Daily News Digest Featured News

Monday November 7 2016, Daily News Digest

cross river bank spreads

News Comments

United States

  • OnDeck shows $12.9m loss in Q3 2016. GP: ” As we have seen for the last few quarters OnDeck has moved from selling loans to holding them on the balance sheet for longer. This strategy continues and for now provides short term losses, in principle, to be offset by long term larger profits. They have about $85mil in cash and equivalents so at a rythm of $15mil in loss per quarter that’s another 6 quarters left. I wish OnDeck would demonstrate and explain when this strategy is going to turn around in their models. On the other side losing $15mil on $71mil in revenue is a little high perhaps. I hope they can make it profitable within 2-3 years.  “AT: “This could be seen as a short-term blip. Sales went down as gross revenues went up, but the company is also investing in technology and analytics, which indicates a long-term strategy for growth.”
  • Cross River Bank is no ordinary bank. AT: “We’ve reported on this already, but PeerIQ takes a look at CRB in their newsletter, including charts showing the bank’s improved ROE positioning. The question here for banks is, can they follow Cross River into alternative lending and be more profitable than ever before?”
  • CFPB ruling won’t change anything. AT: “The structure of CFPB as likely been mended, but that won’t stop the battle from continuing. You’ll likely see more on this issue in the future as Washington continues to talk about regulation of MPL.” GP: ” I also stronly believe that the CFPB structure will be solved one way or another and will have no impact on CFPB’s activity. The ruling on CFPB’s structure is just a witty anecdote. “
  • Credit markets spurred by strong balance growth and low delinquency rates. AT: “This is another indication that the credit market is looking good even for marketplace lenders. Maybe especially for MPLs.” GP: ” This is a great indication that the credit market is healthy. When a market is healthy it’s much easier to build a business. It will become much more interesting when the credit market will be less healthy and that is what online lenders should prepare for.”
  • TD Ameritrade gets a robo-advisor. GP: ” As we wrote in the past, online lenders should learn from the dynamics of the robo-advisor market. I believe they behave in very similar ways.”
  • Wish raises another $500m in new financing. GP:”This is an online shopping app. This makes me think of point of sale financing.”
  • The credit scoring blind spot. GP: ” A very interesting analysis pointing out that credit scores ” are not designed to provide an absolute statement of risk but rather a relative assessment within a population of borrowers.””
  • Kroll assigns final ratings to SoFi Consumer Loan Program 2015-1. GP: ” first term ABS securitization of unsecured consumer loans for SoFi. Very interesting.PeerIQ has repeatedly pointed out that SoFi has the best rated and lowest priced securitizations. Why ? Is it all about belief in their underwriting or just the fact that they focus on super prime borrowers ? “
  • A bill has been introduced that would create a FinTech sandbox in the U.S. AT: “Whether this bill passes or not, I see the U.S. establishing some type of regulation for FinTech.” GP: ” We hope the bill passes !”
  • How Citibank is tackling the FinTech problem.
  • MPOWER reaches new funding milestone and celebrates zero-interest loans. GP: ” We have covered MPower this past spring and we are glad they are seeing such nice traction.”
  • MPOWER secures Series A funding. GP: ” With traction comes funding, very well done. “

United Kingdom

International

Australia

China

Asia

Latin America

Russia

Israel

News Summary

United States

OnDeck posts $ 12.9m loss on quarter despite origination record (altfi), Rated: AAA

OnDeck, the New York Stock Exchange listed online lender for small businesses, has published its financial results for the third quarter. The company increased its loans under management by 44 per cent year-over-year to $1.1 billion, while bolstering originations by 27 per cent to $613m. Gross revenues rose by 15 per cent to $77.4m.

OnDeck operates a hybrid lending model which involves keeping some loans on balance sheet while distributing others via an institutional marketplace, often for a mark-up. But the platform’s marketplace sales have been trending downwards in 2016, in keeping with a wider decline in investor appetite across the industry.

The firm’s cost of funding during the third quarter of 2016 decreased to 5.7 per cent, down from 5.8 per cent in Q3 2015. Operating expenses were $49.4 million, up 16 per cent over last year as the company continued to invest in its technology and analytics capabilities.

OnDeck’s common stockholders lost $16.6m in the third quarter, compared to net income of $3.7m across the same period in the previous year.

Cross River Bank – Not Your Ordinary Community Bank (PeerIQ Email), Rated: A

Currently, community banks are in a secular consolidation trend owing to a low spread environment, and higher regulatory fixed costs, such as capital and liquidity rules, tighter Bank Secrecy Act/AML obligations, tighter FDIC de novo charter requirements, and new consumer protection requirements.

Indeed, per FDIC, from 2000 to 2008 there were over 1,000 community bank de novo charters issued. Post-2008, bank formation has slowed to a handful of charters per year. Industry consolidation across the 6,000+ extant community banks is expected to continue.

Cross River Bank was one of the few new charters and was founded in 2008 by CEO Gilles Gade, a former banker at Barclays and CFO of a mortgage lender.

CRB is also an early adopter of new financial technology innovations. It has partnered with payments companies including TransferWise, Stripe, Ripple, and CoinBase. CRB is reportedly developing an online-only digital bank dubbed ‘Almond Bank’ with a focus on millennials.

In prior newsletters, we made the argument that banks can improve their ROE position by purchasing or financing whole loans using Discover Financial Services as a case-study.

Here we test the hypothesis further:

cross river bank

While the broader banking industry consolidates and struggles to earn their cost of capital, Cross River Bank has expanded NIM (net interest margins) and lowered funding costs over time.

Exhibit 2 shows the increasing basis between NIM and cost of funding since June 2012. The improved NIM and declining cost of funding provides a powerful motivation for non-bank lenders to entertain bank acquisition, and also the converse, for banks to seek partnership or origination of consumer loans.

cross river bank spreads

Below, we have listed some statistics to put growth and value in perspective:

  • Cross River Bank has experienced a ~70% CAGR in Net Operating Income since 2012 around when CRB increased MPL origination activities.
  • Total assets have grown from $10 Mm to nearly $500 Bn in assets since inception, while maintaining high levels of equity and asset quality.
  • Maintaining an ROE of 20% over 10 years will generate a 6.2x increase in book value.
  • 9-month revenue more than doubled to $55MM from $26 MM last year.

CFPB structure ruled unconstitutional, but powers likely to remain intact (CI Marketplace Lending), Rated: A

Marketplace lending firms should still prepare for scrutiny and the possibility of challenges brought against them by the CFPB. This is despite a recent ruling that the agency’s structure is unconstitutional, which has raised questions about the government body’s future.

Richard Eckman, partner at Pepper Hamilton law, believes that the CFPB’s future is far from over. He says of the ruling: “It sounds more ominous than it really is. It was more about the structure of the CFPB and that in its current form, it has a single director who can’t be removed without cause, so is therefore technically unconstitutional.”

Of concern is the lack of controls and checks on the CPFB that are incumbent on other US government bodies. However, this could change as a result of the ruling.

At the moment, for example, there are a real lack of checks on the CFPB and this case may provide opponents of the agency with greater ammunition. The CFPB is not subject to an appropriation process, for example, that may now be pursued by Congressional actions and the financial industry – which has been concerned about the CFPB’s extensive powers since its establishment.

For the marketplace lending sector, the recent ruling may have provided hopes for a dissemblance of the CFPB’s powers and perhaps therefore less scrutiny. But the CFPB is still most likely going to pursue platforms if it spots any sign of wrongdoing.

Healthy, Well-Functioning Credit Markets Spurred on by Strong Balance Growth, Low Delinquency Rates (MarketWatch), Rated: A

Balances continue to rise and delinquencies remain muted across all credit products, according to TransUnion’s TRU, +1.17% Q3 2016 Industry Insights Report. The report, powered by PramaSM analytics, points to a healthy, well-functioning consumer credit market, which has seen continued growth across diverse products such as the mortgage market and the personal loan space.

More than 15 million consumers had a personal loan in the third quarter of 2016. The number of consumers with a personal loan grew by 1.5 million between Q3 2015 and Q3 2016. The report also found that personal loan balances surpassed $100 billion for the first time in Q3 2016, with $17 billion of balance growth occurring in the last year.

Despite surpassing $100 billion, total personal loan balances experienced the slowest third quarter growth rate since Q3 2013. In the third quarter of 2016, balances grew 20.9%, down from 24.9% in Q3 2015 and 25.5% in Q3 2014.

FinTech lender share of originated personal loans has more than tripled since 2013. FinTech originations reached 26% of all personal loans in Q2 2016, up from 8% in Q2 2013 and 16% in Q2 2014. Originations are viewed one quarter in arrears to ensure all accounts are reported and included in the data. In total, more than 3.57 million personal loans were originated in the second quarter, down 0.5% from 3.58 million in Q2 2015.

FinTech Lenders’ Share of the Personal Loan Market

Q2 2010   Q2 2011   Q2 2012   Q2 2013   Q2 2014   Q2 2015   Q2 2016

2%            3%           5%            8%           16%          27%          26%

In Q2 2016, near prime originations declined 4.7% and prime originations declined 2.7%, while both subprime and super prime originations grew by 3.2%, compared to Q2 2015. A prior TransUnion analysis found that FinTechs were outpacing traditional lenders in personal loans originated to near prime and prime borrowers. “The decline in near prime and prime originations reflects the challenges faced by some FinTech lenders,” added Laky. “Offsetting this, banks and credit unions are expanding in the super prime risk tier, while traditional finance companies continue to expand in subprime.”

transunion credit markets

TD Ameritrade Adds Low-Cost Robo Advisory Services (ETF Trends), Rated: A

To help investors better adapt to various market conditions and craft a diversified investment portfolio, TD Ameritrade will provide a low-cost robo-advisory service that offers intuitive and easy-to-use investment advice.

The new TD Ameritrade Essential Portfolios is an automated, low-cost advisory service for digital-first investors. There will be five portfolios, all designed by Morningstar, to provide investors with a diversified strategy based on low-cost exchange traded funds from Vanguard or BlackRock’s iShares. The minimum investment is $5,000 to open an Essential Portfolios account with a 0.30% fee per year.

The low minimum investments in the robo-advisor program may be a good way for starting investors to begin saving today as many human advisors require large minimum balances. The robo-advisory is seen as an easy step for investors to gain more in-depth financial advise without having to hire a financial advisor, allowing users to access their accounts from anywhere with a smartphone or personal device.

Some advice and guidance is better than nothing. Research has shown that people who have a financial plan with specific goals are 85% confident they will reach their retirement goals, compared to 28% that do not, according to TD Ameritrade.

Using a slider bar to change monthly contributions or target dates, investors are able to further customize their recommended strategies. Through the various adjustments, users may find varying details on asset allocations, expected returns and some limited historical returns.

TD Ameritrade joins a number of custodians in adding their own robo-advisories. Charles Schwab launched its retail robo-advice, Intelligent Portfolios, in March 2015. Fidelity Investments came out with its Fidelity Go in July 2016. Others money managers in the space include Vanguard Group, BlackRock Inc., Morgan Stanley and Bank of America.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Investors will choose a robo portfolio based on their investment goals and their general investment time frame, selecting from options like retirement, wealth-generation, education or other. A range of risk exposure is also provided from least to most risky options.

Making another $ 500M Wish (The Daily Pitch email), Rated: A

Shopping app Wish is raising about $500 million in a new financing led in part by Temasek, according to Recode. The San Francisco-based startup, which sells unbranded consumer goods at a low cost, previously collected over $500 million in a May 2015 round at a $3.5 billion valuation; the report indicates the new post val is above that mark but below $5 billion. Current Wish backers include DST Global, Founders Fund, GGV Capital and Formation 8. Investors in the latest round are said to be receiving special liquidation preferences.

The credit scoring blind spot – Macroeconomics (Wain Street), Rated: A

In February 2016, about six months after rating a securitization, Moody’s found “faster buildup of delinquencies and charge-offs than expected” in the pool of Prosper loans backing the ABS. Experts had noticed deterioration months earlier…pundits discerned a signalinsights followed—macro trend…credit cycle…borrower stress. But then in July, Moody’s decided there was “absence of substantial deterioration”.  So, what about that borrower stress?  Well, it’s back.  In its October 8-K filing, Lending Club observes “Higher delinquencies are more evident in 2015 and early 2016 vintages, which coincides with an uptick in consumer indebtedness in the U.S.”.  And the pundits are considering the evidence.

WAIN Street’s analysis of over a million loans originated by a leading marketplace lender between January 2012 and June 2016 shows that median credit scores have been flat and even increased slightly since Q1 2014.

First, don’t blame the credit scores.  They are not designed to provide an absolute statement of risk but rather a relative assessment within a population of borrowers.  The actual level of defaults is influenced by economic conditions.  Not convinced.  Just look at default rates for various credit score bands before, during, and after the Great Recession.  For the same credit scores, defaults nearly doubled during the Great Recession.

quarterly default rate of very small businesses

Third, link individual  borrowers to economic conditions.  We assigned each loan to a Local Economic Vitality band based on data current as of the origination date and examined the loan mix for the eighteen quarters. The proportion of loans originated to borrowers from economically stronger locations peaked mid-2014 and has been declining since then.

Kroll Bond Rating Agency Assigns Final Ratings to SoFi Consumer Loan Program 2015-1 (BusinessWire), Rated: A

Kroll Bond Rating Agency (KBRA) assigns ratings to one class of notes issued by SoFi Consumer Loan Program 2015-1 LLC (“SCLP 2015-1” or the “Issuer”). This is a $189.37 million unrated consumer loan ABS transaction that closed on August 21, 2015 and as of the October 17, 2016 payment date has a current note balance of $143.8 million. At the request of SoFi Lending Corp. (“SoFi” or the “Company”), KBRA is issuing public ratings for SCLP 2015-1 on November 4, 2016.

SCLP 2015-1 represents the first term ABS securitization of unsecured consumer loans for SoFi. Since the closing of SCLP 2015-1, SoFi has sponsored four unsecured consumer loan securitization in 2016, each has been rated by KBRA. SoFi currently originates personal loans through its state licenses or complies with certain requirements where a state lending license is not required.

THE U.S. WANTS A SANDBOX TOO (K&L Gates), Rated: A

On September 22, 2016, Republican Congressman Patrick McHenry from North Carolina announced the introduction of H.R. 6118, the Financial Services Innovation Act of 2016 (the “Bill”). McHenry is the chief deputy whip and vice chairman of the House Financial Services Committee. According to the press release, the bill was introduced as part of the “Innovation Initiative” that McHenry co-launched earlier this year with House Majority Leader Kevin McCarthy, a fellow Republican from California. On October 19, 2016, the Bill was referred to the Subcommittee on Commodity Exchanges, Energy, and Credit. Before the Bill becomes law in the United States, it must be past by both chambers of Congress and signed by the President. With this Bill, America joins, among others, the United Kingdom, Hong Kong, and Malaysia in establishing FinTech regulatory sandboxes.

In its current form, the Bill takes a two-prong approach to constructing a regulatory sandbox. First, it creates a government-wide FinTech oversight regime, and second, it codifies an exclusive no-action relief mechanism for financial innovators.

Citibank’s plan to fight the fintech revolution (CNBC), Rated: A

Fintech is revolutionizing the world of finance, and traditional banks worldwide are reacting — boosting mobile services and shuttering branches to trim costs — all in an effort to stay in the game.

Over the past decade, venture capitalists, private equity firms and a number of other big players have been pouring money into fintech start-ups. Since 2010, more than $50 billion has been invested globally in almost 2,500 companies as these innovators redefine the way we bank, according to Accenture. In the United States alone, revealed a Citibank report, investing increased from $1.8 billion in 2010 to $19 billion in 2015.

Although only about 1 percent of North American consumer banking revenue has so far migrated to these new digital business models, claims the report, that number is expected to increase to about 10 percent by 2020 and 17 percent by 2023 as consumer behavior continues to shift toward digital ways to save, spend and move money.

Citibank, for one, formed Citi Fintech in November 2015, a division consisting of a number of employees from tech companies such as Amazon and PayPal. Its first mission: an upgraded app that uses voice and facial recognition to eliminate the need for passwords. Although Citibank won’t disclose any of the details, a spokesperson there did confirm the app is on point to roll out before the end of the year, is partnering with a number of fintech start-ups and was testing its voice recognition feature using Amazon’s “Alexa” program.

Their approach is to embrace the latest financial technology, not fight it. “We talk to fintech’s all the time,” said the Citibank spokesperson.

MPOWER Reaches $ 100M Milestone, Celebrates by Awarding Zero-Interest Loan (PRWeb), Rated: B

MPOWER Financing today announced that it has exceeded $100 million in loan application volume, offering thousands of high-potential students a way to access and complete their undergraduate or graduate education at top U.S. universities. To celebrate this milestone, MPOWER awarded a zero-interest loan to one of its borrowers.

Nitish Gupta, the student granted a zero-interest loan, shares a background and experience similar to many of MPOWER’s borrowers. A graduate student in a STEM (Science, Technology, Engineering, or Math) field, Gupta was turned down several times for loans in his native country of India because the banks failed to recognize his promising future, instead focusing on co-signers, on collateral, or on his not-yet-established credit history. Yet within a week of completing his application to MPOWER, Gupta’s loan was approved based on dozens of factors, including his future earning potential.

MPOWER designed its loans to serve high-potential students like Gupta who may not fit within traditional credit assessment models. MPOWER borrowers attend top universities and hold high post-graduation employment potential but may not yet have an established U.S. credit history.

MPOWER Secures $ 6M Series A Funding from Institutional Investors (PRWeb), Rated: B

MPOWER Financing today announced that it has secured $6M in its Series A equity round, led by Zephyr Peacock India Fund III and followed by several other institutional backers, including initial investors 1776 Ventures, Goal Structured Solutions (GS2), and VilCap Investments (Village Capital), as well as newcomers DreamIt Ventures, Fresco Capital, and University Ventures.

This latest funding allows MPOWER to create solutions for a greater number of students, offering more loan approvals to qualified candidates. MPOWER plans to use the capital to enhance its technology platform and expand its outreach efforts in emerging markets.

United Kingdom

Abundance launches UK’s first green Innovative Finance ISA (BusinessGreen), Rated: A

Abundance has become the first investment platform in the UK to open an Innovative Finance ISA (IFISA) targeting green energy projects.

The IFSA, which has been open to new subscriptions since April in a pre-launch phase was formally launched late last week. It enables investors to lend tax-free to renewable energy projects via Abundance’s peer-to-peer platform.

IFSAs first launched in April this year, and Abundance was one of the first peer-to-peer lending platforms to receive an approval to offer the investment vehicle.

Under Abundance’s IFISA investors will be able to invest in a host of clean energy projects.

Report: UK P2P Property Lending Delivers Returns from 2.25% to 12.7% (Crowdfund Insider), Rated: A

Independent ratings agency 4thWay is out with an interesting report on the peer to peer property lending market in the UK. This sector of alternative finance has been very popular due to the asset class and the solid returns. Even in light of Brexit turmoil, P2P property lending remains a robust and growing opportunity for investors.

According to the report, today there are 12 P2P lenders that specialise in property.  Combined, these platforms have lent £1.6 billion since 2013. Returns have ranged from 2.25% to 12.7% and lender losses have been placed at zero at 11 out of the 12 platforms. 4thWay explains there have been cases of bad debt but lenders have not lost their money largely due to the investment being secured by the property. Overall, lenders have lost just £15,000 out of £1.6 billion lent (0.0009%). Only one platform, Funding Secure,  has experienced losses of 0.02% –  spread over three years. 4thWay states this is easily offset by interest of 12.7% per year.

The report says that lending decisions are underpinned by underwriting processes with “sensible” maximum loans-to-value of 70% to 80%. Average loans-to-value (LTV) are considerably lower. In some cases, lenders can specifically choose loans with a maximum of 50% LTV. An example of this may be found through Proplend. Interest rates remain high as lenders are cautious and thus demand a premium.

bridging loans

 

Latest Insights into the UK Fintech Investment Market. (TechBullion), Rated: A

Fintech Week 2016ranked the UK first amongst the world’s leading Fintech hubs. Last year, professional services firm EY listed the UK as the most fintech-friendly country, with the industry employing over 61,000 people and generating £6.6bn in revenues. For investors, the country provides a fertile ground for fintech entrepreneurs and start-ups. The UK fintech investment growth is driven by the availability of business capital, supportive regulations, tech talent, and position of London as a global trading base.

The availability of funds in the UK is good for fintech start-ups. According to a study by Let’s Talk Payments  over $5.5 billion of investments were made in the financial technology sector from July 2015 to January 2016. The UK leading fintech investors include Index Ventures, Seedcamp, Balderton Capital, The London Co-Investment Fund, Northzone, Octopus Ventures, Accel, and 83North, Draper Esprit, Anthemis Group, Passion Capital, Notion Capital and General Atlantic.

The fintech industry is served by many angel investors who have the required experience and skills to understand fintech business. Also, private equity investors are many, with more than 130 funds registered.

The UK has the best fintech policy environment in the world, with a very supportive regulatory regime. The Financial Conduct Authority (FCA) has reduced barriers to the entry of new fintech players, with UK-based start-ups benefiting from tax breaks and funding schemes designed to foster growth. For instance, R&D tax incentives are available to firms that employ few people.

Fintech accelerators, too, play an important role in shaping investment environment in the UK. There are many Fintech start-ups accelerators in the UK willing to give support in the form of affordable office spaces, starting capital and mentorship. These accelerators in the UK include Seedcamp accelerator, Barclays accelerator, and Fintech-Innovation-Lab accelerator, Techstars Accelerator, Level39, Tech City UK and Dot Forge Accelerator.

International

Why FinTech Startups Will Not Win If They Play Like The Banks (Fintech News), Rated: AAA

My recent experience with FinTech Startup Revolut has shown me that the banks can still sleep quietly for a while as Fintech Start-ups will in fact not be in measure to disrupt the industry if they don’t also change the rules of the game…

So what went wrong with my Revolut account… I used my multi-currency card abroad to pay for goods in Euro. I received a VAT refund in Euro that was to be re-credited to my Revolut account. But today, when I logged into my account, I noticed that the refund had been re-credited in Sterling, with someone taking a hefty spread in the process…

What clients of FinTech Start-ups want is a completely different approach that puts them at the center. They want services that are not only answering their needs, but that are also:

  • simple to use
  • fast
  • convenient

Banks on the other hand are struggling to make sense of big data. Because it lives on several databases and systems that are hardly integrated, because they did not think of asking clients the right to use this data twenty years ago when they signed them up, and because of plenty other valid reasons, mining through this data is a difficult, near impossible, task.

Clients are attracted to FinTech Start-ups because of the glitter this new lawyer of technology provides. They see the novelty in the approach and they believe something has changed…

Clients love the new simplicity – no more endless paper form to sign, all is done with a click on a fancy app interface and they even work with pictures of you, your ID card or proof of residence taken through your smartphone!

Clients love the increased speed – they can do it here and there, through the internet and 4G mobile connection, wherever they are, no more need to visit a branch in person.

Clients love the convenience – FinTech Start-ups provide the same services as traditional banks, often even better, and at a fraction of the price they normally pay their bank.

What should have happened instead at a Fintech Start-up?

First, the FinTech angle should have kicked in immediately:

The data analysis should have been instantaneous, with artificial intelligence reading the support chat channel and picking up that I was growing more and more upset by the interaction with the customer service representative.

Social Media listening should have also indicated real-time that I was starting to tweet about my problem and my frustration at the lack of understanding from the customer service representative, and that I was starting to drag influencers in the discussion.

Finally, the CRM system should have spitted out a customer profile showing that over the past 4 months:

I had increased my volume of transactions significantly (so I was on my way to become a “good” client) that all transactions I had done were in Euros and that there were no transaction in GBP (so there was possibly something abnormal with those two transactions in GBP).

So, in other words, the customer service representative should have assessed what was my issue with Revolut (i.e. refund process did not work properly), should have assessed the most practical and easiest way for Revolut to address my need (i.e. fix the refund by compensating the difference) and should have asked me how Revolut could still increase my client satisfaction (i.e. reinforce their client promise and turn me into a champion of their brand to drum up more business).

Client-centric champion Amazon would have paid back the 2.92 GBP in a split-second and would have probably issued a compensation voucher to make up for the bad customer experience. This would have reinforced my trust in their brand and would have led me to sing their praises on the social networks, bringing them additional clients attracted by this positive client experience sharing.

Race to Attract Fintech Talent Accelerates with Worldwide Regulatory Revamp (Crytocoins News), Rated: A

The British regulators, undoubtedly running while others seem to have just began walking, announced a raft of new measures to shake up banking based on recommendations by the Competition and Markets Authority. The most relevant for Fintech is an emphasis on Open Banking, giving access to traditional bank provided APIs and customer data so that they can provide direct services.

The CMA, however, fell short of what some had asked – the breaking up of giant banks as only a handful of them dominate the market, making banking an oligopoly or, even, a cartel which, at times, operates capriciously with little, if any, recourse as the closure of CoinJournal’s banking facilities illustrates.

The race has now been joined by the Swiss which announced a new proposal for light-touch fintech regulations. They are to create a “sandbox” for companies to experiment in a customized regulatory environment together with a fintech license, allowing new entrants to hold up to just above $100 million, making it easier to compete with traditional banks.

The race, however, is not limited to just the west. Abu Dhabi is also making its run with an announcement that they are to launch a Regulatory Laboratory through a new fintech legislative framework. Similar to a sandbox, it makes it easier to launch new innovative products and experiment with market reactions.

The United States is also on the move with the banking regulator appointing a senior lawyer to run a new “Office of Innovation” for Fintech. The primary task of the new center will be the designing of a fintech licensing framework to streamline regulation across the 52 states. Such discussions have now been ongoing for months, with the speed of movement probably decided by the outcome of the election.

The overall picture, therefore, seems to be one of a global understanding that finance is rapidly changing due to new technologies such as blockchains, smart contracts, APIs, and the internet.

How Fintech will revolutionise finance in the next decade (e27), Rated: A

Huy Nguyen Trieu is currently the CEO of The Disruptive Group, a business builder and advisory firm in finance. The firm aims to build and help the next generation of large-scale financial companies by combining a good understanding of financial services and technology disruption.

Prior to founding The Disruptive Group, Huy has navigated between startups and large organisations. He founded Ukibi — a precursor to Linkedin — in 1999. After five intense years, he joined international banks where he built high-growth businesses for over a decade, culminating in his last position as Managing Director at Citi.

Apart from writing his personal blog, Disruptive Finance, he is the Fintech Resident Expert at Oxford and a board member of Fintech Hong Kong.

1. Can you share with us your experiences and motivations behind launching The Disruptive Group?

The Disruptive Group was shaped by my experiences over the last eighteen years. I’ve worked in very large international banks but have also been very involved in the startup scene as a mentor, investor as well as a startup CEO.

3. You mentioned that you are a strong advocate for the potential of fintech. Could you elaborate further on your views?

In 1990, I co-founded Ukibi, which was essentially LinkedIn, but five years before LinkedIn. Despite having great investors, people and a superb product, it wasn’t enough to get significant traction. This experience taught me the importance of timing.

Over the last few years, I’ve applied this approach to finance and it is very clear that finance is being revolutionised because of technology. Although we are only at the beginning, there have been incredible results. For example, Zhong An sold online insurance to more than 300 million people in two years. Twenty per cent of the US adult population uses Credit Karma — a company that had no clients five years back.

In addition to innovative startups, we will start to see some real transformations in finance. The whole value chain will be transformed and there will be new entrants. At the same time, this will be a great way to bring finance to those who couldn’t access it — both in the West and in emerging markets.

Finally, we will start to see whole new services, which we never imagined. It will be much more than bringing new technology to old finance. It will be about creating new ways to manage finance – in exactly the same way that Facebook was not just a mere evolution of existing services.

4. Having been involved in fintech across Europe and Asia, how would you access the potential of fintech across these markets?

I would say that there is a more mature ecosystem in Europe today — especially London. That’s because it started earlier, but also because you have a very established financial capital in London that became a de facto Fintech capital for Europe. Hence, there are definitely a lot of projects, ideas, and emulation happening in Europe. However, the financial infrastructure is also very mature, meaning that startups have to compete with existing products coming from very large companies, which is not easy.

One of the main challenges in Asia would be the heterogeneity of the markets, especially from a regulatory standpoint. Today, in Europe and the USA, you could access a large market without having to be regulated on a case-by-case basis. In Asia, there isn’t a common regulatory framework yet. I think this would help a lot for the development of fintech.

5. Vietnam’s fintech industry is still in its early stages. How would you evaluate Vietnam’s fintech potential, and how does it compare to the international scene?

Despite being in its early stages, Vietnam has huge potential. Only a third of the population has a bank account, but on average, people have more than one mobile phone each! So there is definitely great opportunities to build fintech in Vietnam. There have been some very good traction in Vietnam. For example, we look at the case of  Timo and Momo. That should hopefully attract more and more entrepreneurs to that space.

The examples of London and Singapore show that there are a few keys to building a successful fintech momentum. This includes the ecosystem, talents, money, government and regulations.

Of course, not all countries are in the same position as the UK or Singapore, but a lot can be done to build a thriving ecosystem for new financial services. I don’t know enough about Vietnam to properly compare, but I am definitely looking forward to knowing more at Echelon.

Australia

Australian Government Eyeing Big Banks to Prevent Blockchain Monopolization (Crowdfund Insider), Rated: AAA

The Australian Competition and Consumer Commission (ACCC), an independent arm of the Australian government that aims to regulate competition in the market and uphold national consumer law, has been closely eyeing four big banks to prevent attempts of monopolizing the blockchain industry in fintech. The banks include the Commonwealth Bank of Australia, Westpac, National Australia Bank, and Australia and New Zealand Banking Group.

According to Reuters,  ACCC Chairman Rod Sims said the government regulatory body has not yet examined any cases of Australia’s “Big Four” banks purchasing smaller fintech companies or acquiring blockchain technology.  However, in the interest of fair marketplace competition, Sims alluded to the fact that any major proposed deals by the banks would face ACCC scrutiny.

Startup entrepreneurs, however, suggest that the ACCC’s attempts at regulation may harm rather than help small businesses.

Larger companies such as Apple, on the other hand, have leaned toward regulation of big banks in the blockchain industry, especially when they are attempting to enter a new market.

For now, the ACCC has yet to find the big banks in violation of laws protecting marketplace competition.  We will see how far the banks can push the boundaries.

apple blockchain letter

China

Chinese peer-to-peer lender Lufax sees IPO helping local, overseas growth (Reuters), Rated: A

Lufax, China’s biggest peer-to-peer lending and wealth management platform, sees a potential listing helping to fund expansion at home and abroad, though it has set no specific timeline for a deal, Chief Executive Officer Gregory Gibb told Reuters in an interview on Monday.

Valued at $18.5 billion when it raised $1.2 billion from a group of investors in January, Lufax picked four banks to prepare a Hong Kong initial public offering that could raise $5 billion, sources said previously. Giant Chinese insurer Ping An Insurance (601318.SS) is its biggest investor.

China’s Online Insurer ZhongAn Launches Fintech Incubator (Insurance Journal), Rated: B

ZhongAn Online Property & Casualty Insurance Co. Ltd., China’s first online insurance company, has launched a fintech innovation company.

The company, called Called ZhongAn Information and Technology Services Co. Ltd. (also known as “ZhongAn Technology”), will explore innovation for its parent company, ZhongAn, and its external partners.

ZhongAn Technology will focus on innovation in four main areas: artificial intelligence, blockchain, cloud computing, and data driven.

Further, its services will be rolled out on a blockchain cloud platform.

Asia

Framework to be developed to boost ‘fintech’ services (The Japan News), Rated: AAA

Megabanks and regional banks have started creating a framework to safely provide their customers’ information to burgeoning start-up companies that offer new services called fintech, a combination of financing and information technology.

The framework aims to prevent personal information from being leaked and give a further sense of security to customers.

Banks, fintech companies, the Financial Services Agency and experts established a review panel earlier this month and will compile a report by the end of this fiscal year.

Although the FSA can request financial institutions, including banks that are subject to its supervision, to carefully manage the information they have, it only loosely regulates and supervises fintech companies at the moment.

Banks have asked fintech companies through contracts for thorough information management and sharing responsibility when personal information is leaked. They aim at easily cooperating with fintech companies by drawing up unified security standards industrywide.

japan fintech

Singapore fintech snags top Indian bank as client (AsiaOne), Rated: A

A HOMEGROWN fintech has snagged India’s largest bank has its client, using technology to create spending analyser tools for card customers at the State Bank of India (SBI). The move is a good sign that fintechs are moving beyond Singapore, noted the Monetary Authority of Singapore (MAS) in a statement issued by the fintech, Percipient.

Senjo Group Relocates to Fintech Hub Singapore (Crowdfund Insider), Rated: A

Privately held investment firm Senjo Group has relocated its corporate headquarters to Singapore in recognition of Singapore’s growing influence in the Fintech sector. Representatives said the business-friendly environment and focus on financial innovation was key in their decision to lease the entire 56th floor of One Raffles Place. Senjo was only recently set up in 2015. The company was launched to manage a portfolio of payments processing, cross-border remittance, foreign exchange, trade finance, e-commerce, mobile payments, commodity trading and factoring businesses.  Senjō also has regional offices in Japan, Indonesia, Malaysia, Myanmar, Thailand, Luxembourg and the UK, and operations in most major markets.

Korea Fintech Center Signs MOUs With 500 Startups & Silicon Valley Forum (Crowdfund Insider), Rated: B

The Korea Fintech Center has signed a memorandum of understanding (MOUs) with two Silicon Valley organizations, 500 Startups and Silicon Valley Forum.

500 Startups is described as a global venture capital company and startup accelerator. It has supported 1,700 startups in over 50 countries. Silicon Valley Forum has reportedly hosted over 150 conferences and demo days. It also has a global network of more than 20,000 in 40 countries. The new MOUs marked South Korea’s fifth accord with foreign countries in regards to fintech. Other MOUs were from Britain, Australia, France, and Singapore.

Singaporean Government & Banks to Award S$ 1.15 million to FinTech Companies (Crowdfund Insider), Rated: B

The Government of Singapore is inviting startups, tech companies, investors, and banks to its inaugural Singapore FinTech Festival between November 14-18. Events will include a Hackcelerator Demo Day, the FinTech Awards, and a speakers expo. Finalists competing in the FinTech Awards had been busy implementing their solutions to fintech company and financial institution obstacles by June to compete for one of ten awards, ranging from S$ 50,000 to S$ 250,000 for a total prize pool of SG $1.15 million. Nearly 40 startups and companies are finalists, including Citi and OCBC Bank.  The festival is expecting over 6,000 attendees.

Singapore’s FinTech Festival is another step in the country’s push to establish itself as Asia’s leader in fintech and a global hub for the industry.

Latin America

Uber Teams Up With Fintech Bank Bankaool to Launch Its First Debit Card in Latin America (Crowdfund Insider), Rated: AAA

On Friday, Uber and Mexican fintech bank Bankaool announced they have team up to launch Uber’s first ever debit card in Latin America. The online transportation network company revealed that the Uber Bankaool card has been available since October 21st and offers users who do not have a credit card an e-commerce new payment option.

Russia

Moscow Hosts Blockchain & Bitcoin Conference, Largest Russian State Bank to Participate (Coin Telegraph), Rated: A

On Nov. 10, representatives of IBM, Microsoft, QIWI and Sberbank will gather in Moscow to discuss challenges related to the digitizing of the FinTech sector and its transition to Blockchain.

Representatives of IT, financial system and entrepreneurship will learn more about operational Blockchain projects in Russia and abroad.

There are many reasons to attend the annual Blockchain & Bitcoin Conference Russia in 2016, including cases of implementing public and private Blockchains in banking, logistics, real estate and media, as well as issues connected with cryptocurrency regulation.

Israel

RBS to Host Fintech Hackathon at the Tel Aviv Stock Exchange (Finance Magnates), Rated: A

The Royal Bank of Scotland (RBS) in partnership with Google Cloud Platform and Intel are set to host a 48-hour Fintech Hackathon in Israel from November 15th to the 17th. The event will be taking place at the fintech accelerator dedicated to connecting Israeli startups with global financial markets – The Floor – located inside the Tel Aviv Stock Exchange building.

During the RBS Fintackathon, the bank’s team will set out various challenges and give entrepreneurs from Israel the opportunity to shape, design and build solutions for one of the UK’s largest financial institutions.

The RBS notes that people with ideas from all over fintech world are encouraged to participate.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

Testimonials

default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest

Daily News Summary Digest Sent Daily To Your Inbox