thing that people possibly can point to is inflation, or if some country decides not to pay back their debt, or just forgive it, or come up with some kind of engineering that creates a technical problem.”[End quote]
According to Abramowitz’s contacts, the only thing that can stop the current plunge in bond yields is for some country to decide not to pay back their debt — essentially to declare sovereign bankruptcy. In other words, there’s a major financial crisis coming no matter what. Bloomberg and Fitch Ratings.
Medallion Financial Corp. Reports 2016 Second Quarter Results, (Business Wire), Rated: AAA
Medallion Bank anticipates entering into a new line of business developing relationships with marketplace lending platforms.
Consumer loans originated by Medallion Bank were stronger than expected. In June alone, nearly 2,500 loans were funded for over $45 million in volume
Medallion Bank’s six month’s earnings increased by 39%
Managed assets reached $1.760 billion, including $1.159 billion at Medallion Bank, both all-time highs
Man claims Marlette Funding LLC made harassing phone calls to collect alleged debt, (West Virginia Record), Rated: A
Jeffrey Warren filed a complaint on July 7 in the U.S. District Court for the Southern District of West Virginia against Marlette Funding LLC alleging violation of the West Virginia Consumer Credit and Protection Act and the Telephone Consumer Protection Act and other counts.
The plaintiff requests a trial by jury and seeks compensation for all damages, costs of litigation, attorney’s fees and such other relief as the court shall deem just and proper. He is represented by Daniel Armstrong and Benjamin Sheridan of Klein & Sheridan LC in Hurricane.
Banks are rolling out personalized customer experiences, (Tradestreaming), Rated: A
Customer satisfaction with big banks has surpassed levels with midsize banks for the first time this year.
17 percent of large banks reported implementing contextual, personalized insights and solutions to consumers.
Considering the high cost, it isn’t surprising that big regional or national banks have the lead in this arena. 17 percent of big regional or national banks reported implementing contextual, personalized insights and solutions to consumers, compared to only six percent of community banks and 2 percent of credit unions, according to Digital Banking Report’s The Power of Personalization in Banking. More than 50 percent of each category reported having a basic level of digital prowess with plans to increase future investments in digital.
There are some estimates of ROI on digitization of banking services. McKinsey identified several areas of digitization that drive more profitability than others. These areas include product back office automation, digitization of document management, automation of credit decisions, and big data analytics applied to sales campaigns.
What brokers lost by focusing so much on the desktop experience, ( TradeStreaming), Rated: A
Sticky products build engaged audiences.
That’s why Yahoo Finance continues to get a firehouse of traffic. For those of us who built our portfolios on the site ten or more years ago, that’s enough of a reason to go back. We’ve invested enough of our time and energy into the service that leaving it becomes difficult.
The thing is, as internet usage has shifted from desktop to mobile, so should trading volumes.
It isn’t enough for a broker to just recreate a web experience on mobile, either. Today’s users don’t want non-native apps. People want to feel that an app is trustworthy and vetted through the Apple Store. According to comScore, 87 percent of all time spent on mobile in the U.S. was spent in mobile apps.
Brexit blamed for fall in crowdfunding deals, (FT), Rated: AAA
Crowdfunding platforms have experienced a slowdown in deal flow for the first time in five years, in a sign that “armchair investors” are taking a more cautious approach to alternative investments.
However, the number of investments offered online fell 17 per cent in the first half of 2016, compared with levels seen in the last half of 2015, according to research company Beauhurst. The fall follows 10 consecutive half years of growth in terms of the number of deals offered to investors.
Beauhurst’s head of research Pedro Madeira said the slowdown in crowdfunding was “particularly noteworthy”.
Beauhurst’s data also show that venture capital and private equity firms slowed investment into UK start-ups and high-growth companies in the same period.
Bruce Davis, spokesman for the UK Crowdfunding Association (UKCFA), the trade body of crowdfunding platforms, said the dip in deals offered was just “a pause”. The UKCFA said it was confident deal numbers would begin to grow again.
RateSetter to close 3-year market, (Alt Fi News), Rated: AAA
RateSetter says that demand for its 5 year product is the primary impetus behind the planned closure. The 3 year market has become less and less popular ever since the platform introduced its 5 year offering, and now accounts for less than 5 per cent of new investments. The company says that investors have voted “with their wallets” and that they clearly prefer to lend in the 5 year market. The 5 year market currently pays a rate of 5.7% per annum, with the 3 year sitting at 4.0%.
TISA launches P2P forum, (Mortgage Finance Gazette), Rated: A
The Tax Incentivised Savings Association (TISA), the trade association working with the retail financial services industry, has launched a peer-to-peer lending forum to enable those in the sector to develop policy recommendations for regulators and legislators, address operational challenges and determine best practice.
Initially the peer-to-peer forum will concentrate on four key areas:
-Building an effective dialogue with the FCA, HMRC and HM Treasury
-Developing standardised terminology, operational technology, data governance principles and best -practice
-Enhancing accessibility to the sector by improving the understanding of intermediaries, discretionary managers, consumers and related parties including PI insurers
-Identifying unintended regulatory and technical blockages – for example in relation to the inclusion of P2P within SIPPs – and proposing solutions
Fintech investor joins Fidelity’s venture push, (Financial News), Rated: A
A former fintech investor at Accel Partners, who was involved in high-profile investments in WorldRemit and Funding Circle, has joined the London-based proprietary investment arm of Fidelity International as it seeks to strengthen its European business.
GLI Finance Hires Two Senior Executives, (Crowdfund Insider), Rated: B
GLI Finance Limited (LSE:GLIF) has announced the hiring of two senior executives. Russell Harte has been appointed Chief Operating Officer and Steven Simpson has been selected as the Head of Group IT.
Harte is a Chartered Accountant with extensive general management experience. His recent roles have included being Finance Director of Liberty Holdings Limited, a JSE listed long-term insurer, where he played a key role in the turnaround of that business. Most recently he was CFO of Standard Bank Jersey Limited. Simpson is currently Head of IT at one of GLI’s subsidiaries Platform Black. He has over 25 years of experience in the design, implementation and administration of secure and highly-available enterprise and web-based solutions for corporate customers across various sectors including finance and telecoms. Russell and Steven will join the senior management team. Russell will report to the Group CEO and Steven will report to Russell.
GLI has been going through a period of change as Whelan took over the Chief Executive role at the very beginning of 2016.
Disruptive partnership forms between two Australian platforms, (Alt Fi), Rated: A
ThinCats Australia has joined forces with DomaCom, a soon to list real estate equity investment platform.
The partnership will involve using ThinCats loans in order to gear properties on the DomaCom platform. This may be the first time that a peer-to-peer lending company and real estate equity investment platform have collaborated in this way.
The ThinCats partnership may also open up future investment opportunities for investors across the two platforms. Naoumidis said: “This also provides the 350 lenders on the ThinCats platform the opportunity to gain exposure to property assets and the ability to lend funds at an attractive interest rate with a lower risk profile.”
Profiling the typical ‘peer-to-peer’ investor, (Stuff), Rated: A
Investor Tom Enright was the first person to invest through LendMe, a peer-to-peer property lender.
He invested $542,000 by funding a fully-secured residential mortgage loan on an Auckland property, getting a 7.84 per cent return on his money.
There are four peer-to-peer businesses: LendMe (direct secured property lending), Harmoney (unsecured personal loans), Squirrel Money (diversified secured property lending), and Lending Crowd (focus on secured car lending). Harmoney is by far the biggest peer-to-peer lender with $275m of loans made.
Figures from Harmoney show most peer-to-peer lenders are 50 or under, with 41 being the average age.
REASONS TO BE A PEER-TO-PEER INVESTOR
Harmoney says people invest in peer-to-peer because:
– They are looking for an investment that could offer regular repayments over time. This includes people trying to generate income to live off
– They are spreading risk by putting a percentage of their portfolios into consumer lending.
– They understand they are taking the risk of a loan defaulting, but believe the risk is manageable and the return fair.
– They enjoy the process of lending.
Failing Grade: Many Chinese P2P Lenders Do Not Meet Government Requirements, (Crowdfund Insider), Rated: A
According to ECNS, the majority of P2P platforms have not yet established a relationship with a bank as a fund depository agent. Even though 149 P2P sites had signed agreements with banks “few had materialized.” Overall only 48 P2P lenders or just 2% of these online lenders have qualified, according to Shanghai Ying Can Investment consulting. These 48 platforms were some of the largest platforms in the country. These same platforms are poised to benefit by the additional regulatory scrutiny as undercapitalized and poorly managed P2P lenders may leave the market.
Chinese regulators are allowing a transitional period of 18 months for P2P lenders to adopt the new requirements. It will be interesting to see what happens after that.
P2P Finance in China: Why Firms Need Better Risk Controls, (Knowledge @ Wharton, UPenn), Rated: AAA
Since 2015, many P2P platforms including Ezubao, the Dada Group, the Kuailu Group, the Zhongjin Group and others have been charged with illegal fundraising, involving tens of billions of yuan. This is not confined to China. In May, the U.S. Treasury Department released a report criticizing the peer-to-peer (P2P) lending business and recommended it be more tightly regulated.
According to the industry website WDZJ.com, China’s P2P online finance industry reached 2.036 trillion yuan (about $300 billion in transaction volumes) by the end of May 2016. It took seven years to reach its first trillion yuan and just seven months to reach the second trillion.
Take the Lending Club in the U.S., for example. It originally hoped to evaluate personal risk based on data extracted from Facebook, Twitter and other social platforms. That is in America, which has much more sophisticated credit investigation and personal data systems than in China. So you can imagine a large amount of P2P business based on personal credit in China will meet trouble in operation if there is no appropriate risk control system in place.
“There is one feature of the finance industry — the one that grows the fastest, will also collapse the fastest.”