- Today’s interesting articles: for entrepreneurs the reasons not to become a unicorn before you are self-sufficient; and 2 articles on emerging bank’s user strategy vs established bank’s user strategy.
- And for analysis: a great article on Europe’s Fintech data and trends, a must read to understand the ongoing results of all the local various European experiments.
- A very interesting article on why being a unicorn without being self-sufficient may be a bad idea. A well explained and articulated thesis with examples and data. A must read for all entrepreneurs.
- The implications of CFPB vs Cash Call. We covered this news on Monday, but as many of our readers were on vacation we thought we should remind about the implications of this case.
- New Securitization from SpringCastle, a firm we don’t hear from often on Lending Times. This is personal loan securitization for $1.74 billion. Perhaps our securitization reader experts would like to compare this type of securitization to the ones we usually cover for Prosper, SoFi, Lending Club and more.
- Marlette , Prosper, Pave , Lending Originator and Progressa all bought Aspire Financial’s tech. We are all curious what Aspire’s tech does beyond the usual marketing meaningless language of “better data, analytics and communication infrastructure”.
- Kabbage is launching a creative marketing campaign. After OnDeck made a large push on marketing over the last month with great marketing as well the marketing competition is heating up. Smart and creative marketing. Well done.
- An interesting article on emerging bank user experience vs products discussion. I wish the article had clearer examples but an interesting article none the less.
- And as a follow up on the article just above: traditional banks are starting to offer spend-analysis tools to customers. Intriguing.
- Tradestreaming’s top 4 best TV ads for loans. Very entertaining.
- P2PGI and VPC Specialty Lending the hardest hit trusts after Brexit. The data and speculation on possible reasons. I also wonder how much of their price dive is from the traditional finance sector hitting back to the fintech space as a mini “we told you so” at the best possible moment to set a self-fulfilling trend of “we told you so”.
- Zopa’s move to focus on an API is paying off with another large partnership with a 70,000 user mobile app. Well done.
- The latest report on Cambridge Center for Alternative Finance. A ton of data and useful info. They include the UK in Europe, so we did the same. A must read as it gives great insights on market behavior. Useful info to have to try to model how the market will evolve in other geographies as well. Europe is a kilt of various experiments in fintech.
- And a mode detailed view of the Spanish fintech sector which is booming. Yes, Spain’s Fintech is larger , as number of firms, than Brazil’s, Mexico’s, Colombia’s or Chile’s.
- United States
- Why Fintech Startups Might Not Want to Become Unicorns, (Bloomberg), Rated: AAA
- Ruling Boosts CFPB, Raises Marketplace Lending Questions, (BNA), Rated: A
- SpringCastle Funding Asset-Backed Notes 2016-A, (Kroll Bond Rating Agency), Rated: A
- Aspire Financial Technologies Announces Four Initial Data Partnerships for the Aspire Gateway Platform, (Newswire), Rated: A
- Kabbage Launches “Elevator Pitch,” a Nationwide Campaign with Lori Greiner, (Benzinga), Rated: A
- How emerging banks are changing the banking experience, (Banking Technology), Rated: A
- To retain customers, banks are empowering them, (Tradestreaming), Rated:AAA
- 4 best ads for loans during the Summer of 2016, (Tradestreaming), Rated: A
- United Kingdom
- P2P Global Investments and VPC Speciality Lending among hardest hits trusts since Brexit, (Alt Fi Credit), Rating: A
- Pariti taps into Zopa API to help millennials pay off card debt, (Finextra), Rated: A
- European Union
- European Alternative Finance Jumps to €5.4 billion in 2015, (Crowdfund Insider), Rated: AAA
- Finnovista: Spanish Fintech Sector Has Quadrupled in Three Years, (Crowdfund Insider), Rated: A
Why Fintech Startups Might Not Want to Become Unicorns, (Bloomberg), Rated: AAA
Striving to achieve a valuation of $1 billion or more may no longer be in a start-up’s best interest, according to recent valuation trends and the venture capitalists who invest in the space.
“What you don’t want to do is get into sort of this half pregnant phase when you’re past where you’re digestible but not clearly on the trajectory for long term, self sufficiency,” said Sean Park, co-founder of venture capital firm Anthemis Group.
CB Insights showing second-quarter funding to venture capital-backed finch companies dropping 49 percent on a quarterly basis.
To date, CB Insights’ data also shows that the biggest acquisitions in the space have been Monsanto Co.’s 2013 purchase of agricultural insurance startup The Climate Corp. for $1.1 billion, Singapore Telecommunications’ 2015 acquisition of payment security startup Trustwave and EBay Inc.’s deal to buy global payments platform Braintree for $800 million in 2013.
Another such deal was Northwestern Mutual’s 2015 acquisition of LearnVest, an online financial planner, for what sources say was over $250 million but less than the $1 billion unicorn mark.
Online lending platforms Social Finance Inc. and Lu.com now have valuations topping $4 billion and $18 billion, respectively, and JD.com’s finance subsidiary has a $7.1 billion valuation.
Robo advisors Betterment LLC and Wealthfront Inc. are each sitting at $700 million, and online money transfer startup WorldRemit has a valuation of $500 million.
That may leave the unattractive option of being sold for a lower valuation, which has happened in a number of other industries. Gilt Groupe Holdings Inc., for instance, was once valued at about $1 billion, but later agreed to be acquired by Hudson’s Bay Co.for $250 million.
Going public also isn’t as attractive as it used to be. Of three prominent IPOs in the space, only one is trading above its initial offering price. LendingClub and On Deck Capital Inc. are both significantly below where they debuted, while shares of Square Inc. are now above that price despite a volatile few months.
Nauiokas of Anthemis said that while a number of startups may already be in that “half pregnant” phase, they might be fine with staying in . “I think for a lot of these companies that are in that in-between phase, there’s a lot of runway to go it alone.”
Ruling Boosts CFPB, Raises Marketplace Lending Questions, (BNA), Rated: A
Commentary: Lending Times covered these news on Sept 4th, however many readers being on vacation may have missed this important piece of news.
In an Aug. 31 decision, Judge John F. Walter of the U.S. District Court for the Central District of California said Orange, Calif.-based CashCall Inc. and others engaged in deceptive practices by servicing and seeking full payment on loans rendered uncollectible or partially void by state usury and licensing laws.
He also said CashCall was the “true lender” on loans issued and sold to CashCall by Western Sky Financial, a South Dakota limited liability company licensed to do business by the Cheyenne River Sioux Tribe (CRST) in South Dakota.
According to Walter, “true lender” status depends on the substance of a transaction, not its form.
Using the “totality of the circumstances” test to determine which transaction party has the “predominant economic interest” in a transaction might also affect marketplace lenders that rely on loans made and funded by bank partners, they said.
SpringCastle Funding Asset-Backed Notes 2016-A, (Kroll Bond Rating Agency), Rated: A
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of SpringCastle Funding Asset-Backed Notes 2016-A (“SCFT 2016-A”), a personal loan asset-backed securities transaction.
The collateral in the SCFT 2016-A deal includes approximately $1,744.5 million of loans, as of July 31, 2016. The preliminary ratings reflect the initial credit enhancement levels of 19.55% for the Class A, 7.20% for the Class B notes, and 0.50% for the Class C notes, as well as the target enhancement levels of 20.55%, 8.20%, and 1.50% for the Class A notes, Class B notes, and Class C notes, respectively. Credit enhancement is comprised of over collateralization, subordination of junior note classes, a cash reserve account, and excess spread.
Aspire Financial Technologies Announces Four Initial Data Partnerships for the Aspire Gateway Platform, (Newswire), Rated: A
MaRS FinTech venture Aspire Financial Technologies (“Aspire”), announced today that it has formed new Data Partnerships with US-based marketplace lenders Marlette Funding, Pave, and Prosper Marketplace, along with Canadian Alternative Lending Originator, Progressa.
Aspire’s inaugural product, the Gateway platform, is designed to provide better data, analytics and communications infrastructure to Alternative and Online Lending Originators and Institutional Investors. The platform uses proprietary software developed by the Aspire team providing a workflow, data, analytics, funding and reporting infrastructure solution for these two distinct user groups.
Kabbage Launches “Elevator Pitch,” a Nationwide Campaign with Lori Greiner, (Benzinga), Rated: A
Kabbage, today announced a nationwide campaign for small business owners. In early October, five finalists will have the opportunity to deliver an “Elevator Pitch” directly to entrepreneur and investor Lori Greiner. One finalist will win $10, 000 and a private, one-hour business consultation with Ms. Greiner. Contestsubmissions are open beginning today until midnight on September 20, 2016.
Since launching in 2011, Kabbage has served more than 80,000 small businesses across the U.S. with over two billion dollars in capital.
Business owners must create a short video of their best business growth idea. After contestants upload the video to Kabbage’s Facebook page, a panel of judges will select the qualifying finalists to deliver their best “Elevator Pitch” in person to Lori Greiner. Limit one entry per small business.
How emerging banks are changing the banking experience, (Banking Technology), Rated: A
Modelling products around user experience
Monzo has taken this to a whole different level. The business has identified UX as not only one of the most important drivers towards success, but as THE most important driver. This is why it has not only created its mobile app with the user at the forefront of its design, but is allowing early adopters to use features within the app already.
Customers using these features can offer feedback on their experiences and any UX improvements they feel would be beneficial. This directly influences the development team’s decision making, as offering the highest quality, most innovative UX on the market is the main driving force behind the project.
Modelling user experience around products
Atom Bank is arguably the highest profile business using this approach. All products will be built on Unity, a game-design platform which offers the type of view on development traditional banks wouldn’t even consider.
Both of these approaches are viable and clearly working in the digital age – there is enough buzz around emerging banks that it’s clear people are disillusioned with traditional banks and looking for an alternative.
To retain customers, banks are empowering them, (Tradestreaming), Rated:AAA
Only 55.1 percent of bank clients said they are likely to stay with their bank in the next 6 weeks, according to the 2016 retail banking survey. Less than 40 percent said they will refer a friend to their bank.
In North America, 68 percent of customers aged 18-34 say they would welcome receiving Personal Finance Management offerings like a “safe-to-spend” analysis from their bank, according to Accenture.
Deutsche Bank, for example, launched its PFM FinanzPlaner, developed by financial software company Strands.
ING recently launched a slew of digital money management products. The bank added a forecasting feature to its mobile banking app in the Netherlands. ING in Spain launched a digital financial advisor called My Money Coach and a similar one was launched in France.
Barclays’ PFM solution is open even to non-customers, highlighting the importance of such an offering for customer retention and acquisition.
4 best ads for loans during the Summer of 2016, (Tradestreaming), Rated: A
Australian home lender and mortgage broker Aussie’s September 2016 ad has a family applying for a loan in an airy, bright room, among dozens of service providers eager to assist and a jovial boss helping Mom and Dad choose the very best home loan option for them.
State Farm’s June 2016 car loan/insurance commercial cleverly parallels a young woman getting a car and an older businessman discovering that his car has been jacked. Though they each say the exact same sentences, “I cannot believe this” and“what a day”, they each benefit from a different financial service from the insurance provider.
Rocket Mortgage’s $5 million Super Bowl ad riled consumers, who believed that Rocket Mortgage spelled the housing apocalypse 2.0. The firm’s 2016 summer ads have avoided any major controversy so far, and tap into the renewed Star Trek franchise, with Vulcans discussing and explaining how Rocket Mortgage works.
Ok, so this video from Sainsbury’s Bank was actually posted back in May, before summer kicked off, but it snuck onto the list thanks to its really funky cinematography, which intersperses the loan applicants’ narrative with wacky short clips that enact what the family is talking about. The bank has a number of 2016 YouTube shorts that follow the same template, advertising other products, like travel money and credit cards.
P2P Global Investments and VPC Speciality Lending among hardest hits trusts since Brexit, (Alt Fi Credit), Rating: A
The two largest p2p and marketplace lending focused closed-ended funds are among the worst performers of all investment trusts listed on the London markets since market fallout from the Brexit vote, according to research by Numis Securities.
The best performing funds have been in Asia/EM, benefitting from both strong local markets (the MSCI Asia ex Japan is up 10% since 23 June in local currency terms) and the weakness of Sterling, down 10 per cent versus the US dollar. Technology and biotech has also rallied after a weak start to the year.
“Concerns have been expressed about the quality of loan books, the effectiveness of credit analysis, growing delinquencies, slowing growth, funding shortfalls and the prospect of greater regulatory scrutiny, while the Lending Club debacle has cast a long shadow. Against this challenging backdrop, full disclosure and transparency are critical to address growing investor concerns. “
Alan Brierley, director of investment company research at Canaccord Genuity says for P2P Global Investments – the largest fund in the space – a significant hit was from an impairment charge of £7.7m.
The £414m BlackRock Income Strategies Trust also makes it into the list of worst performers. It also is a big investor in P2P, holding one of the largest stakes in the Funding Circle SME Income fund, another listed vehicle, albeit a stronger performer since Brexit.
Pariti taps into Zopa API to help millennials pay off card debt, (Finextra), Rated: A
UK money management app Pariti has formed a referral partnership with P2P financing outfit Zopa to help users swap out their credit card debt for a consolidation loan.
The startup, which claims 70,000 users, says the agreement with Zopa is the first of a number of bundled relationships aimed at creating a ‘marketplace bank’ for millennial consumers.
Pariti is using Zopa’s recently-released loan application service API to draw down rates from the peer-to-peer funder.
European Alternative Finance Jumps to €5.4 billion in 2015, (Crowdfund Insider), Rated: AAA
The Cambridge Centre for Alternative Finance (CCAF) has published its 2nd report on the rapid growth of alternative finance across Europe. Entitled “Sustaining Momentum“, the CCAF research has quickly become the definitive report quantifying the growth and documenting the evolution of alternative finance around the world. CCAF has previously published research on new forms of finance covering both the Americas and Asia Pacific.
According to CCAF, as one would expect, the UK continues to dominate the continent at €4.4 billion in aggregate funding. France and Germany are second and third with €319 million and €249 million. The Netherlands had a solid showing at €111 million. If you remove the UK, European alternative finance increased by 72% year over year going from €594 million in 2014 to €1.019 billion in 2015. While the overall rate of growth slowed, the industry is sustaining momentum as new regulations kick in and platforms mature.
Other interesting facts highlighted in the research:
- Estonia is 1st in Europe in alternative finance volume per capita at €24, followed by Finland at €12 and Monaco at €10 (outside of the UK).
- UK per capita volume stood at over €65
- Balance Sheet lending was very small at just € 2 million, excluding the UK
- About 38% of surveyed platforms felt their national regulations for crowdfunding and peer-to-peer lending were adequate and appropriate, 28% perceived their national regulations to be excessive, and a further 10% said current regulations were too relaxed.
- The biggest risks cited were increasing loan defaults or business failure rates, fraudulent activities or the collapse of platforms due to malpractice.
- The UK had the most platforms (94) followed by France (49), Germany (35) & Italy (30)
- Just shy of 50% of firms indicated no in flow of funding from outside their country, while 72% of platforms indicated no out flow of funds to other countries
Finnovista: Spanish Fintech Sector Has Quadrupled in Three Years, (Crowdfund Insider), Rated: A
When Finnovista first covered Spanish fintech in 2013, the site recorded only 50 startups in the sector; now, three years later, in its first edition of Fintech Radar Spain, the site identified 207 Spanish fintech startups, indicating the sector had quadrupled in three years, stats largely in line with fintech’s global trend.
Finnovista predicts that over the next five years fintech startups will compete to overtake 20% the traditional Spanish banking market creating a more significant presence in all categories of financial services including Payments, Loans, Management Corporate Finance and Personal, Insurance, Investment Management, Trading, and Savings.
In addition, Finnovista cited that Spain’s 207 fintech startups make Spain the largest market for innovation compared to Latin America, ranking significantly above Brazil’s 130 startups, Mexico’s 128 startups, Colombia’s 77 startups and and Chile’s 56 startups. Not surprisingly given these statistics, Spanish Fintech leads in number of startups in 12 of the 13 categories that Finnovista monitors through its initiative Fintech Radar for Latin American countries.