- Today’s main news: An open-source blockchain technology may solve marketplace lending’s problem.
- Today’s main analysis : Prosper changes its prices.
- Today’s thought-provoking articles: How FinTech policymakers can improve. Cordray reignites bank-FinTech fight. An interview with Julian Cork, COO of Landbay.
- Could PUFIN be the answer to marketplace lending’s problems? AT: “Blockchain is looking more and more like the long-term solution the financial services has needed to prevent fraud and encourage more transparency, and not just in marketplace lending. If PUFIN does anything, it could spur a new spate of blockchain innovation that will scale in ways not heard of since Gutenberg’s famous press.”
- Prosper defends its recent price change. AT: “As it should be, higher risk borrowers will pay more and lower risk borrowers will pay less. Every now and then, change is good. The market works itself out in the end.”
- 10 principles for better policymaking in FinTech. AT: “Some of these are no-brainers. For instance, “ensure regulations encourage innovation.” Who can argue with that? Others might be a bit controversial. Will regulators pay attention?”
- Did CFPB director Richard Cordray send a shot over bankers’ bow? AT: “It’s evident that now that banks have decided to partner with FinTech firms they don’t want any boats to rock. There will be some disagreement among the players, and there is always friction between the regulators and those they regulate, but if banks think they can keep every bit of information they have on consumers for themselves without injuring their relationship with their partners, then they haven’t truly been converted.”
- Islamic finance gets its first robo advisor.
- Comcast Ventures and Stereo Capital lead funding round for Lendio.
- PeerStreet sails through first year with no losses.
- Accenture’s 7th annual FinTech lab hits all-time funding high.
- LendingClub gets into car refinancing.
- London’s FinTech takes center stage.
- An interview with Landbay COO Julian Cork. AT: “Highlight: ‘The technology of FinTech isn’t disintermediating banks. What’s disintermediating banks are customer expectations.’ That’s astute insight and a fine nuance, but true.”
- In Canada, FinTech is providing positive benefit for blockchain and the Bitcoin industry.
- Dream Payments win global FinTech challenge.
- Singapore and South Korea partner on FinTech projects. AT: “We’re seeing more and more cross-national cooperation in various areas of FinTech. This should be encouraged.”
- United States
- PUFIN Open Source Blockchain Tech May Be Marketplace Lending Answer (PR Newswire), Rated: AAA
- Prosper Announces Pricing Change (Prosper), Rated: AAA
- 10 Principles for Better Fintech Policymaking (ThinkAdvisor), Rated: AAA
- Cordray Reignites Bank-Fintech Fight After Comments on Data Sharing (American Banker), Rated: A
- First robo advisor enters the Islamic finance stage (Gulf Times), Rated: A
- Lendio Raises $20 Million in Growth Capital Led by Comcast Ventures and Stereo Capital (Benzinga), Rated: A
- PeerStreet Funds $150M in Investments with Zero Losses During First Year (Crowdfund Insider), Rated: B
- Accenture’s 7th annual fintech lab launches as funding hits all-time high (Biz Journals), Rated: B
- Lending Club zooms into car refinancings in turnaround effort (TechCrunch), Rated: A
- United Kingdom
- London’s fintech status to get a global boost with a government-backed showcase (City A.M.), Rated: A
- P2P lending – Benefiting from the British property market – Landbay (Vimeo), Rated: A
- European Union
- Scottish Enterprise partners with P2P platform (The Herald Scotland), Rated: A
- Canada’s FinTech Prominence Bodes Well for National Bitcoin Industry (Cryptocoins News), Rated: A
- Dream Payments Named Winner of Global Fintech Challenge VentureClash (Crowdfund Insider), Rated: B
- China’s Firms Shine Bright in 2016 ‘Fintech 100’ List (Finance Magnates), Rated: B
- Investor network launches three new instruments to renewable energy and green growth in India (Free Press Journal), Rated: A
- Singapore and South Korea sign up for fintech co-operation (Banking Technology), Rated: A
PUFIN Open Source Blockchain Tech May Be Marketplace Lending Answer (PR Newswire), Rated: AAA
In the wake of recent company shakeups and growing pains in the marketplace lending industry, the need for better transparency and industry tools for all participants has become a critical concern. PUFIN, an online and open source project to create free and global loan identifiers using blockchain technology, aims to deliver order and uniformity in a secure environment to the marketplace.
Recent entrants into the market are proposing systems that reserve the right to charge fees at any time. The idea of a free enticement that allows for charging fees later may be the basis for a slow or incomplete industry adoption of online loans.
LendingCalc.com’s Ben McMillan and Mike Mazier may have the open source answer: They have filed to patent a fee-free system to use blockchain technology to generate unique identifiers for loans in line with the US Treasury’s whitepaper “Opportunities and Challenges in Online Marketplace Lending.” The company is in the works to set up their system as an open source resource for the industry.
The PUFIN project has been set up so that it can never be proprietary. (Learn more at pufin.org.) PUFIN licensing requires all uses of the license to be free of cost to all parties.
Prosper Announces Pricing Change (Prosper), Rated: AAA
Today, the rates offered to borrowers through the Prosper platform are being modified. The changes are a direct result of the forward looking credit market, interest rate expectations, the US credit environment and the competitive environment in US consumer unsecured lending.
Over the course of the last 12 months, rates through the Prosper platform have been raised twice and Prosper has made conservative adjustments to its loss expectations. These rate changes underscore our commitment to operating a marketplace that balances the economic incentives for both our borrower and investor communities.
Borrowers in the AA-C rating grades will generally see rates that are lower. Borrowers in the D-HR rating grades will see higher rates. While the exact portfolio composition going forward will be a result of future marketing mix and borrower reaction to the pricing change, we believe this is a fair representation of the potential impact of the changes to borrowers and investors. As one can see, higher quality borrowers will begin seeing lower rate offers while higher risk borrowers will begin seeing higher interest rate offers.
10 Principles for Better Fintech Policymaking (ThinkAdvisor), Rated: AAA
A report from ITIF identifies 10 things regulators should consider as they develop fintech regulations
Information technology innovation has allowed financial firms to score easy wins to improve labor productivity, like automating data gathering and reducing the burden on bank tellers. However, “the next wave of IT-based financial-services productivity will depend on significantly different business and service models,” most notably by supplanting firms that acted as intermediaries between the consumer and the service provider.
Fintech companies face a wide range of regulatory bodies and rules including banking laws, consumer protection disclosure requirements, prohibitions on unfair, deceptive or abusive practices, and anti-money-laundering rules. Companies that operate internationally are subject to each country’s financial regulations, as well as rules that force them to store citizens’ data within that country.
Finally, the process of getting a rule passed in the United States is itself too slow, as regulators have to propose a rule, allow for public comment and review those comments before issuing a final rule.
1. Support fintech transformation. Governments themselves should be early adopters of fintech to promote broader adoption, for example, allowing citizens to pay taxes and purchase hunting and fishing licenses on the same online platform, the report suggested.
Governments can also look to fintech solutions to improve reporting and data management. ITIF pointed to Estonia, which adopted blockchains earlier this year to secure patient health records.
2. Ensure regulations encourage innovation.
3. Eliminate redundant regulations. Consumer disclosure and anti-money laundering are two areas where fintech firms may find themselves responding to multiple regulators.
4. Regulate fintech at the national level.
5. Create incentives for fintech companies to protect consumers. Regulators can “go too far” and punish companies acting in good faith, the report noted, which could limit innovation if firms spend more time and money on compliance than development.
6. Create tech-neutral rules. Rules shouldn’t favor one type of application more or less than another.
7. Encourage a level playing field between incumbents and new entrants. Banks are held to rules that startups can avoid, the report claimed.
8. Promote cybersecurity in fintech. Rather than setting prescriptive standards, ITIF recommended regulators create incentives for firms to improve their cybersecurity policies.
9. Support standards development and financial data interoperability.
10. Promote harmonization of international regulations.Harmonization should also occur between different countries, ITIF wrote. Digital currencies and online marketplaces have already lowered barriers to trade between global users. Regulations regarding routing transactions, transparency, anti-money-laundering, regulatory compliance and access to data for law enforcement should follow, according to the report.
Cordray Reignites Bank-Fintech Fight After Comments on Data Sharing (American Banker), Rated: A
Consumer Financial Protection Bureau Director Richard Cordray has revived an ongoing dispute between banks and fintech firms over screen scraping, a method certain companies use to obtain access to consumer bank records.
In a speech on Monday, Cordray bluntly warned banks not to limit access to financial data by third-parties working on behalf of the customer — comments that elated fintech firms which rely on aggregating data to offer financial advice and other services.
Though banks and fintech companies have found several ways to collaborate on sharing and analyzing data, tensions have periodically flared particularly around the method of screen scraping. This technology allows financial advisers and other fintech companies to obtain the financial data of willing consumers through their bank’s website.
Some of the largest banks have reportedly taken steps to limit screen scraping, which they argue poses significant security risk.
Cordray’s comments were the first of their kind for a federal regulator and may be a signal that the CFPB will consider stepping in if banks and fintech firms cannot reach an accord.
First robo advisor enters the Islamic finance stage (Gulf Times), Rated: A
Islamic finance-oriented investors seeking advice on advantageous halal banking products or investment portfolios now have a new option: A robo adviser called Wahed, the world’s first automated Islamic investment platform.
It was launched last month by New York-based Wahed Invest Inc, a financial advisory company founded by Junaid Wahedna, a Columbia- and Yale-educated entrepreneur, Islamic finance specialist and former financial analyst at New York’s M Capital Group.
The functional principle of Wahed is that of an automated platform which analyses thousands of halal securities worldwide to create portfolio allocations with the highest growth potential for its clients. Its aim is the provision of access to halal portfolio management for 2bn potential Muslim clients around the world, as well as for non-Muslims who want to engage in ethical investing. The proprietary platform uses real-time software which conducts fully automated investment allocations by deploying customised financial optimisation algorithms.
The Wahed platform, accessible under www.wahedinvest.com, is currently available to investors in the US only, but it will be rolled out to over 100 countries worldwide starting from 2017. There are also plans to develop an Islamic pension offering for the Middle East and North Africa region, where private sector employee pension plans are in great demand.
The company’s board shows some of the most prestigious names in international Islamic finance, including Sheikh Taha Abdul Basser, former Islamic Chaplin at Harvard University and Shariah board member of Dubai’s sovereign-backed private equity firm Fajr Capital, as well as two former McKinsey & Company partners specialised in Islamic finance.
Lendio Raises Million in Growth Capital Led by Comcast Ventures and Stereo Capital (Benzinga), Rated: A
Lendio, the nation’s leading marketplace for small business loans, today announced at Money20/20 that it has secured $20 million in funding from Comcast Ventures and Stereo Capital with participation from existing investors Napier Park, Blumberg Capital, Tribeca Venture Partners and North Hill Ventures. This round of capital will be used to accelerate Lendio’s growth through marketing, sales and brand awareness for millions of small business owners across the U.S.
The funding comes after facilitating another record quarter of loan volume funded through Lendio’s online marketplace of 75 lenders with $63 million going to small businesses in Q3.
With more than 100 percent growth year-over-year, Lendio has focused efforts over the past twelve months on the customer experience, investments in technology and critical unit economics of the business. This round of capital will enable Lendio to further leverage its market leadership and move towards expanded brand awareness among small business owners.
PeerStreet Funds 0M in Investments with Zero Losses During First Year (Crowdfund Insider), Rated: B
On Tuesday, PeerStreet celebrated its one-year anniversary by revealing that it has funded $150 million investments with zero losses in the last twelve months. The real estate crowdfunding platform also declared it is offering investors average annualized returns between 6% and 12% to date and a weighted portfolio LTV of 65%.
Accenture’s 7th annual fintech lab launches as funding hits all-time high (Biz Journals), Rated: B
FinTech Innovation Lab., the startup bootcamp launched by the Partnership Fund for New York City and Accenture (NYSE: ACN), is accepting applications for its seventh annual class.
The lab, notably where financial industry expert Blythe Masters launched her bitcoin-related startup Digital Asset Holdings (DAH) out of stealth mode, begins in April 2017 and continues for 12 weeks.
Among the banks lined up to provide guidance and mentorship to the lab’s 2017 slate of up-and-coming entrepreneurs are are American International Group, Bank of America, Barclays and Credit Suisse. VCs from Canaan Partners, Contour Venture Partners, Nyca Partners, Rho Ventures, RRE Ventures and Warburg Pincus are also on board.
Lending Club zooms into car refinancings in turnaround effort (TechCrunch), Rated: A
Many Americans learned through Lending Club that they can refinance their credit card debt online; now, the lending marketplace is hoping they’ll start refinancing their automotive loans using its platform, too.
In comparison, the overall U.S. auto loan debt market had grown to $1.103 trillion by this past June, according to the research firm Experian Automotive.
Lending Club will begin refinancing car loans for California consumers with FICO scores above 640, and whose cars are less than 7 years old and have been driven fewer than 80,000 miles. Sanborn says that interest rates for California customers will range from 2.49 percent to 19.99 percent, and that the average borrower could save $1,350 over the life of their loan.
Initially, the loans, which Sanborn says will range from $5,000 to $50,000, will be made off the company’s balance sheet. Eventually, he says, the program will be extended nationwide to a wider variety of borrowers, and it will be funded by the same sources of capital that currently provide personal loans to borrowers at Lending Club.
London’s fintech status to get a global boost with a government-backed showcase (City A.M.), Rated: A
The best and brightest of London’s fintech scene will be given centre stage by the government next spring, as the Treasury today revealed plans for an annual fintech conference.
Set to launch next April, the exhibition will give UK fintech firms the chance to present their business to international investors.
Britain’s blossoming fintech sector now employs over 61,000 people and, in 2015, generated £6.6bn in revenue.
There has been some concern raised recently that the Brexit vote could lead to fintech firms moving away from London. In particular, fintechs, like banks, are concerned the final deal could gloss over their passporting needs, while clamping down on freedom of movement could see their access to talent run dry.
P2P lending – Benefiting from the British property market – Landbay (Vimeo), Rated: A
In the Master Investor Show, we interview Julian Cork, COO at Landbay, who speaks on their peer-to-peer technology that matches investors with borrowers, the benefit of peer-to-peer technology, and why they chose mortgages in particular for meeting investing and borrowing needs.
Scottish Enterprise partners with P2P platform (The Herald Scotland), Rated: A
SCOTTISH Enterprise is to make £2.75 million of funding available to small and medium sized enterprises via the peer-to-peer lending platform LendingCrowd.
LendingCrowd chief executive Stuart Lunn said the business had approached Scottish Enterprise after the Scottish Government last year published a report highlighting the difficulty small and medium sized enterprises (SME) have in accessing funding in the £150,000 and below bracket.
The average size of loan made via LendingCrowd is £75,000 but SIB will not provide the full amount being sought by any of the SMEs on the platform. It expects to lend between £5,000 and £250,000 on a case by case basis.
Canada’s FinTech Prominence Bodes Well for National Bitcoin Industry (Cryptocoins News), Rated: A
Canada’s Commissioner of Competition, John Pecman, discussed October 6th 2016 the link between competition and innovation. The Commissioner suggested new disruptive technologies challenge not only traditional business but, as well, regulatory models.
Mr. Cotten cites Vitalik Buterin, Founder of the Ethereum Project, as one prime example of how Canadians are expanding the possibilities of Blockchain technology.
There are numerous Bitcoin startups in Toronto. QuadrigaCX is among Canada’s leading Bitcoin exchanges, but also a multi-sig wallet with enhanced account security features, funding options and e-Transfer. QuadrigaCX’s core usership is located in Canada, though it does accept international users.
The MARS Discovery District claims $6.8 billion was invested in fintech in 2014. Mostly going to New York and London. But Toronto attracts much investment, also, and is considered the 9th largest fintech city in the world with hundreds of thousands of employees. Why such “competitive intensity” in Toronto’s fintech scene?According to the Globe and Mail, Toronto is home to more financial institutions of a $50 billion market cap or higher.
Vancouver, according to number of Bitcoin ATM’s in the west coast city (21), seems to attract most of the Bitcoin energy spent in the nation.
Dream Payments Named Winner of Global Fintech Challenge VentureClash (Crowdfund Insider), Rated: B
On Tuesday, Toronto’s cloud-based mobile payment platform Dream Paymentsannounced it was named the winner of the global investment challenge for fintech and digital health companies, VentureClash. The event was held on October 20th at Yale University. The company stated it was among almost 200 contenders that participated.
China’s Firms Shine Bright in 2016 ‘Fintech 100’ List (Finance Magnates), Rated: B
According to the 2016 Fintech Innovators Report, which evaluates and ranks the world’s top 100 fintech companies, China’s fintech firms have outperformed their counterparts in other countries this year.
According to the rankings, 13 UK firms featured in the Fintech 100 this year, down from 18 in 2015. Chinese fintechs stood out in 2016, with eight firms in the 100, but four of these – Ant Financial, Qudian, Lufax and ZhongAn – are in the top five. In contrast, Atom Bank was the only representative from England to appear on this year’s top 10 list. In the US, 24 companies made the list of 100 including three in the top 10.
Investor network launches three new instruments to renewable energy and green growth in India (Free Press Journal), Rated: A
Today, the India Innovation Lab for Green Finance (the India Lab) announced endorsement of three innovative investment vehicles that will help drive millions of dollars of needed investment to India’s clean energy and green growth targets.
This announcement is in partnership with the India Lab’s public and private Lab Members, including the Indian Ministry of New and Renewable Energy, the Ministry of Finance, the Indian Renewable Energy Development Agency (IREDA), the Asian Development Bank, ReNew Power, the World Bank, and the development agencies of the French, UK, and US governments, among others.
The three endorsed instruments, which were selected from among a highly competitive pool, and refined and developed over the course of a year, will now move forward for piloting in India with the support of the India Lab’s members. They include a rooftop solar financing facility, a new lending platform for green investments, and a currency exchange instrument.
The new instruments endorsed by the India Lab today are:
* The Rooftop Solar Private Sector Financing Facility aims to drive capital at a lower cost of financing for developers of rooftop solar projects, by providing long term debt financing through securitization.
* Loans4SME is a peer-to-peer lending platform that would increase access to debt financing for small and medium enterprises (SMEs) for renewable energy and energy efficiency initiatives, by connecting them directly with lenders. Loans4SME has the potential to mobilize around USD $2.2 billion in debt financing for SMEs in renewable energy and energy efficiency by 2022, and thereby help in providing access to finance almost 800 MW of rooftop solar projects.
* The FX Hedging Facility aims to facilitate large-scale foreign investment into renewable energy in India by providing a cheaper currency hedging solution.
Singapore and South Korea sign up for fintech co-operation (Banking Technology), Rated: A
The Monetary Authority of Singapore (MAS) and the Korean Financial Services Commission (KFSC) have signed an agreement to foster more co-operation in the fintech space.
Under the agreement, MAS and KFSC will explore potential joint innovation projects on technologies such as big data and mobile payments.
MAS and KFSC will also discuss issues of common interest, and share information on fintech trends and how it may impact existing regulations.