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Wednesday November 2 2016, Daily News Digest

zopa loan originations

News Comments

United States

  • Online lenders strike back at scammers and loan stackers. AT: “There is a clear difference between fraudsters and people who get in over their heads. The challenge for online lenders is to identify the latter before they destroy their own lives and impact the profitability of the lenders.” GP : ” I find it interesting that originators went through the effor to build this themselves when there are so many credit bureaus where they could have reported this data instead. Why did they do that ? Is it a price ? A differentiator ? Can anybody join ID Analytics ? What is the cost ? Conditions ?”
  • Taking the peer out of P2P lending. GP : ” It is difficult to find billions of dollars from retail investors when companies like Lending Club and SoFi originate billions per quarter. I understand why they have gone after instutions where a few months of work for a few people can get you billions of dollar to lend. But I continue to believe that the p2p aspect provides billions of dollars worth of marketing and good will which was the main reason why Lending Club was able to be cheaper then a bank. Eventually the banks will catch up on the cost of underwriting and application as there is no real barrier and the good will in p2p will be the only thing left.”
  • Ripple gets a new CEO. GP : ” For context from their website, Ripple works with banks to transform how they send money around the world — a necessary step to compete in today’s growing economy. Our vision is to enable the Internet of Value so the world can move value the way it moves information today. This is relevant to lenders if they need to do a lot of disbursements around the word for cheap.”
  • What’s really happening at Wealthfront? GP : ” Betterment is pulling ahead of Wealthfront. When this happens investors get nervous and they replace the founder CEO. For entrepreneurs: interest are aligned with your interest as long as things go well. Once they don’t, your interest diverge. When the VCs take over it could go in 2 directions: either very well or very bad, rarely does it stay the same. Lets see how this will go.”


United Kingdom

European Union





  • Ant Financial moves into Thailand. GP: ” It is important not to underestimate Jack Ma and Ant Financial. One day it will enter the US when it is ready. For most of humanities’ history China was #1 in GDP and in nearly every metric.  “


News Summary

United States

Online Lenders Band Together to Strike Back at Scammers, Stackers (American Banker), Rated: AAA

Online lenders’ struggle with fraud is driving them to join new networks designed to find links between fraudulent loan applications and signs of loan stacking.

Lending Club, Prosper Marketplace, Marlette Funding and Avant are among those that have joined such a group in the past month.

ID Analytics formed its Online Lending Network in late October and has recruited about a dozen online lender members, including Lending Club, Prosper Marketplace and Marlette Funding. It’s focused mainly on loan stacking.

The vendor’s technology is meant to thwart online application fraud of any kind, including credit cards or deposit accounts. Many of its clients are wireless providers, marketplace lenders and traditional online lenders.

ID Analytics also tracks soft hits – consumer-initiated credit pulls that don’t show up on the credit report. Lenders are not allowed to see this activity, per the Fair Credit Reporting Act. But because ID Analytics’ tech platform was designed to solve fraud, the Gramm-Leach-Bliley Act allows it to collect that information and notify lenders of consumers who are receiving multiple offers, so they can slow down their decision-making process and prevent the consumer from getting three or four loans in seconds. ID Analytics also compares applicants against a repository of information about bad actors.

TransUnion announced a similar fraud prevention network, Fraud Prevention Exchange, in early October that includes Lending Club and Avant. The effort is run by Pat Phelan, a senior vice president in the innovative solutions group at TransUnion, who founded an online identity verification company called Trustev that TransUnion acquired last December.

Funds Are Taking The Peer Out Of Peer-To-Peer Lending (Financial Advisor Mag), Rated: A

Less than a decade ago, individual investors piled into the peer-to-peer lending industry with an idealistic belief that Silicon Valley could form a better banking model than Wall Street. In recent years, that picture has changed substantially.

Money from large investment firms account for the lion’s share of online financing—so much so that people operating within the space increasingly refer to this industry as marketplace lending rather than peer-to-peer lending. The biggest online marketplaces, including LendingClub and Prosper, are increasingly focused on compliance and lending standards rather than just user-friendly interfaces, according to Peter Renton, publisher of Lend Academy.

Now this evolving online lending landscape is reaching back out to individuals, only with a Wall Street twist by providing them access to funds that use leverage and charge relatively big fees. After all, it turns out that many moms and pops aren’t much interested in investing directly in these loans or brokering them among one another.

The latest example of this effort to make it easier for anyone to slip into this industry is a new closed-end fund that may start trading soon. The Van Eck Overland Online Finance Trust “may invest in a broad range of online-sourced loans,” including consumer, small business, student, real estate and other loans, according to a prospectus dated September 28.

The creation of this fund shows how big firms are trying to get individuals to pour their money into a field that’s going through some growing pains after years of rapid growth.

Ex-AOL, Yahoo executive appointed Ripple CEO (Reuters), Rated: B

U.S.-based financial technology start-up Ripple announced on Tuesday its Chief Executive Officer Chris Larsen has decided to step down and will become the company’s executive chair.

Larsen said Brad Garlinghouse, the firm’s current chief operating officer, will become the new CEO effective Jan. 1.

What’s really behind the leadership change at Wealthfront (Investment News), Rated: A

Wealthfront’s growth being surpassed by its competition may have led the robo-adviser to cut chief executive Adam Nash from daily management of the company, outside fintech experts said.

The digital advice platform announced Monday that venture capitalist and founder Andy Rachleff was reclaiming the top title at the company, while Mr. Nash would remain a member of Wealthfront’s board of directors.

Wealthfront also is slipping further behind its original robo-rival Betterment, which has branched out to serve non-retail clients, such as financial advisers. Wealthfront has said it only plans to provide digital financial advice to investors.

Financial technology expert Bill Winterberg said the change at the top could be a result of any of these factors: the firm’s slowing growth, increased competition or its delays in platform updates.

Tim Welsh, president and founder of Nexus Strategy, said Wealthfront’s failure to expand its technology for new clients, like Betterment has done with advisers and the 401(k) market, is adding to its troubles.


Here’s Why More Banks Are Expected to Team With Fintech Companies (The Street), Rated: AAA

Global financial technology investments are expected to continue, propelled partly by financial services companies that want in on the trend, according to consulting firm Accenture.

During the first quarter, global investments in fintech companies soared 67% from a year earlier to $5.3 billion, with more than 60% of investments going toward fintech companies in Asia and Europe.

There have been many deals in the sector, indicating that the fintech industry is maturing.
Last year alone, there were nearly 100 fintech deals that exceed $50 million, which includes mega-deals such as SoftBank’s $1 billion bet on Social Finance. Last year, Social Finance received $1 billion of primary capital in a funding, which was led by SoftBank.
The total transaction value in the fintech sector is expected to grow to $1.57 trillion by 2020, according to Statista.

fintech growth

The expected number total users of personal finance, business finance and small to medium enterprises is more than 400 million, worldwide, by 2020. In the fintech sector, the more users there are, the higher the potential revenue.

fintech growth
It makes more sense for banks to collaborate or acquire a fintech company, rather than spending money and building a fintech platform.

10-Year FinTech Landscape (Infographic) (ValueWalk), Rated: A

With the rapid growth of the financial tech industry it’s important to keep-up-to-date with everything that’s happening in the industry. We have created an infographic that highlights the growth of this sector over the last 10 years, ranging from accounting to personal finance.

Detailing the growth in the area over the last ten years (and covering some of the major FinTech companies from before that, like SagePay and Xoom, both founded in 2001), it splits the developing companies across their different specialisations – including:

  •        Accounting, like New Zealand software-as-a-service company Xero
  •        Crowdfunding giants such as Kickstarter and Patreon
  •        Investment gurus like Nutmeg and Xoom – among others
  •        Personal finance pioneers, covering non-traditional data sources (Moven) and savings assistance (Squirrel)

fintech landscape

Half of Banking Customers Globally Now Using FinTech Firms Finds World FinTech Report 2017 (EconoTimes), Rated: A

Half of banking customers across the globe are using the products or services of at least one FinTech firm1, according to the first World FinTech Report (WFTR) from Capgemini and LinkedIn, in collaboration with Efma. The inaugural report quantifies and tracks customer response to the rise of FinTechs, includes the views of financial services industry executives at both FinTech firms and traditional financial institutions2, and summarizes how innovation is key in the emerging industry landscape.

FinTech report

United Kingdom

UK Banks Now Required To Refer SMEs To Alt-Lenders (PYMNTS), Rated: AAA

The U.K.’s bank referral scheme has officially kicked off.

Reports by Financial Times on Tuesday (Nov. 1) said the program that requires traditional banks to refer small businesses to alternative lenders if they’re rejected for a loan has begun.

The initiative was first proposed in 2014 as a way to make up for the nearly $4.9 billion in loans that SMEs cannot access each year because they are rejected for traditional bank financing. According to the U.K. Treasury, last year, 26 percent of the 324,000 SMEs that applied for a bank loan saw their initial applications turned down. Just 3 percent of those denied said they turned to alternative options to access the finance.

Further, according to reports, 80 percent of small business loans are provided by the Big Four banks — RBS, Lloyds, Barclays and HSBC.

The bank referral scheme was developed to inject competition into the SME lending market and to fill the gap of billions of dollars that small businesses cannot access via traditional lending methods.

The numbers behind Zopa’s interest rate cuts (altfi), Rated: AAA

Last week saw leading consumer lending platform Zopa drop interest rates across all lender portfolios – Access, Classic and Plus – by 0.2 per cent. It was the second time in as many months that the platform had dropped rates by that margin, and each time representatives cited increased competition within the broader consumer credit space as the key driver.

As a Zopa lender, the rationale makes sense. Consumer lenders both old and new are busily adjusting to the Bank of England’s recent decision to cut interest rates to an all-time low of 0.25 per cent. And while Zopa may claim not to be as connected to shifts in the base rate as the banks, the company has nonetheless conceded to at least a level of correlation. Ergo, Zopa has been forced to lower gross interest rates in order to ensure that it remains an attractive option for creditworthy borrowers. Lower gross interest rates correspond to lower investor returns; it doesn’t take a “lending genius” (in the immortal words of Lord Adair Turner) to work that out.

What we see is that average gross interest rates either fell or were flat for all of Zopa’s risk bands in September. This fits with the fall in lender rates.

zopa's interest rates

However, rather surprisingly, the average gross interest rate across all bands rose by 31bps. How can this be?

Answer: the average gross interest rate chart is weighted by origination, and the composition of Zopa’s origination from August to September changed significantly. A* loans accounted for 25 per cent of originations in September, down from 33 per cent in August. Meanwhile, volume as a percentage of monthly origination grew in every other risk band – with D loans exhibiting the greatest growth, from 7 per cent of monthly origination in August to 10 per cent in September.

zopa loan originations

Bottom line: Zopa is telling investors that returns are falling because gross interest rates are having to be lowered in the context of a more competitive consumer credit space. That looks to be true.

Fintech Trends: Challenger Banking (Finleap), Rated: AAA

According to Burnmark’s October case study, Challenger Banks are “a new breed of technology-driven and customer-centric financial institutions”. Those banks split into three categories: Embryonic Challengers who are using mainly mobile apps to form partnerships with other banks; Real Challengers who have obtained a banking license in the last five years; and Pseudo Challengers who are the digital partners and startups of existing banks, using both branch and digital channels.[1] On the other hand, a report by KPMG divides Challengers into Large (longer established), Small (from the past ten years), and Large Retailers (retailers who have entered the financial services market).[2] Thus, the categories of Challenger Banking are not concrete. Most, however, agree that those banks offer cheaper, faster, customer-oriented financial products that have helped disrupt the industry.
Challenger Banks have come in and shown that banking can be truly digital. Many of them rely purely on apps while others provide API-based services. All, however, attempt to simplify the financial world.[3] Those new banks have a larger return on equity compared to large banks, more flexibility when it comes to lending, lower operational costs and an increase of profits by £194 million compared to a decrease of £5.6 billion for UK’s largest five banks.[2] Some examples of Challenger Banks include Atom Bank – founded in 2014, it is a UK digital challenger bank; Moven – founded in 2011 as a neo-bank; Tandem Bank – founded in 2013 as the second challenger bank to be granted a baking license in the UK. Germany also plays a huge part in the Challenger Banking movement by including Fidor Bank, N26, and of course FinLeap’s solarisBank – a tech company with a banking license that enables digital companies to create solutions to their financial needs.[4]

Pinsent Masons calls for clearer regulatory guidance on robo-advice (Finextra), Rated: A

Despite initiatives from the Financial Conduct Authority (FCA), including the establishment of a regulatory sandbox scheme to allow businesses to test new ideas outside of the usual regulatory constraints, and a new ‘advice unit’ dedicated to supporting firms looking to develop low-cost, automated advice, there is still a need for greater support and clearer guidance in financial decision-making.

There needs to be a shift in the debate from advice versus guidance, and should instead move towards clear information for users of robo advice tools so that they understand the risks of using them and any limitations that the tools have.

Funding Circle smashes its own UK monthly origination record (altfi), Rated: A

Funding Circle, the world’s largest marketplace lender for small businesses, has broken its own UK record for monthly origination volume. Funding Circle lent £95,086,880 in October, besting the previous watermark – which was set in September – by approximately £20m.

Funding Circle has now lent a cumulative total of around £1.62bn across 23,719 loans, according to AltFi Data. 1,187 new loans were issued by the platform in October, ranging from £5k to £572k in size.

How to put crowdfunding investments into your Isa (Financial Times), Rated: A

The Innovative Finance Isa has so far proven to be something of a damp squib, but from this week it expands to include a whole new asset class — crowd bonds.

Until now, this tax-free individual savings account has only been able to hold peer-to-peer loans.

VPC Specialty Lending Investments Updates on Challenging Conditions (Crowdfund Insider), Rated: B

As part of their Q3 review, VPC Specialty Lending Investments (LSE:VSL) announced it was shifting away from purchasing whole loans to balance sheet investments in the online lending sector.  VPC said continued softness in certain whole loans in their portfolio were offset by a one time revenue item related to a single platform. The overall situation was exacerbated by downward pressure on the British pound requiring  the company to post collateral and thus reducing available cash to invest. The conversion rate between the pound/dollar has dropped from 1.47 at the end of 2015 to 1.30 at the end of September 2016. The impact on the company’s liquidity was said to be “dramatic” having settled £64.5 million as required margin to counterparties.

World-leading UK FinTech firms discuss sector plans at roundtable (Gov.uk), Rated: A

Today (01 November 2016), some of Britain’s cutting-edge FinTech companies met with Simon Kirby, the Economic Secretary to the Treasury, to discuss how the UK’s world-leading FinTech sector can build on its previous success and take advantage of the opportunities ahead.

The meeting was the first of 2 roundtables with the sector, taking place over 2 days, at which the government is listening to the issues affecting the sector and the plans it has to grow and develop.

Attendees included chief executives from across the FinTech industry, financial regulators and Eileen Burbidge, HM Treasury’s FinTech envoy. Robin Walker, a Minister for the Department for Exiting the European Union, and Mark Garnier, the Parliamentary Under Secretary of State at the Department for International Trade, will also represent the government.

European Union

Creamfinance to Offer Loans From Denmark Through P2P Lender Mintos (Crowdfund Insider), Rated: A

On Monday, Latvia’s peer-to-peer lending marketplace Mintos announced it would be hosting Creamfinance loans, which are currently averaging from €50 to €1,000 with a repayment deadline of 5 to 30 days. Mintos revealed that the non-bank credit lender would offer short-term, unsecured consumer loans issued in Denmark through its marketplace.

Creamfinance added short-term, unsecured consumer loans issued in the Czech Republic to the Mintos platform. Mintos noted that the annual return to investors is expected to reach 11%. Recently, Mintos announced that since its launch a year and a half ago it has seen investors funding over €50 million in loans to both private individuals, along with small and medium-sized businesses.


Ontario Securities Commission Creates Fintech Advisory Committee (Crowdfund Insider), Rated: A

The Ontario Securities Commission (OSC) is joining a growing roster of global securities regulators to acknowledge the shifting environment of finance and the need to better understand Fintech innovation. The OSC is now seeking applications for a Fintech Advisory Commmittee (FAC) that will advise staff on the OSC Launchpad – a sandbox type environment that was announced in a speach by OSC Chair Maureen Jensen in September. Jensen said at that time that it was important not to prevent promising business models from coming to market. The OSC Launchpad will attempt to allow innovation to occur without being overwhelmed by regulatory mandates in an environment that is secure.

The FAC will meet four times a year and will be chaired by head of the OSC Launchpad Pat Chaukos.  Members will be selected based on the following criteria and experience;

  • Digital platforms (e.g. crowdfunding portals, online advisers);
  • Cryptocurrency or distributed ledger technology (e.g. blockchain);
  • Venture capital, financial services and/or securities, with a focus on the fintech or technology sector;
  • Data science and/or AI (artificial intelligence); or
  • Fintech or technology entrepreneurship.

HSBC Launches New R&D Lab For Fintech In Hong Kong (Wealthx), Rated: AAA

HSBC and the Hong Kong Applied Science and Technology Research Institute (ASTRI) launched a research and development innovation laboratory on Monday, the latest in a series of initiatives to boost the development of financial technology (fintech) in the city.

The hope is that collaboration between HSBC and ASTRI will develop solutions to real problems that affect the bank and its customers. These include development of advanced authentication technologies, cyber security protection and behavioral biometrics using artificial intelligence technologies.


Monexo ties up with WantedNote for easy access to credit for chemists (Economic Times, India Times), Rated: A

Peer to peer lending platform Monexo has tied up with online pharma aggregation platform WantedNote, to create an on demand credit facility for distributors and chemists operating in the pharma sector in India. The collaboration is set to address the working capital needs of distributors and chemists.

WantedNote, which has over 150 distributions and over 10,000 chemists registered with it, sees nearly 3,000 transactions per day on its platform. Monexo will be using this information for Monexo’s data driven P2P lending platform which can run its analytics engine and compute the credit and interest rate for a distributor or a chemist very fast.


Jack Ma’s Ant Financial starts global foray with Thai expansion (Business Standard), Rated: A

Billionaire Jack Ma’s is taking initial strides abroad after becoming China’s largest provider of internet financial services. On Tuesday, it confirmed an investment in Thailand’s Ascend Money, an arm of the agriculture-to-telecoms conglomerate Charoen Pokphand Group. The company is now looking for similar partners to spearhead overseas ventures, including developed countries, said Douglas Feagin, who heads operations.

will help Ascend build an insurance service, initially targeting motorbike riders. It will also create a business modelled on Alibaba’s Koubei, which offers local-area dining reviews and grocery deliveries, he said. Through partners like Ascend and India’s Paytm, the Chinese online finance giant hopes to serve two billion users globally within 10 years.

Apart from following its Chinese users overseas, expects to drive more local users to the digital wallets of its partners. Ascend now operates True Money for online payments and Ascend Nano for lending, and has digital wallet licenses in countries including Thailand, Indonesia, the Philippines and Vietnam. In Myanmar and Cambodia, it works through local banks and is applying for an online payments license.

Ant plans to share its cloud computing and cybersecurity technology with Ascend. It also wants to help its partners connect, building a platform where Indian users can buy goods through Ascend’s network in Thailand, and vice versa. That’s an overseas initiative it’s already rolling out for Alipay’s 450 million users when they travel.

Ant’s partnership with Ascend will expand over time.


Wealth Migrate Real Estate Crowdfunding Platform Adopts Distributed Ledger Tech (News BTC), Rated: AAA

Wealth Migrate, the South Africa-based crowdfunding property platform has announced the inclusion of blockchain technology into its online investment marketplace. With the inclusion of distributed ledger technology, the platform now offers enhanced security and privacy protections to its global investors.

Started in 2009, Wealth Migrate became the first online platform to allow people directly invest in both residential and commercial properties across the world. Now listed among the top United States Real Estate Crowdfunding Platforms, Wealth Migrate intends to tackle the rising issue of investment frauds, especially across borders with blockchain technology. The company’s adoption of digital currency technology comes at the time when leading banking and financial institutions are researching into various use cases of blockchain technology in their day-to-day operations.

With the implementation of distributed ledger technology, Wealth Migrate aims to successfully tackle multiple challenges involving personal information protection, enhanced compliance with respective laws of the regions it operates in, an inclusion of smart contracts for investments and decentralized confirmation of transactions over the blockchain. The immutable feature of blockchain technology makes it one of the most reliable and secure information storage method.  With the implementation, the company has gone a step forward and integrated an additional layer of security in the form of one-way hash code.

Blockchain technology is revolutionizing lots of industries. The use of such technology in crowdfunding and crowdinvesting makes the whole process much more reliable and transparent.


George Popescu
George Popescu
Allen Taylor
Allen Taylor


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