- Today’s main news: PeerStreet announces $ 15M funding round led by Andreessen Horowitz. Online lenders and non-profits team up on small business loans. Wonga may sell BillPay to Klarna.
- Today’s main analysis: China leading as new guard takes over FinTech.
- Today’s thought-provoking articles: Korean government to regulate Bitcoin. Why President-elect Donald Trump should and should not dismantle Dodd-Frank. Will China implement its own cryptocurrency?
- Andreesen Horowitz leads PeerStreet’s $ 15M funding round. GP: “PeerStreet has a particularly strong team, with Google high level alumni, and I believe this is the main reason why Andreesen decided to invest in PeerStreet vs all their 30+ competitors.”
- Online lenders team up with non-profits to offer more small business loan options. AT: “Online lenders continue to get innovative. Partnering with non-profits to deliver more loans to small businesses, who are typically underserved by traditional banks, expands the opportunities for all parties.”
- Marketplace lending grows while Payday lending shrinks . “At 210% growth, personal Marketplace loans were the fastest-growing segment while online and storefront payday loans together fell the sharpest, reflecting 23% less spending by consumers.”
- Maples Fund Services launches MPL solution. AT: “Here’s another interesting development in MPL that solidifies the sector as legitimate. I expect to see more tech solution providers move into the online lending space.”
- CoverWallet acquires $ 7.8M in funding. GP: ” This is not that relevant for our focus except it is yet another example of insure-tech which could be connected well with lending, SMB lending in this case.”
- MPL reasons to kill and not kill Dodd-Frank. AT: “In the mainstream press, you don’t often hear arguments opposed or in favor of Dodd-Frank as it impacts alternative lending. This article gives both sides of the argument as it pertains to marketplace lending. I always favor legislation that encourages innovation rather than protection, but I’m not the president.”
- Wonga weighs sales of BillPay to Klarna. AT: “If this happens, it could spell a new chapter in Wonga’s life. It could also be a big win for BillPay, not to mention Klarna.”
- Online loan defaults concerns MPL industry.
- ThinCats becomes NACFB patron.
- Central bank recruits blockchain experts. AT: “The interesting thing here is the possibility of the Chinese government introducing its own cryptocurrency. To my knowledge, no other government has backed its own cryptocurrency, although the U.S. National Science Foundation has funded a grant for cryptocurrency research.”
- P2P lending target of growing scrutiny.
- China in the lead on FinTech takeover. AT: “Take a look at the number of P2P lenders in China as of June this year.”
- Robo-advisors help investors, not wealth managers.
- United States
- PeerStreet Announces $ 15 Million Series A Funding Round Led by Andreessen Horowitz (BusinessWire), Rated: AAA
- Nonprofit, Online Lenders Team Up to Offer More Small-Business Loans (Palm Beach Post), Rated: AAA
- CFSI Study: Payday Shrinks While Underserved Consumers Pay More for Auto Insurance (3bl Media), Rated: AAA
- Maples Fund Services Launches Marketplace Lending Solution (Fin Alternatives), Rated: AAA
- Small Business Insurance Site CoverWallet Pulls In $ 7.8 Million in Funding (Insurance Journal), Rated: A
- Reasons Why Donald Trump Should and Shouldn’t Dismantle Dodd-Frank (Forbes), Rated: A
- United Kingdom
- Wonga weighs sale of German arm BillPay after Klarna approach (Sky News), Rated: AAA
- Increase in Defaults in Online Loans Has Industry Concerned (Investopedia), Rated: A
- P2P Lender ThinCats Becomes NACFB Patron (Crowdfund Insider), Rated: B
- European Union
- Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (BusinessWire), Rated: A
- China’s central bank recruits blockchain experts (The Asset), Rated: AAA
- P2P lending sees growing scrutiny (China Daily), Rated: AAA
- China is leading the way as a new guard takes over the fintech charge (Business Insider), Rated: AAA
- Robo-advisers help investors instead of wealth managers (China Daily), Rated: A
- Government to introduce regulations for Bitcoin (Korea JoongAng Daily), Rated: AAA
PeerStreet Announces $ 15 Million Series A Funding Round Led by Andreessen Horowitz (BusinessWire), Rated: AAA
PeerStreet, the leading marketplace for investing in real estate backed loans, today announced a Series A funding round led by Silicon Valley venture capital firm Andreessen Horowitz.
This investment round comes on the heels of a significant first year for PeerStreet. To date, the firm has onboarded thousands of investors, funded over $165 million in loan investments and returned more than $50 million to investors; all with zero losses. Additionally, PeerStreet has significantly expanded its national footprint, working with more than 50 lenders and offering investments across half the country.
Nonprofit, Online Lenders Team Up to Offer More Small-Business Loans (Palm Beach Post), Rated: AAA
A wave of new partnerships between online lenders and nonprofits that offer microloans means more small-business owners can get fast, convenient and sometimes less expensive small-business loans.
The details of the specific partnerships vary, but they all combine what makes online lenders successful – intuitive, sophisticated technology – with what nonprofit lenders bring to the table – lower-cost capital and relationship-driven support.
Lending Club and Opportunity Fund
Opportunity Fund focuses on underserved California business owners. It offers small-business loans from $2,600 to $100,000 with one- to five-year terms and APRs ranging from 10.6% to 23%, depending on the term. Through the partnership, California borrowers with bad credit who apply for a Lending Club loan and don’t qualify will be seamlessly directed to Opportunity Fund, which will underwrite and service the loan.
OnDeck and the Association for Enterprise Opportunity
The Association for Enterprise Opportunity’s Tilt Forward initiative uses OnDeck’s technology to help participating CDFIs underwrite borrowers more efficiently. Four CDFIs currently use the Tilt platform: Georgia-based Access to Capital for Entrepreneurs, New Jersey-based The Intersect Fund, Missouri-based Justine Petersen and New York-based Business Center for New Americans. When small-business owners apply for a loan with these nonprofits, they’ll have the same fast and convenient experience that OnDeck offers, but they’ll be matched with a lower-cost loan.
VEDC offers small-business loans with lower APRs – 8% to 15% – and terms up to 10 years, but it doesn’t have a line-of-credit product. It can offer borrowers a wider range of financing products.
CFSI Study: Payday Shrinks While Underserved Consumers Pay More for Auto Insurance (3bl Media), Rated: AAA
Today, the Center for Financial Services Innovation (CFSI) and Core Innovation Capital (Core) released their sixth annual Financially Underserved Market Size Study. The report, which benefited from the financial support and strategic input of Morgan Stanley and with additional financial support from CFSI’S Founding Partner the Ford Foundation, reveals that underserved American consumers spent $141 billion in fees and interest in 2015, generated from a volume of $1.6 trillion in financial activity. More information and visual assets are available at www.cfsinnovation.com.
The Market Size Study found that the overall volume of financial activity grew from $1.5 trillion in 2014 to $1.6 trillion in 2015, a rate of 4.3%, while spending on fees and interest increased by nearly six percent.
- Marketplace Outpaces Payday: At 210% growth, personal Marketplace loans were the fastest-growing segment while online and storefront payday loans together fell the sharpest, reflecting 23% less spending by consumers. This fluctuation could be attributed to a shift in available loan alternatives for consumers to installment loans or subprime credit cards as a result of regulatory and marketplace pressures.
- Driving For Broke: Perhaps most startling was the high cost of auto insurance for underserved consumers, a category tracked for the first time in 2015. Underserved consumers spent more on auto insurance premiums in 2015 ($36.5 billion) than they did for interest and fees on subprime auto loans ($24 billion). On average, underserved consumers paid 26.5% more in premiums than their fully served counterparts to insure vehicles of comparable value.
- Going Long: Consumers continued to spend the largest share of interest and fees on long-term credit by a nearly 2-to-1 margin. At $55.2 billion in spending, long-term credit is the single largest percentage of fees and interest paid by consumers, with subprime auto and student loans making up the majority of these loans. Short-term credit products such as subprime credit cards and marketplace loans account for $26.2 billion in spending and continue to grow at a faster rate than single payment products like payday or overdraft.
Maples Fund Services Launches Marketplace Lending Solution (Fin Alternatives), Rated: AAA
Fund administrator Maples Fund Services has extended its product offerings to include the rapidly growing peer-to-peer lending sector.
The company’s customized solutions for marketplace lending funds introduce a level of independence in asset verification and valuation and ensure data integrity. By assuming certain administrative tasks – such as platform and custodian reconciliations, interest accruals, principal repayments, default monitoring and accounting for late payment penalties – Maples Fund Services streamlines the internal operations of marketplace lending fund managers so they can focus on investment decision making.
Small Business Insurance Site CoverWallet Pulls In $ 7.8 Million in Funding (Insurance Journal), Rated: A
Online commercial insurance agency CoverWallet announced it has received $7.8 million in funding in a Series A round led by Union Square Ventures, bringing its total raised to date to $9.5 million.
CoverWallet announced seed funding of $2 million in March.
Launched in early 2016, CoverWallet provides a concierge-like service for small businesses, giving them access to quotes, advice and policy management tools online or over the phone. It offers general liability, commercial property, workers’ compensation, directors and officers, professional liability, errors and omissions, and cyber liability coverages.
Reasons Why Donald Trump Should and Shouldn’t Dismantle Dodd-Frank (Forbes), Rated: A
The Center for Financial Services Innovation(CFSI) recently released its latest Underserved Market Size report, highlighting just how expensive financial services are for subprime consumers. The report revealed that underserved Americans paid $141B in fees and interest last year for access to some financial services , including lending – an increase of $3B since 2014. The growth in marketplace lending has been particularly relevant in light of Dodd-Frank criticism. According to CFSI, marketplace lending for personal loans grew by a staggering 210%, and small business loans in this sector grew by 64%.
Some analysts have argued that the major impetus for this growth has been the funding gap that was indirectly created by the Dodd-Frank Act.
The CFSI report found that “Microloans to small businesses in low-to-moderate income communities, and Marketplace Loans for small businesses, represented $1.7 billion in spending on fees and interest.”
Alternative lending can get very expensive for some small business owners. The average annual interest rate for large national banks varies between 1.31% and 4.31%. For online and alternative lenders, these rates can climb, on average, to as much as 66.57%.
Given the prevailing attitudes in both the Legislative and the Executive Branch, it is unlikely the law will survive in its current state for the next four years.
Wonga weighs sale of German arm BillPay after Klarna approach (Sky News), Rated: AAA
The new approach for BillPay, which Wonga only acquired in 2013, is understood to have come from Klarna, a Swedish-based provider of e-commerce payment solutions.
A source close to the situation said Wonga was examining the approach as part of a broader effort to raise additional financing capacity over the coming months.
The discussions follow a shake-up of the payday lender’s management team, with Tara Kneafsey taking over as group chief executive, and Tommy Jordan replacing her at the helm of its UK operations.
Wonga has sought to focus on the expansion of a flexible loan product as it seeks to diversify away from the short-term lending activity that sparked political and public controversy.
Wonga’s losses have totalled nearly £120m in the last two years following a string of scandals and costs associated with cutting hundreds of jobs.
Wonga executives will also have to continue rebuilding its public image amid continuing disdain for the payday lending industry.
Increase in Defaults in Online Loans Has Industry Concerned (Investopedia), Rated: A
When online and peer-to-peer (P2P) lending became trendy, it was hailed by some as a revolution to consumer loans, offering a viable alternative to standard bank loan proceedings. However, it seems that things are not entirely as they should be in that industry, as a surge in defaults has sent analysts into a panic about the future of the burgeoning area. There have been signs that trouble was on the horizon for several months, starting with concerns throughout the industry about LendingClub, a leader in the P2P lending area.
At this rate, lenders and underwriters may be forced to begin paying down bonds too early. In spite of efforts by LendingClub and some of its competitors to tighten lending standards and raise interest rates, it may be too late to counter the trend of defaults and the longer term repercussions this had.
P2P Lender ThinCats Becomes NACFB Patron (Crowdfund Insider), Rated: B
P2P lending platform ThinCats, which recently passed £200m milestone in loans issued to UK SMEs, has joined become an NACFB patron seeking to provide a direct link with member brokers who demonstrate similar working methods to the ThinCats model.
Growth in FinTech is Shaping the Future of Invisible Finance & Virtual Banking (BusinessWire), Rated: A
Research and Markets has announced the addition of the “Future of Financial Services”report to their offering.
This study will address implications to the labor force employed in the financial services market, as a lot of the responsibilities currently held by individuals will be susceptible to automation. Another consequence to automation might be the role of institutions in the industry moving to advisory rather than transaction processing.
Key Topics Covered:
- Executive Summary
- Research Scope, Objectives, and Background
- Overview and Introduction
- Key Disruptions in Segments
- Funding of Fintech
- Trends in Financial Services
- Profiles of Fintech Disruptors
China’s central bank recruits blockchain experts (The Asset), Rated: AAA
China’s central bank is recruiting cryptocurrency and blockchain experts to explore the potential of distributed ledger technology in the financial sector.
With digitization becoming an integral part of China’s financial system, Chinese authorities are exploring uses for blockchain technology in improving its financial system. China is also planning to launch its own cryptocurrency.
The People’s Bank of China (PBoC), China’s central bank, has set up an R&D department for digital currency this year.
In the private sector, e-commerce giant Alibaba Group’s affiliate Ant Financial is leading the charge to develop blockchain.
P2P lending sees growing scrutiny (China Daily), Rated: AAA
As China advances its supply-side structural reform, a large number of struggling financial companies will be eliminated, thus exposing once-concealed online financial risks.
Peer-to-peer, or P2P online lending platforms, reflect the explosion of online financial risks. Statistics provided by independent P2P portal wdzj.com shows that there were 3,858 P2P in operation at the end of last year, and 1,263 of them had operation problems. Most of these platforms promised an extremely high return rate, as much as 10 percent annually. Meanwhile, they illegally established capital pools.
Platforms which have been reported with problems have mostly crossed the red line of illegal fund-raising.
But Wang says such simple reasons cannot sustain P2P companies’ much higher return rate compared to banks. Most P2P companies cannot find small and micro-sized enterprises that are willing and able to return the loans. Therefore, P2P companies give these loans to big company clients.
China is leading the way as a new guard takes over the fintech charge (Business Insider), Rated: AAA
China’s fintech scene is being boosted by huge private funding rounds, while the UK is suffering, and Germany is benefitting, from Brexit related uncertainty.
This means the dynamics of the global fintech ecosystem are changing as funding and focus shifts away from the original fintech hubs. The US and UK can no longer be complacent when it comes to potential threats to their fintech crowns.
Marketplace lending, for example, is the largest segment of the alternative finance market across Europe and the US, but it’s now taking off in a big way in China.
Robo-advisers help investors instead of wealth managers (China Daily), Rated: A
Leading Chinese peer-to-peer lending and wealth management company CreditEase Corp is developing a robo-adviser product to serve small and medium domestic investors.
Tang said they have about 1 million small and medium investors at their platform.
Launched in June, ToumiRA is a robo-adviser mobile application that can create asset allocation solutions for investors based on their investment goals and risk preferences. The threshold to be an investor is $500.
Government to introduce regulations for Bitcoin (Korea JoongAng Daily), Rated: AAA
In response to the growing popularity of Bitcoin and other digital currencies traded online, the country’s financial regulator said Thursday that it would introduce regulatory guidelines for digital currency exchanges by the first quarter of next year.
The Financial Services Commission has launched a task force that will meet regularly to discuss the regulatory status of digital currency and create licensing rules for exchanges as well as devise measures to prevent money laundering and fraud in transactions.
The top three Bitcoin exchanges in the country processed around 1.5 trillion won ($1.3 billion) between January 2015 and October 2016, according to data from the regulatory commission. The Financial Services Commission said average monthly transactions in 2016 increased by 6 percent compared to last year.
Besides Bitcoin, there are over 700 digital currencies circulating around the world.