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Monday November 14 2016, Daily News Digest

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United States

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

This year saw the launch of the first online lending-focused, registered closed-end funds (or ’40 Act funds) in the U.S. It is a significant step that further legitimizes the industry to U.S. investors by providing a way to gain exposure to the loans of multiple originators via professionally managed, SEC-registered investment vehicles. RiverNorth Capital Management, LLC, the investment manager that launched the RiverNorth Marketplace Lending Corporation (NASDAQ: RMPLX) in September, recently announced it will host a webinar called ‘Incorporating Marketplace Lending into an Institutional Portfolio’ to help educate institutional investors about online loans and strategies to consider when adding online lending exposure to their portfolio’s investment mix. We would also like to welcome RiverNorth to the Weekly Snapshot. We’ve included RiverNorth Marketplace Lending Corporation (NASDAQ: RMPLX) in a new section covering U.S. listed funds.

weekly borrower interest rates by FICO band

est. weekly available listing volume

LendingClub Loan Volume Stabilizes (The Wall Street Journal), Ratd: A

LendingClub Corp. said its loan volume stabilized after the surprise ouster of its chief executive six months ago, sending shares climbing 15% to their biggest one-day percentage gain ever.

The San Francisco-based loan-marketplace operator reported Monday third-quarter revenue and adjusted per-share earnings that exceeded analysts’ expectations, in addition to a large, new loan-sale arrangement with a unit of one of Canada’s largest banks.

Third Quarter 2016 Results (Lending Club)
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Fundrise Launches RSE Capital as Stand-Alone Company (Multi-Housing News), Rated: AAA
Crowdfunding real estate platform Fundrise is spinning off its real estate investment branch, RSE Capital Partners, into a stand-alone company. The new firm will focus on origination, underwriting, investment and management for the company’s eREIT platform. RSE will collaborate with top brokers and real estate firms nationwide, focusing on institutional-level assets, primarily multifamily acquisitions,multifamily development and infill bridge lending.

RSE has already closed several deals, including three with one its first partners, Arlington-basedInsight Property Group. The two companies aim to invest $200 million in D.C. real estate annually.

Five Issues to Watch as OCC Mulls Fintech Charters (Bloomberg BNA), Rated: AAA

The Office of the Comptroller of the Currency could soon decide whether to offer national charters to financial technology companies, and as a Magic 8 Ball might say, “Signs point to yes.”

More concrete signals come from a couple of arcane regulatory moves by the agency in September: A Sept. 13 proposed rule that deals with receiverships for insured national banks, and a Sept. 28 revision of its charters booklet for the Comptroller’s Licensing Manual that addresses possible trust and special-purpose charters for charter-holders lacking deposit insurance.

If and when the OCC unveils its proposal for a fintech charter, here are five things to look for:

One: Who Will Be Covered?
The OCC exercises charter-granting authority for ventures that engage in at least one of the typical banking functions of taking deposits, lending money or paying checks. The lending criterion would take in online platform lenders, for example, but how wide is the “paying checks” qualification?

Two: Capital Requirements
It remains to be seen how the OCC will set capital and liquidity requirements for companies to receive a fintech charter.

Three: Leveling the Playing Field
Banks are worried that fintech companies may gain an advantage if they’re not held to the same standards as the banks.

Four: Application Process
How long will it take to apply for and receive a charter?

Five: Partnerships With Banks
The OCC will be looking to strike a balance between its primary duty to preserve the safety and soundness of the national banks it supervises and its stated intention to promote what it calls responsible innovation.

Will They Use It?
Some fintech companies look to national charters as a way to simplify their operations by, for example, pre-empting the patchwork of state laws that govern lending. But others are skeptical, viewing the concept as just another layer of government regulation.

Marketplace Lending as a Service Startup Blackmoon Secures $ 2.5 Million in Equity Funding (Fintech Finance), Rated: A

Blackmoon Financial Group has secured $2.5 million in an equity funding round that includes Target Global, A&NN Group, Flint Capital, and several private investors. The valuation of the company and the structure of the investment are not disclosed.

Blackmoon will use the funds for the further development of its technological platform and front-end solutions, and for further expanding its presence in the U.S. market, which will be a key growth area in the next year and a half.

Blackmoon makes money by charging investors for getting access to the unique supply of loans that can not be found on other platforms. According to its own data, monthly transaction volume has grown by a multiple of 2.5 since June 2016 and exceeded $5 million in September 2016.

Four Lessons as Rating Firms Look at Marketplace Lenders (American Banker), Rated: A

Whether we like it or not, independent oversight and regulations exist in financial services for a reason: to protect borrowers, lenders and society’s greater economic health. In other words, they help make industries viable. Therefore, as the marketplace lending industry continues to mature, it needs the oversight equivalent of Standard & Poor’s, Moody’s Investor Services and Fitch Ratings.

In 2008, the credit ratings agencies had clear profit incentives. The agencies were paid by the companies issuing debt — a revenue model that often resulted in ratings agencies bending standards in order to gain business. As we contemplate rating agencies for marketplace lenders, we must avoid repeating this past mistake. Marketplace lenders should not pay the agencies in any way.

Rating agencies for marketplace lender-originated loans need IT solutions that calculate and recalculate, automatically and continuously, consumer and small-business loan ratings. At any moment in time, these ratings should take into account all available information on particular loans and bundles of loans in order to deliver the most accurate risk assessments based on real-time market conditions.

While ratings agencies are very valuable, investors should not over-rely on them, as they often did in 2008.

U.S. small business borrowing falls, delinquencies rise (Reuters), Rated: AAA

Nov 1 Borrowing by small U.S. firms slipped in September, and the percentage of firms late on repaying existing loans rose to its highest in nearly four years, data released on Tuesday showed.

The Thomson Reuters/PayNet Small Business Lending Index fell to 128.9 from a downwardly revised 132.8 in August. Measured from a year earlier, it was the fourth straight monthly decline, with the index at its lowest point since January.

Credible Expands Student Loan Marketplace & Announces Partnership With Massachusetts Educational Financing Authority (Crowdfund Insider), Rated: A

Student loan marketplace Credible announced on Wednesday it has formed a partnership with the Massachusetts Educational Financing Authority (MEFA).  The organization will now be offering student loan refinancing to borrowers nationwide through Credible’s multi-lender platform.

Credible users may now be able to access student loan refinancing options provided by six lenders, which are Citizens Bank, College Ave, CommonBond, iHELP, MEFA, and the Rhode Island Student Loan Authority (RISLA).

Fintech’s Most Powerful Dealmakers of 2016 (Institutional Investor), Rated: A

General Atlantic also stressed partnership in leading a $325 million Series E funding late last year for marketplace lending platform Avant, with Korngold joining the company’s board.

Although there is, by definition, a collaborative element in any investment or advisory relationship, the sector that has come to be known as fintech has special needs. The culture of a start-up is very different from that of an established financial institution; even if the latter wishes to be more nimble and embrace new ideas and technologies, its procurement and compliance bureaucracy can get in the way. Hence the emergence of ecosystems designed to lower such barriers. Eighteen-year-old FTV Capital (<a href=”http://www.institutionalinvestor.com/article/3600713/banking-and-capital-markets-trading-and-technology/The-2016-Fintech-Finance-35-Richard-Garman-and-Brad-Bernstein.html“>Brad Bernstein and Richard Garman</a>, No. 7) pioneered in this regard with its Global Partner Network, which includes major financial companies that invest in FTV funds and thereby gain insight into new developments.

Citi Opens APIs to Third-Party Fintech Developers (American Banker), Rated: A

The API Developer Hub was launched Thursday to foster collaboration and partnerships between fintech companies and consumer brands. Such portals allow developers to build their own financial services applications and client solutions that easily connect to Citi. Mastercard, Virgin Money and others are already leveraging Citi APIs to create customer solutions.

There are four APIs currently available to developers: one that allows Citi customers to access their account summaries; an authorization API that gives customers secure access to their account data for more streamlined transactions; one that approves access to shared Citi customer profile information for deeper engagement; and the Pay with Points API, which allows an app to accept a customer’s Citi rewards points to pay for their purchases.

10 reasons fintech startups fail (Banking Exchange), Rated: A

My employer, William Mills Agency, has represented hundreds of fintech companies. We’ve seen startups with (in our opinion) marginally acceptable products or services thrive. And we’ve also witnessed companies with (again, in our opinion) incredible ideas fail—miserably.

Here are 10 deadly mistakes fintech startups make, as well as some simple solutions to avoid them.

  1. Mistake 1. Underfunding the startup. Solution: Before I start any do-it-myself project I’ve learned (the hard way) that it’s going to cost me twice as much and take three times as long.
  2. Mistake 2. Underestimating the length of the sales cycle. Solution: If you’re selling fintech to any financial institution— be it small community or money center bank—expect a long, arduous sales cycle with multiple setbacks and delays.
  3. Mistake 3. Not understanding the market. Solution: Too many startups are blinded by their own arrogance. They’ve sold themselves into believing their solution will completely change the way the financial world operates, and that they don’t need to work within existing parameters.
  4. Mistake 4. Failing to devise a sound sales strategy.
  5. Mistake 5. Don’t put all your sales chips on “Bob.”
  6. Mistake 6. Don’t blow your shot with a poor start. Solution: If your organization is still trying to figure out what it is and to whom you’re selling, don’t make it up on the fly.

Read the rest at Banking Exchange.

Nead.co to Release Open Fintech Platform for Investment Banking (Eries News Now), Rated: A

Nead.co, provider of middle market finance and technology consulting solutions will soon be launching a dedicated fintech platform for mergers, acquisitions and investment banking. In preparation for the launch, the company is inviting independent software developers with a keen interest in financial technology engineering to join the company’s ever-growing ecosystem.

Fintech developers are encouraged to join by submitting detailed information regarding the types of applications they intend on building into the platform. If accepted, Nead & Co. management will open up the firm’s API tools for access by engineers who wish to develop into a growing ecosystem of expert financial and technology experts.

The War Between Fintech And Traditional Finance Reaches A Crossroads (News BTC), Rated: A

To put this into perspective, the financial sector has an annual revenue of roughly US$5tn. As is always the case, they want that number to keep growing. To do so, they partner with fintech startups to realise new ideas and improve existing infrastructure. Combining the US$5tn market with a US$20bn fintech industry can lead to exciting developments.

Change is inevitable at this stage. The sooner banks and financial institutions realise this inconvenient truth, the better for everybody. Fintech should not be ignored, and various subsectors of this industry are making waves. Blockchain, Bitcoin, robo advising, and AI are just a few examples of what the future holds. Exciting times are ahead of us, even though we are all cogs in the global financial war machine.

Kabbage Hires Chief Technology Officer and Chief Data Officer (PRWeb), Rated: B

Kabbage®, a pioneering financial services technology and data platform, today announced Amala Duggirala has been appointed Chief Technology Officer, and Rama Rao has joined Kabbage as Chief Data Officer.

Amala Duggirala is highly accomplished in building large-scale, high-performing systems with a keen eye toward exponential business growth. Bringing nearly two decades of experience to Kabbage, she is responsible for advancing the automation and growth of the Kabbage Platform and for implementing strategic information technology and product initiatives to power financial services for organizations worldwide.

NYU Stern Hosts Inaugural FinTech Conference Featuring President and CEO of PayPal (BusinessWire), Rated: B

New York University’s Stern School of Business, the first business school to establish aFinTech specialization for MBA students, held its inaugural FinTech Conference on November 9, 2016. Featuring keynote speaker Dan Schulman (MBA ‘86), president and CEO of PayPal, the conference addressed many critical issues in the industry, ranging from regulation to public policy, equity crowdfunding, marketplace investing and blockchain technologies

81% OF NONPRIME AMERICANS DO NOT OVERSPEND: STUDY FROM ELEVATE’S CENTER FOR THE NEW MIDDLE CLASS (Elevate Email), Rated: A

In the wake of last week’s seismic election, Elevate’s Center for the New Middle Class today issued new research on how underserved Americans maintain their financial health, showing that 81% of nonprime Americans – those with credit scores lower than 700 – spend only what they earn, or less on everyday expenses.

Elevate’s Center for the New Middle Class is a research-focused body that engages and educates the public about the growing needs of individuals who do not have access to traditional credit options. In this study, the Center outlines how nonprime Americans are financially savvy in a number of ways, especially in comparison to their prime counterparts. Additional key findings from the study include:

  • Nonprime Americans check their bank account balances 50% more often than prime
  • Nonprime consumers check their credit scores 40% more often than prime
  • Two-thirds of this group plan for major expenses
  • 67% consider themselves “careful spenders”
  • 72% say they know how to create a budget

“Our research shows the narrative about the New Middle Class being less engaged in their finances is just not the case. In fact, it’s the opposite in many situations,” said Jonathan Walker, executive director of the Center. “Because they have fewer financial options, the New Middle Class clearly recognizes and appreciates the need to be fully aware of their financial position at any given moment.”

“Although most nonprimes spend what they earn or less, little room is left for unexpected expenses. When you are one car repair away from a significant financial problem, you have every incentive to know exactly where you stand financially,” concluded Walker.

United Kingdom

AltFi Data sees UK equity crowdfunding market shrinking in 2016 for first time (SMN Weekly), Rated: AAA

The UK equity crowdfunding market is set to close 2016 with more than £130 million new equity issuance, posting a slowdown in momentum for the first time, according to a report of financial markets analytics provider AltFi Data. The segment is expected to facilitate young companies in the UK raise more than £130 million growth capital in 2016.

The report includes data for all equity crowdfunding in the UK from 2011 (when when the industry was started), covering a total of 955 equity crowdfunding rounds and 751 companies. The data refers to six platforms that offer equity crowdfunding services – Crowdcube, Seedrs, SyndicateRoom, Venture Founders, Code Investing(previously CrowdBnk), and Angels Den, the last one of which was new addition for 2016.

altfi data report

Following are details about the funded volume for first nine months of 2016 (and 2015) of the six UK equity crowdfuning platforms included in the report:

altfi data platforms

Financial Stability Board: Fintech Firms Not Posing a Risk to Financial System (Crowdfund Insider), Rated: AAA

Secretary General of the Financial Stability Board (FSB) Svein Andresen announced at a Chatham House conference in London earlier this month that Fintech firms looking to disrupt traditional banking and financial systems are not yet posing an immediate threat, according to Reuters.

The FSB’s mission is to promote global financial stability, conduct outreach to non-member countries, and monitor implementation of agreed policies.  Members include the G20 countries and key financial centers — Hong Kong, Singapore, Spain, and Switzerland.

UK FinTech Bridge to China (Finextra), Rated: AAA

Today it is another significant milestone for the UK FinTech ecosystem as the Financial Conduct Authority (FCA) signed the Co-operation Agreement with the People’s Bank of China.

The purpose of this agreement is to provide a framework for co-operation between the parties with respect to promoting innovation in financial services. The Agreement sets out how the parties plan to share and use information to promote innovation in their respective markets.

Bank of England: We Set Up the Fintech Accelerator to Develop Our Practical Experience of Fintech (Crowdfund Insider), Rated: A

In a speech this past week by Charlotte Hogg, Chief Operating Office of the Bank of England, she welcomed the launch of the Bank’s Fintech Accelerator while explaining their mission.

The Bank of England is currently working with the following Fintech firms:

  • BMLL: This machine learning platform provides access to historic full depth limit order book data. The BMLL platform aims to facilitate analysis and anomaly detection. We have agreed to test their alpha version for this Proof of Concept.
  • Threat intelligence: As part of the Bank’s wider information security and threat intelligence work we have partnered with two firms – Anomali and ThreatConnect– that provide innovative technologies to collect, correlate, categorise and integrate security threat data. For this project, we have asked them to offer a solution to consolidate threat intelligence into a searchable repository that can optimise information collation, enrichment and sharing in support of a proactive intelligence-led defence strategy.
  • Enforcd: In this proof of concept, we are using an analytic platform designed specifically to assess and draw out trends on regulatory enforcement action using publicly available information.

UK’s FCA fully licenses crowdfunding platform UK Bond Network (SMN Weekly), Rated: A

Bond crowdfunding platform UK Bond Network said on Wednesday it has obtained a license from the UK Financial Conduct Authority (FCA). Prior to getting fully licensed, the platform operated under an Appointed Representative temporary authorization.

The platform seeks to grow its business and expand its investment solutions. It considers launching new offering investments which would qualify for the Innovative Finance ISA (IFISA), a program for tax-free peer-to-peer (P2P) lending.

Investor Views: “Peer-to-Peer Lending Boosts my Income” (Morningstar), Rated: A

Harman, who lives in West Sussex with his wife, has built up a portfolio of using pension and ISA wrappers over a number of years. More recently he has also invested in peer-to-peer lending.

Harman says: “It certainly isn’t for everyone but I am comfortable with the risks. I get a steady income stream from the money I’ve lent out, currently around 5 to 6% a year.”

Crowdfunding might make you money but it’s not an alternative to savings (Herald Scotland), Rated: A

For one thing, investors have so far not received any return on their capital and, with BrewDog’s exit route not yet articulated, it is unclear when they will.

For Adam Tavener, chair of both Clifton Asset Management and funding platform Alternative Business Finance, it is for this reason that equity crowdfunding should never be seen as an alternative savings vehicle.

European Union

Fintech Golem’s ‘Airbnb’ For Computing Crowdsale Scores $ 8.6M In Minutes (Forbes), Rated: AAA

Golem Network, the first decentralized global market for computing power, raised more than $8.6 million (m) in just 29 minutes on Friday for its Golem Network Token (GNT) and in so doing became the third largest platform ICO (Initial Coin Offering) ever.

Acting and dubbed as an ‘Airbnb for computers’, Polish-based Golem Network is a peer-to-peer (P2P) network with no central server that allows both application owners and individual users (‘requestors’) to rent the resources of other users’ (‘providers’) machines, and be paid in cryptocurrency.

As the third largest ICO for a platform behind Ethereum, a public blockchain-based distributed computing platform ($18m in 42 days) and Waves, a blockchain-powered tokens platform ($16m in 30 days), Golem claims it “substantially lowers” the price of computations to make applications more accessible to everyone.

Denmark establishes FinTech hub (FS Tech), Rated: A

The Financial Services Union Denmark, the City of Copenhagen and the Danish Bankers Association have collaborated to form Copenhagen FinTech – a new association that will develop an ecosystem for FinTech entrepreneurs in the city.

Copenhagen is currently home to a range of FinTech companies, but many believe it needs investment if the city is to establish itself as a hub for innovation. The City of Copenhagen hopes to see growth and jobs as a result of the new efforts – following a study which showed that FinTech has the potential to create 10,000 new jobs in Denmark.

The association is launching, amongst other things, a co-working space under the name Copenhagen FinTech Lab, where entrepreneurs take lodgings and become part of a FinTech environment with sparring from established companies and other entrepreneurs.

Australia

Australian Treasurer Promotes the Benefits of Fintech & Regtech (Crowdfund Insider), Rated: A

At the inaugural Fintech Australia Summit this month, Scott Morrison MP, the Treasurer of Australia, delivered a speech that addressed this “collision” between Regtech and financial innovation.

Regtech, in Morrison’s opinion, can seamlessly integrate into financial firms creating a “compliance by design” environment where risks can be mitigated as everything is monitored in real-time.

Applying Regtech to Fintech  may ease the burden of the highly regulated industry;

“…we cannot allow our financial regulatory framework to act as a handbrake to this innovation. Excessively stringent rules and obligations result in less business, less competition and ultimately worse outcomes for consumers. RegTech can equip us to avoid these outcomes.”

China

Two banks trialling biometric technology under Hong Kong fintech ‘sandbox’ (Reuters), Rated: A

Hong Kong’s banking regulator received applications from two banks to test emerging biometric technologies under a new regulatory regime, Hong Kong Monetary Authority Chief Executive Norman Chan said on Friday.

The banks have applied to test the use of biometric authentication of securities trading, Chan said at the regulator’s first ever financial technology or “fintech” day on Friday.

India

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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