Daily News Digest Featured News

Tuesday October 11th 2016, Daily News Digest

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United States

United Kingdom

European Union

China

India

News Summary

 

United States

Demarketizing fintech About Us pages, (Tradestreaming), Rated: A

Companies describe themselves as doing the financial equivalent of curing cancer when they’re just taking a splinter out.

Even fintech companies preaching transparency are culprits, shoving so much marketing material into the page you can’t tell what they actually do.

fiserv-about_us

New summary:
“Fiserv is an organization with solutions for mobile and online banking, payments, risk management, data analytics and core account processing.”
Old: 128 words
New: 20 words

Ron Suber, President of Prosper Marketplace, Delivers Keynote at Context Summits Alt Lending 2016, (Youtube Video), Rated: A

 

Hubzu Enhances Investor Experience by Adding RentRange Rental Income Estimates, (Email), Rated: A

Hubzu, a real estate auction marketplace, has launched a new feature to support investors seeking to purchase rental properties. The Hubzu® Real Estate Marketplace now displays low, median and high estimates of potential rental income through its integration with RentRange, one of the premier providers of market data and analytics for the single-family rental industry. Since 2009, Hubzu has facilitated the sale of over 159,000 homes via a transparent online sales and auction process.

Newest Marketplace Lender Launches In Turbulent Times (PYMNTS.com), Rate: A

The alternative lending market’s newest market entrant, Plousio, made its debut with an announcement on Thursday (Oct. 6), revealing plans to launch a platform connecting lenders to small business borrowers. Run by CEO Alex Chang, Plousio reportedly has more than 70 lenders already linked to its services.

Companies that are seeking funding through Plousio can obtain loans between $1,000 and $1 million, the company said, and borrowers aren’t restricted in how they can use the funds.

Classification confusion constraining MPL ABS (sci), Rated: A

Uncertainty over how to define marketplace loans – as securities or whole loans – is restricting securitisation of the assets. However, the US SEC could be considering classifying marketplace loans as securities, signalled by the announcement of its upcoming fintech forum.

Not only has this ongoing issue deterred investors from buying securitised marketplace loans, but platforms are also being dissuaded from the securitisation route as a funding tool.

As well as uncertainty about the asset class itself, there are questions about whether the platforms themselves should be redefined as investment companies. Should that happen, they would come under a whole range of different regulations, such as the Investment Company Act.

AXA IM sheds light on new alternative credit platform (altficredit), Rated: A

AXA Investment Managers has created a new alternative credit platform, with over €31bn in assets under management. The new platform has been forged through the merging of AXA’s alternative solutions and structured finance teams, and will be led by Deborah Shire (pictured above), head of structured finance.

Weekly Online Lending Snapshot – October 07, 2016 (Orchard Platform), Rated: A

On Monday, Orchard CEO Matt Burton spoke on a panel entitled, “Fin-Tech & Financial Inclusion: How New Technology Can Unlock Capital and Level the Investment and Lending Playing Field.” The panel was hosted by the U.S. Small Business Administration and WeWork, as part of the White House South by South Lawn Festival. Online lending is increasingly becoming an important alternative source of capital for small businesses. Just last week, small business lender OnDeck announced a national marketing campaign to raise awareness of available financing options for small business owners. Also, last week, small business lender Able Lending announced that it had raised $100 million in debt financing from Community Investment Management.

Prosper Daily Helps Consumers Make Smarter Credit Card Decisions with the Launch of Credit Card Optimizer™ (Prosper), Rated: A

Prosper Marketplace announced today the release of Credit Card Optimizer, a new feature of the award-winning Prosper Daily app  that helps consumers make better money decisions daily by providing them with actionable insights.

Credit Card Optimizer™ aims to solve common and costly credit card mishaps by arming people with timely information including payment reminders, a breakdown of interest bearing balances by card, and other contextual advice on how to avoid potential fees.

Weekly Industry Update: October 10, 2016 (PeerIQ Email), Rated: A

Last Thursday, PeerIQ CEO Ram Ahluwalia spoke at Bloomberg BNA’s Marketplace Lending: Regulatory Perspectives from Washington and Industry, where he discussed securitization as a key cornerstone of marketplace lenders’ funding strategy and projected that it will continue to grow. Indeed, the first week of Q4 was marked by an impressive active new issuance market for MPL ABS.  We have seen approximately $800 million in new issuance priced this week and an additional $168 million in pre-marketing.
In this week’s newsletter, we summarize the two deals priced this week, MHMT 2016-LC1 and SCLP 2016-3, and highlight key observations and insights from our Q3 2016 Marketplace Lending Securitization Tracker.
Murray Hill Marketplace Trust (MHMT) 2016-LC1
Over the past nine months, American Consumer Lending Holdings, a subsidiary of Prospect Capital, has been purchasing Lending Club (LC) Near-Prime loans with an intent to securitize.  With the market stabilizing, as evidenced by the favorable pricing of the SoFi and Marlette deals, Morgan Stanley, the sole lead, priced this transaction under the Bloomberg ticker MHMT 2016-LC1.
Murray Hill Marketplace Trust (MHMT) 2016-LC1, an unrated transaction, is collateralized by approximately $314 million of Near-Prime unsecured consumer loans.  This deal is significantly larger than Jefferies’ LCIT 2016-NP1, which is backed by about $135 million of LC Near-Prime collateral (for more, see our July Monthly Update).  MHMT 2016-LC1 has a 9 month weighted-average loan age (WALA) and a 26.5% weighted-average coupon (WAC), in contrast to LCIT 2016-NP1, which had 2 month and 28.5% respectively. The more seasoned nature of Murray Hill collateral leads to shorter weighted-average life (WAL) across its capital structure (Exhibit 1).  For instance, the MHMT 2016-LC1 subordinate tranche has a 1.6 year WAL versus a 2.3 year WAL for LCIT 2016-NP1. Still, MHMT 2016-LC1 A and B tranches have identical credit support levels to those of LCIT 2016-NP1. Further, a $39.3 million retained tranche C was created and sat on top of the 10% residual piece.
Exhibit 1 Comparing Capital Structures
                
MHMT 2016-LC1 was priced at 4.25% yield and 6.25% yield for A and B tranches, respectively. Jefferies priced LCIT 2016-NP1 to 3.75% yield for the senior bonds and 6.5% yield for the subordinate bonds. The pricing for MHMT 2016-LC1 A was 50 basis points wider than the senior bond in Jefferies’ deal with the same credit support, yet, longer WAL
SoFi Consumer Loan Program (SCLP) 2016-3 
SoFi Consumer Loan Program (SCLP) 2016-3 is the largest unsecured consumer ABS since the inception of MPL ABS in 2013. JP Morgan, Citi, Deutsche Bank, and Goldman Sachs are the co-leads on the deal with SoFi as the co-manager. The deal was upsized during the initial pricing process—the A tranche was upsized to $452 million from $377 million, and the B tranche to $61 million from $51 million, implying $600 million SoFi collateral pool.
Kroll and DBRS are consistent in the ratings assigned to the tranches; the A tranche is rated single A; the B tranche has a BBB rating (Exhibit 2). The credit support associated with both tranches are also relatively consistent with prior deals.
Exhibit 2 Summary of SCLP Deals
             
Since the inauguration of SCLP shelf, the SoFi deals have priced tighter over time. Comparing SCLP 2016-3 to SCLP 2016-4 (the deal priced last month), the A tranche was 15 basis points tighter, and the B tranche was 30 basis points tighter (Exhibit 3).  We expect further tightening of the asset class as rating agencies grow more comfortable with the category and as investors reach for yield.
Exhibit 3 SCLP Initial Pricing Spreads
              
Source: PeerIQ

Q3 2016 Marketplace Lending Securitization Tracker 

We have released our Marketplace Lending Securitization Tracker for Q3. We underscore several observations and insights below:

  • Total issuance topped $2.4 billion this quarter—a record—and is up 41.1% from Q2, with cumulative issuance now totaling $12.7 billion.
  • Although MPL origination volumes have declined at some platforms, ABS issuance is increasing as is the proportion of loans funded by ABS.
  • The movement towards rated securitizations at larger transaction sizes continues.  All the deals issued in the third quarter were rated, with the exception of LCIT 2016-NP1.
  • New issuance spreads continued to tighten in—a friendly environment for securitization.
  • We estimate $6.0 to $10.3 billion MPL ABS issuance for 2017.

Brace for impact? (Lending Robot), Rated: A

An increase of stock market prices is only sustainable when it matches economic growth. Otherwise it’s pure speculation, and history has shown that ‘corrections’ inevitably happen. The stock market is like a game of musical chairs, everybody knows the music will eventually stops, yet nobody wants to be amongst the players sitting too early.

Tax Treatment in Peer Lending (Lending Robot), Rated: B

tax treatment in peer lending

Demystifying Diversification (Lending Robot), Rating: A

At some point nearly every Peer Lending investor asks the question, “Which platform should I invest on?”

We use interest rate as a proxy for risk to group loans into asset classes of different risk/return profiles. The interest rates we split on are 9.10%%, 12.34%%, and 16.43%% for the 25th, 50th, and 75th percentiles respectively, which are the simple averages of the 25th, 50th, and 75th percentiles on Lending Club and Prosper. 25th_LC corresponds to the asset class of all Lending Club loans with interest rates from 0%% to 9.10%%, 50th_LC corresponds to the asset class of all Lending Club loans with interest rates from 9.11%% to 12.34%%, etc.

To determine the return series over time for each asset class, we use the adjusted net yield methodology described in this blog post. A quick summary of the methodology is that each month, we sum all interest received, subtract all fees and charge-offs, and divide that by the outstanding principal at the beginning of the month:  ∑ (interest − fees − charge−offs) / ∑ beginning outstanding principal). To account for the exponential growth rate in loan originations each month over most of the history for both platforms, we make an adjustment to treat the amounts of new loan originations each month to be equal.

a snippet of the time series for the returns of the various asset classes

Elevate Celebrates Billion in Savings for its Customers (Elevate Press Release), Rated: B

FORT WORTH, Texas – October 11, 2016 – Elevate Credit today announced cumulative savings for customers of more than $1 billion as the company continues to use advanced analytics to lower the average rates of its products.  Since 2013, the average effective rate of the company’s products has dropped over 40% and customers have saved $1.1 billion over what they would have paid for a typical payday loan with a 400% APR.

Elevate’s products represent a new generation of online credit for nonprime consumers that is a significantly lower cost than payday loans, which have an average APR of 400% and bank overdraft products that, according to an FDIC study, have an average effective rate of more than 3,500%.

United Kingdom

UK Banks Will No Longer Be Allowed to Decline Small Businesses For Loans as Alt Lending Wins, (deBanked), Rated: AAA

UK Treasury will make it obligatory for banks to refer rejected small businesses to other lenders. Nine of the country’s largest banks including Royal Bank of Scotland, Lloyds, Barclays and HSBC will be legally obligated to do so when the plan goes into effect in the next three months, The Times reported.

The applicants will be referred to three loan marketplaces — Funding Options, Funding Xchange and Bizfitech that will make referral fees for loans funded on their platforms.

Lloyds Next to Introduce Selfie Technology, (Fintech.Finance), Rated: A

Customers applying online through the new simplified application form will sometimes be required to provide ID. They will be able to complete a simple step-by-step application process to open a current account and take pictures of their UK driving licence or passport, along with selfie images to confirm their identity.

UK P2P Finance Association Releases Major Research on Economics of Peer to Peer Lending (Crowdfund Insider), Rated: A

The UK Peer to Peer Finance Association (P2PFA) has released a commissioned study on the economics of the peer to peer lending market in the UK.  The independent assessment, provided by the economic consulting firm of Oxera, analysed the risks, costs and benefits of peer-to-peer lending and provided an objective account of how P2P business models work. The study focused specifically on the eight-member platforms of the P2PFA – each held to high standards of transparency and operation – which collectively comprise over seventy-five per cent of the UK market.

FINTECH CEO: The government’s foreign workers crackdown ‘will be a competitive disadvantage for the UK’ (Business Insider), Rated: B

The CEO of a leading London fintech startup says the government’s planned crackdown on foreign workers would be a “competitive disadvantage” for the nascent industry.

Home Secretary Amber Rudd said in a speech earlier this month that the government would make it harder for companies to give jobs to immigrants before recruiting British people, as part of a post-Brexit crackdown on immigration.

Whatever Happened To … RateSetter (PYMNTS.com), Rated: B

RateSetter was founded in 2010 by Lewis, a former Lazard investment banker, and Pete Behrens, the current chief commercial officer, who formerly worked in law and then banking at the Royal Bank of Scotland.

RateSetter’s business is based on peer-to-peer lending, with both borrowers and lenders competing for matched loans, specifying a particular rate they’re willing to accept. Lenders can participate in four markets — one, 12, 36 or 60 months — while borrowers can apply for loans from six to 60 months.

2014 was a big year for RateSetter. In July, the British Business Bank released that it would start lending via the business in order to support individuals, traders and other business-related purposes. Later in November, RateSetter opened an office in Australia. As for the RateSetter team, it’s grown quickly from just two employees to its current 170 employees.

Looking to the future, Lewis said the plan is to achieve a system where each investor gets at least the market rate of interest to ultimately make the RateSetter system become a “benchmark.”

AMTD Group and LendIt Jointly Announce the Formal Establishment of AMTD-LendIt Joint Global Office and Signing of Strategic Partnership Agreement (LendIt Press Release), Rating: A

London, 11 October 2016 – AMTD Group Company Limited (“AMTD”) – the leading diversified financial services group based in Hong Kong with broad business coverage and network across Asia, and LendIt – the world’s largest and most influential Fintech summit organization, are pleased to formally announce the establishment of AMTD-LendIt Joint Global Office (“Joint Global Office”) as well as the signing of a strategic partnership agreement, creating a premier conduit for optimal and seamless exchange between Asian / global capital and the leading global internet / Fintech universe. In recognition of its global footprint, this announcement comes during LendIt’s Europe event in London, currently in full swing with its highest attendee numbers ever.

This latest collaboration marks the next stage of a long-term partnership between AMTD and LendIt, on the back of the resoundingly successful and unprecedented inaugural LendIt-AMTD Global Fintech Investment Summit held in Hong Kong in July 2016. AMTD and LendIt are committed to cultivating the global Fintech industry through resources sharing, capital infusion and technology development.

European Union

Slovakia P2P Lender Žltý melon Appoints Head of Risk Management & Announces Partnership With Lucron Development (Crowdfund Insider), Rated: AAA

On Monday, Slovakia-based peer-to-peer lending platform Žltý melon announced it appointed Michal Milko as Head of Risk Management. Milko joins the online lender after serving as Head of Credit Policy at mBank Czech Republic and Slovakia, a Polish internet bank. He has also held several positions in Retail risk management in VUB/Banca Intesa and CSOB.

Žltý melon also announced it formed a new partnership with real estate development company Lucron Development for the co-financing of new housing loans. The lender stated it has a similar commercial partnership is already running successfully in cooperation with the Cresco Group for the past two years and during just this short time already 25% of the group’s private customers have taken advantage of this new lending opportunity.

China

Investors protest at EY Shanghai office over P2P lender (Global Times), Rated: A

A dozen angry investors gathered in front of the Shanghai office of audit firm EY on Sunday, alleging that the firm had participated in capital fraud involving online peer-to-peer (P2P) lending platform Uprosper Assets.

 

investors in China protest P2P lending in Shanghai

Student ‘vanishes’ with half a million yuan in others’ loans (CRJEnglish.com), Rated: A

Fang Feiyang, a senior student in a Hunan province college was out of touch after borrowing over 500 thousand yuan from 12 online peer-to-peer (p2p) lending platforms. He utilized 18 of his classmates personal IDs to borrow the money since last October.

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

Up to 30th September, 2016, PowerEgg Drone from PowerVision has raised more than ¥86.3 million (USD $12.87 million), becoming the most funded campaign on JD.com’s crowdfunding platform.

AllPay, Taiwan’s first platform specializing in digital payments, finally hits the market. The platform now has more than 20,000 cooperative partners and 1.45 million users.

After CBRC released the official rules for online lending, the whole industry has witnessed a fiercer competition environment and an increase in operation cost. In respond to that, many platforms chose to reduce their loan yield rates.

According to a newly released regulatory document from PBOC, from the 1stDecember, one non-bank payment institution shall only open one fully-functional account for one individual or company.

According to a P2P Monthly Report (September) from Yingcan Consulting, there are now 2202 p2p lending platforms in operation in China (33 less than in August), with 43 newly added ones.

India

Show Mudra and banks can’t deny loans to small borrowers, (India Times), Rated: AAA

Mudra was established as a subsidiary of the Small Industries Development Bank of India (SIDBI) by Prime Minister Narendra Modi in April this year.

Banks which for long used the lack of data for small borrowers as an excuse to withhold loans will see that rationale evaporate with Mudra, the company formed to lend to small and medium enterprises (SME), launching a digital platform where potential borrowers can register themselves.

In the past five months, Mudra LtdBSE has disbursed Rs 42,000 crore, one fourth of its total annual target of Rs 1,80,000 crore. The lending agency’s disbursals nearly doubled in the last two months to about Rs 27,000 crore from the Rs 15,000 crore it disbursed in the first quarter of the current fiscal year.

This loan marketplace will have data which may be ten times more than what the credit bureaus have and would be accessible to all banks.

“The application forms filled by customers will go into a loan marketplace and gets pushed to preferred banks,” Jiji Mammem, MD & CEO, Mudra said. “So far we may have disbursed nearly Rs 300 crore under the scheme.”

Out of the total registrations of 9,300, loans have already been sanctioned to nearly 2,700 borrowers.

Of the planned disbursement of Rs 1.8 lakh crore this fiscal year, public sector banks would disburse Rs 77,700 crore, followed by Rs 21,000 crore by private and foreign banks, Rs 15,000 crore by regional rural banks and Rs 64,240 crore by MFIs.

Ahead of Diwali, India bitcoin startups Unocoin, Zebpay and Coinsecure mine new investments (Geektime), Rated: AAA

Zebpay, a bitcoin wallet provider based in India, is raising a new funding round of between $4 million and $5 million, following a $1 million seed investment the company got earlier this year. Like a number of new Fintech and e-commerce startups in India and Southeast Asia, the company is tying mobile payments to personal cell accounts because so many residents of that part of the world are unbanked.

Zebpay, founded as BuySellBitco.in in 2012, is integrating bitcoins into mobile payment services for Indian customers of Flipkart, Amazon and MakeMyTrip.

Some are predicting a bitcoin surge over Diwali. There are some unique factors behind the rise of the coin in Bangalore, Mumbai and New Delhi. India saw another recent bitcoin investment in the $1.5 million round of Bangalore-and-Tumkur-based Unocoin, which boasts 100,000 users and 30 employees, according to Bitcoin Magazine.

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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