- Our readers have commented on yesterday’s Lending Times section titled: “Why Did Funds Appear To Have Poor Q1/Q2 Returns?” .
- Our reader’s comments :
- LCA has 1 or 2 months of negative returns over several years.
- Yes, VSL and other publicly traded funds have lesser performance. Flip side is the dividend yield is higher as price drops – 7.5%. Hard to find that return in fixed income markets.
- Here is a document showing returns for various HF strategies. P2P returns have consistent risk-adjusted returns across years as compared to these other strategies. Not shown in the document are the monthly returns. P2P returns are also generally positive most months. To say returns have been bad recently seems to miss the broader point about the high consistency of risk-adjusted returns, and low correlation.
- Today’s most interesting news are Square who is lending to non-clients as well now, Uber who is building a lending/lease arm, and Faircent in India who raised $1.5mil.
- Square Capital started making loans to non-Square customers after partnership with Upserve. The move puts Square in direct competition with OnDeck, Kabbage, CAN Capital, BizFi, etc.
- UBER also has an in-house $1bil financing capability arranged by Goldman Sachs and other banks. “Uber is vertically integrating, becoming more of an Uber Bank”. Uber is also testing in partnership with Clearbanc an advance on earnings. Very interesting business model for Uber. The image of a dystopian future comes to mind where you wake up, pedal all day, get served food, and go back to sleep, all of it in the company’s house, using the company’s bicycle, and eating the company’s food.
- Tradestreaming is pointing out LendUp, Avant and Even as possible payday loan alternatives.
- A new Federal Reserve research paper shows that in difficult times PayDay loans are as helpful as they are damaging in normal financial situations.
- A trio of 3 articles from Lend Academy discussing the Lending Club results, OnDeck results and the future of bank branches. Regarding bank branches: banks like Silicon Valley Bank never need you to come to the branch, ever.
- RealtyShares explains why focusing on California allowed them to do well.
- A review of Fundera’s process from a borrower’s point of view. Great insights and great ideas on how to do better.
- OnDeck appoints new product group lead. Most likely a sign that OnDeck is focusing more and more on building and selling technology.
- Mondo got its UK banking license. Mondo CEO , at 31, is the youngest bank CEO in the UK. It took 18 months to get the license. I can’t wait to watch them do all these impossible things that all the other banks think are impossible or shouldn’t be done. Experience is often a barrier to innovation as well as people have preconceived ideas of what is a good idea and what is not a good idea. Very exciting.
- Funding Circle’s loans boosted the UK economy by £2.7 Billion since 2010 according to a credible study. Very useful data and information.
- And a second article reporting on the same study with a useful, not so rosy, chart of monthly originations.
- Faircent raises $1.5mil. Congratulations !
- United States
- Square Capital Outgrows Square, (deBanked), Rated: AAA
- Uber hitches a ride with car finance schemes, (Financial Times), Rated: A
- 3 top online payday loan alternatives,(Tradestreaming), Rated: A
- Are Payday Loans Really All Bad?, (Pacific Standard), Rated: A
- Lending Club Reports Q2 2016 Results With $1.96 Billion in Originations, ( Lend Academy), Rated: A
- OnDeck Reports Q2 2016 Results and Continues to Grow Originations, (Lend Academy), Rated: A
- Do We Need Bank Branches?, (Lend Academy), Rated: A
- California a Hot Real Estate Market for RealtyShares Crowdfunding Investors, (Realty Shares), Rated: A
- A Review Fundera’s process, (Nav), Rated: AAA
- OnDeck Appoints Gagan Kanjlia to Lead Product Group, ( Yahoo Finance), Rated: B
- United Kingdom
- It’s game on as Mondo, the UK banking startup, finally becomes a licensed bank, (TechCrunch), Rated: AAA
- Centre for Economics and Business Research: Small Business Loans on Funding Circle Boosts UK Economy By £2.7 Billion Since 2010, ( Crowdfund Insider), Rated: A
- UK SMEs flock to p2p lending boosting jobs and housebuilding, report finds, (Alt Fi Credit), Rated: A
- Peer-to-peer lending platform Faircent raises $ 1.5 mn funding from BCCL, (Your Story), Rated: A
Square Capital Outgrows Square, (deBanked), Rated: AAA
You don’t need to process payments through Square anymore to get a loan from Square Capital. Restaurants that use Upserve, a restaurant payments and data analytics system, are now eligible as well.
“We are proud to partner with Upserve and offer loans through Square Capital to even more small businesses who traditionally face barriers when seeking access to funds,” said Jacqueline Reses, Head of Square Capital.
The move puts them on a path to truly competing with other alternative lenders such as OnDeck and CAN Capital.
Uber hitches a ride with car finance schemes, (Financial Times), Rated: A
Uber launched its Xchange in-house vehicle leasing programme in the US a year ago and later gave it a shot in the arm with a $1bn credit facility, arranged by Goldman Sachs and funded by more than half a dozen Wall Street banks.
When Grace Mora found herself strapped for cash in 2014, her son recommended she try driving for Uber. With a “terrible” credit score and few options for buying a car, she took out a loan from one of Uber’s partners, Exeter Finance, which would see payments deducted from her earnings as an Uber driver each week.
Ms Mora, who took out a car loan two years ago from Blackstone-owned Exeter, says monthly payments of $726 for her Toyota Prius cost more than the rent on her apartment. “I told them this is usury, absolute usury,” she complains. Yet she still keeps driving for Uber because she receives a 10 per cent discount when she makes repayments through her weekly Uber pay cheques. Mark Williams, a finance professor at Boston University, says the programmes remind him of the “company store model” and describes the terms of the loans as “onerous”.
“Uber is vertically integrating, becoming more of an Uber bank,” he points out.
Last year, more than 50,000 Uber drivers got their cars through such schemes, and Uber expects 100,000 more to do so by the end of this year.
The Silicon Valley-based ride-hailing app is also putting considerable financial firepower behind its lending programme, with a $1bn credit facility that allows its subsidiary, Xchange Leasing, to buy cars and then lend them out.
In addition, Uber is testing a scheme called Advance Pay where new drivers can get a $1,000 interest-free loan — to be paid back from earnings — in partnership with lending start-up Clearbanc.
In Singapore, Uber subsidiary Lion City Rentals has built a fleet of vehicles that it rents out to drivers.
In India, Uber leases vehicles to drivers through Xchange Leasing — a challenging proposition in a country with no centralised credit score system. “If somebody cannot pay the monthly amount, they can simply return the car,” he added.
Uber says its Xchange leasing programme is not profitable.
3 top online payday loan alternatives,(Tradestreaming), Rated: A
Payday loans are the crud at the bottom of the personal loan product basket. The Pew Charitable Trust’s 2010 report on the use of payday loans shows that the phenomenon is hardly minor: that year, approximately 12 million Americans, or about 5.5% of the entire population, used a storefront or online payday loan.
That same survey found that payday loans are rarely just for emergencies. Borrowers tend to use payday loans for everyday expenses. On average, a payday borrower will take out eight loans of $375 each per year and spend $520, or nearly 40%, on interest.
Online payday loan have made it easier to get quick cash. With great convenience, though, comes even worse payday terms and conditions for users.
A number of online payday loan alternatives have sprung up to provide fair everyday lending alternatives.
LendUp bills itself as payday loan alternative with a mission “to provide anyone with a path to better financial health”. And when they say anyone, they mean anyone – even a person burdened with unsavory credit history.
Avant, a Chicago-based company launched in 2012, positions itself as an alternative to both credit cards and payday loans. Users might not have the right credit history to procure a credit card, and the company’s website notes that payday loans can charge up to 700% in interest. However, Avant provides subprime loans regardless of credit history, with rates ranging from 36.00% to 9.95% APR.
QCash was originally launched by Washington State Employees Credit Union in 2003 as an in-house alternative to payday loans. WSECU had found that alarming numbers of their members were turning to predatory lenders for a product that was not available at the credit union – short term cash needs.
Even doesn’t make the cut simply because it hasn’t launched yet, though its premise is promising.
Yet another alternative payday app is Activehours, which essentially mimics payday loans by allowing borrowers to cash in what they’ve earned through the app before the two week payday rolls around.
Are Payday Loans Really All Bad?, (Pacific Standard), Rated: A
Lending Club Reports Q2 2016 Results With .96 Billion in Originations, ( Lend Academy), Rated: A
Lend Academy reports on Lending Club’s results and includes a few nice charts from the Lending Club deck.
Lending Club still holds $832 million in cash and equivalents with no outstanding debt. They leveraged a portion of this cash to purchase $135 million in loans in the second quarter with a majority of these loans being resold at a later date.
OnDeck Reports Q2 2016 Results and Continues to Grow Originations, (Lend Academy), Rated: A
Lend Academy also reports on OnDeck results also with some nice slides from the OnDeck presentation. Also worth a look.
When trying to understand OnDeck as a company, it’s important to understand what holding more loans on their balance sheet means from a financial perspective. The financial highlights above at a glance paint a pretty negative picture but there is more to the story. Historically, OnDeck has captured more revenue directly from the sales charge called “gain on sale revenue” due to selling loans on their marketplace. This gain is realized immediately and boosts quarterly revenue when a larger portion of loans are sold.
When loans are kept on their balance sheet, the income is realized over time as loans repay which explains in part the decrease in net revenue. In addition, the company has higher provision expenses since this expense for loans held on their balance sheet is realized immediately even though the loans pay out over time. Q2 2016 provision expenses were $32.3 million, up from $15.5 million in the same period last year. This increase is to be expected as there was a 74% increase in loans designated to be held on balance sheet over the same time period.
The below donut charts show the funding mix for the past three quarters. While the marketplace made up just under half of funding in Q4 2015, this has dropped to around 25% in Q2 2016. Securitization remains a fairly consistent source over the last three quarters.
Do We Need Bank Branches?, (Lend Academy), Rated: A
An article in American Banker says that large bank branch networks are here to stay. The author is basically saying that people of all ages like to deal with real people, particularly when it comes to finance.
The author went on to say that the argument was made 30 years ago that branches would become obsolete but the fact is that branches are still alive and well today.
According to this Washington Post article from April the World Bank predicts that the number of branches in the US by 2025 will drop 33% from their 2004 levels. In Europe that number will be 45%. Clearly the number bank branches is in decline.
Talk to a typical millennial today and ask them when was the last time they visited a bank branch.
When it comes to investing, something that most millennials are just getting started with, I would argue that the popularity of robo-advisors like Betterment or Wealthfront are better suited to serve the needs of this new generation. SoFi has started making inroads here as well with a similar service that is slightly more high touch but still very much tech-oriented.
I think the bank of tomorrow will be so vastly different to the bank of today that we can barely even conceive of it today.
California a Hot Real Estate Market for RealtyShares Crowdfunding Investors, (Realty Shares), Rated: A
California borrowers and sponsors have raised more than $53 million across 90 properties in the Golden State. “One of the most reliable recipes of entrepreneurial success in the last 20 years has been taking an existing asset class and making it freely tradeable by anyone in the world over the Internet,” said Gene Linetsky, Chief Technology Officer.
RealtyShares continues to target supply constrained markets with diversified economic bases across the United States in an effort to give its tech-savvy investors diversification options they might otherwise not have access to.
A Review Fundera’s process, (Nav), Rated: AAA
Fundera lists your available options in a clean table. The application form is easy and can be a time-saver. If you click to see more details about each individual funding option, you’ll see an explanation of the pros and cons of each option. Once you’ve submitted your application, you are assigned a loan advisor who connects you to available funding options.
Using Fundera’s online application form, it’s hard to get a good idea of the annual percentage rate (APR) of each financing product. The “my profile” dashboard shows what options the applicant is ineligible for, but it’s hard to get a firm idea of why.
OnDeck Appoints Gagan Kanjlia to Lead Product Group, ( Yahoo Finance), Rated: B.0.0.1.2.0.1.0.0.0.0.0.0.$SideTop-0-HeadComponentTitle-Proxy.$SideTop-0-HeadComponentTitle.0">OnDeck Appoints Gagan Kanjlia to Lead Product Group, ( Yahoo Finance), Rated: B
OnDeck appoints Gagan Kanjlia as Senior Vice President of Product.
Kanjlia joins OnDeck from Capital One, where he co-founded the Capital One Garage, a corporate internal incubator for Capital One Financial Services, ran digital product efforts for the Auto Finance and Home Loans divisions and built out the digital product practice for Capital One Financial Services.
“This newly created role on our senior management team reinforces our commitment to product and technology innovation as key drivers of our growth,”
It’s game on as Mondo, the UK banking startup, finally becomes a licensed bank, (TechCrunch), Rated: AAA
That’s because, until now, the London-based company didn’t hold a banking license and existed entirely in the form of a pre-paid Mastercard and accompanying, albeit rather nifty, iOS and (more recently) Android app.
It offers the ability to do things like track your spending in realtime, view geolocation-marked transactions on a map, view spending by category, and get a graphical timeline of your overall expenditure.
Mondo has been granted a UK banking licence ‘with restrictions’ by the UK regulators FCA and PRA. This means that its beta testers can now in theory begin switching to a Mondo current account and use the startup to do a lot more of their banking.
Competitors Starling (for which Mondo’s founders have history), Atom Bank, and Tandem already secured licenses — Mondo says, at only 18 months old, it is the youngest company ever to be granted a banking licence and proof regulators are becoming more nimble as the country attempts to foster its fintech reputation.
It also notes that Mondo co-founder and co-CEO Tom Blomfield, who previously foundedGoCardless, is now the youngest CEO of a bank in the UK, having turned 31 just one day after the licence was granted.
Centre for Economics and Business Research: Small Business Loans on Funding Circle Boosts UK Economy By £2.7 Billion Since 2010, ( Crowdfund Insider), Rated: A
On Thursday, the Centre for Economics and Business Research released its latest report that revealed small businesses loans facilitated by Funding Circle had boosted the UK economy by £2.7 billion since 2010.
The report also revealed:
- Over three-fifths (61%) of Funding Circle borrowers saw their revenue increase as a result of the loan, while nearly half (47%) reported a rise in profits.
- The GVA (Gross Value Add) impact has built up over time, from £39.8 million in 2011, to £401.6 million in 2013, reaching £2.7 billion by mid-2016.
UK SMEs flock to p2p lending boosting jobs and housebuilding, report finds, (Alt Fi Credit), Rated: A
Small businesses are increasingly using p2p and marketplace lending platforms to meet their financial needs, according to a report by the Centre for Business and Economics Research (CEBR).
The report also highlights that businesses from the North East use non-bank forms of finance much more than traditional high street banks. North East businesses at Funding Circle make up 10 per cent of all lending but only 3 per cent of the UK business population.
Scott Corfe, director at the Centre for Economics and Business Research said: “Since the financial crisis, UK businesses have increasingly turned to non-bank lending to raise the funds they need to invest, hire new staff and expand to new markets. Companies such as Funding Circle are driving billions of pounds of economic activity and generating tens of thousands of jobs, something that’s set to grow rapidly as the financial landscape continues to evolve.”
Peer-to-peer lending platform Faircent raises $ 1.5 mn funding from BCCL, (Your Story), Rated: A
Peer-to-peer lending platform Faircent, which caters to retail and business loans, has raised $1.5 million funding from Brand Capital, the Bennett Coleman and Co (BCCL) arm for ad-for-equity investment.
Faircent was founded by Rajat Gandhi, Vinay Mathews and Nitin Gupta in 2014. In two years, it has over 6,000 and 26,000 registered lenders and borrowers, respectively and has disbursed total loans amounting to Rs 6.5 crore.
The firm had earlier raised an undisclosed amount of funding in a Series A round from Mohandas Pai’s Aarin Capital and JM Financial Products, a subsidiary of JM Financial.