- Today’s main news: SEC urges LC to be more transparent.
- Today’s main analysis : Millennial home ownership shrinks while student debt grows.
- Today’s thought-provoking articles: UK crowdfunding to get harder, but money will be safer. A roundup of international FinTech regulation. What new rules for Chinese P2P lenders are designed for.
- SEC requests more transparency from LendingClub. AT: “This makes me wonder whether the non-GAAP financial reporting used by LC had anything to do with its Laplanche-related troubles, or does the SEC think so? If the SEC starts regulating the industry, which is most likely, there will undoubtedly be rules related to reporting, and companies could very well be forced to use GAAP reporting.”
- Student debt grows as millennial home ownership shrinks. AT: “The relationship is uncanny. Every generation has its challenges. This is the millennial generation’s challenge. However, it does affect the rest of us. In the short-term, it means rental properties are the best investment. Long term, a buy-and-hold strategy will still build equity. But what student loan default rates? I’d expect to see them go up.”
- OnDeck builds $200 million revolving credit facility. GP:” $200m is a nice amount of change, but when you originate $600m per quarter that’s just 1 month of origination. It feels really little. Perhaps it’s just a toe in the water in order to do more. ” AT: “OnDeck partners with Credit Suisse on this deal.”
- MPL industry expected to consolidate. GP:” I don’t believe in consolidation in the space at all. I think there is no value in a consolidation. I think there will be pure bankruptcies.” AT: “This is a 5-minute video. The number of consolidations expected is staggering.”
- Is this the beginning of the end for P2P lending? GP:” Given the UK P2P lenders are making new record originations, I would say clearly not.”
- Not all SME loans are created equal.
- 7 things investors should know about P2P lending. AT: “It’s good to know what is being said about P2P lending from the other side of the table.”
- 5 ways technology can help fund your business.
- Why crowdfunding will get harder. AT: “Not earth-shattering news at this point.”
- Zopa on the FCA announcement. GP: ” A very reasonable point of view and a must read if concerned with the FCA announcement.”
- Assetz Capital sets new lending record. GP: ” Congratulations”.
- Why the FCAis worried about P2P lenders buying loans.
- Wellesley pitches to raise 1.5 GBP from the crowd. GP: ” It is a little strange to raise so little money. I think they should be raising more.”
- FinTech comms specialist opens office in Cambridge.
- How regulators overseas are dealing with FinTech. GP:” A nice review worth reading.”
- How to know whether crowdfunding is right for your small business.
- New rules for P2P lenders designed to minimize fraud. GP:” I do think that slowing down growth was their objective. And I am glad they succeeded.” AT: “China has major issues with P2P lending fraud–more so than most countries. If they can’t clean it up, consumers will lose trust.”
- Evaluating default risk in P2P lending.
- Malaysia first country in region to regulate P2P financing.
- How to use open data to benefit your business.
- Top 10 FinTech companies in Mexico. GP:” One should not discount the online lending of non major financial centers of the world. “. AT: “It’s good to know who they are.”
- United States
- SEC Urges LendingClub to Disclose More About Loans and Funding (The Wall Street Journal), Rated: AAA
- Millennial Home Ownership Shrinks as Student Debt Grows (Financeography.com), Rated: AAA
- OnDeck Announces New $ 200 Million Revolving Credit Facility with Credit Suisse (PR Newswire), Rated: A
- Consolidation Is Coming In Marketplace Lending (Bloomberg), Rated: A
- Peer-to-Peer Lending: Is This the Beginning of the End? (DepositAccounts), Rated: A
- Not All SME Loans Are Created Equal (PYMNTS.com), Rated: A
- Peer-to-Peer Lending: 7 Things Investors Should Know (The Motley Fool), Rated: A
- 5 Ways Technology Can Help in Funding Your Small Business (Newswire), Rated: B
- United Kingdom
- FCA crackdown: UK crowdfunding will get harder, but your money will be safer (The Memo), Rated: AAA
- Today’s FCA announcement (Zopa), Rated: AAA
- Assetz Capital’s Record-Breaking Month: Lends £26 million in November 2016 (Crowdfund Insider), Rated: A
- Some UK peer-to-peer lenders are buying each other’s loans and the watchdog is worried (Business Insider), Rated: A
- Interview: Wellesley Pitches to Raise GBP 1.5M from the Crowd (Info-Europe), Rated: A
- FinTech communications specialist opens in Cambridge (Business Weekly), Rated: B
- European Union
- PEER-TO-PEER LENDING MARKETPLACE VIVENTOR RELEASES MOBILE APP (Labs of Latvia), Rated: A
- How overseas regulators are dealing with fintech problems (Finder.com.au), Rated: AAA
- How to decide if crowdfunding is right for your business (Business Insider), Rated: A
- New Rules for Chinese P2P Lenders Designed to Minimize Fraud, Slow Industry Growth (NASDAQ), Rated: AAA
- Evaluating borrower’s default risk in peer-to-peer lending (Taylor and Francis Online), Rated: A
- P2P Lending Platform Rupaiya Exchange Secures $ 200K Funding (Inc42), Rated: A
- Malaysia: ASEAN’s First Country to Regulate P2P Financing (Crowdfund Insider), Rated: AAA
- How to use open data to benefit your business (MIS Asia), Rated: A
- Top 10 Fintech Companies in Mexico (TechBullion), Rated: AAA
SEC Urges LendingClub to Disclose More About Loans and Funding (The Wall Street Journal), Rated: AAA
The Securities and Exchange Commission has urged LendingClub Corp. to disclose more about its lending operations and has questioned the company’s use of tailored “non-GAAP” financial measures, according to newly released correspondence between the regulator and the online lender.
LendingClub told the SEC that it would provide some more information about its lending and funding, according to the letters. But the company pushed back against the commission’s requests in some respects, and insisted its metrics were “not misleading.”
LendingClub is the latest high-profile company to face SEC criticism over its use of non-GAAP metrics—unofficial measures of earnings that don’t comply with generally accepted accounting principles, or GAAP. They strip out one-time or noncash items to provide what companies consider to be a truer measure of performance, but critics fear the metrics can be used to make companies look healthier than they really are.
Millennial Home Ownership Shrinks as Student Debt Grows (Financeography.com), Rated: AAA
At the beginning of 2016, the home ownership rate for those 30 and under sat at about 27.7%, the lowest it has been in decades.
On the other hand, student loan debt rose to $1.2 trillion, though it has already surpassed the $1.3 trillion mark earlier this year. In a development which should surprise nobody, there seems to be a pretty clear correlation between the growing student loan debt Americans hold and the under 30 home ownership rate.
It isn’t too far of a stretch to see the percentage hit the 25% mark within the next couple of years.
OnDeck Announces New $ 200 Million Revolving Credit Facility with Credit Suisse (PR Newswire), Rated: A
OnDeck® (NYSE: ONDK), the leader in online lending for small business, announced today the closing of a $200 millionasset-backed revolving debt facility with Credit Suisse.
In addition to its other funding sources, OnDeck may now obtain funding under the new credit facility with Credit Suisse, subject to customary borrowing conditions, by accessing $125 million of committed capacity and an additional $75 million of capacity available at the discretion of the lenders.
Under the facility, loans will be made to Prime OnDeck Receivable Trust II, LLC, or PORT II, a wholly-owned subsidiary of OnDeck, to finance PORT II’s purchase of small business loans from OnDeck. The revolving pool of small business loans purchased by PORT II serves as collateral under the facility. OnDeck is acting as the servicer for such small business loans. The Class A Loans under the facility were rated by DBRS, Inc.
OnDeck intends to initially use a portion of this facility, together with other available funds, to optionally prepay in full without penalty or premium, the existing $100 million Prime OnDeck Receivable Trust, LLC facility which was scheduled to expire in June 2017. As a result, OnDeck will benefit from obtaining additional funding capacity through December 2018.
Consolidation Is Coming In Marketplace Lending (Bloomberg), Rated: A
Peer-to-Peer Lending: Is This the Beginning of the End? (DepositAccounts), Rated: A
It was just a few years ago, that peer-to-peer lending was taking off so strongly that some thought traditional lending would never be the same.
Right now, the question is, what’s going on? Is this the beginning of the end or what? Truth is, success brings scrutiny. Marketplace lending was not regulated in the same way as traditional lenders. With the explosion of the industry where billions of dollars were in play, state regulators began to take a closer look and increased regulations. Earlier this year the Consumer Financial Protection issued a bulletin to consumers about the pitfalls of peer-to-peer lending and began accepting complaints about P2P lenders.
But it’s too early to have a funeral for P2P lending.
Not All SME Loans Are Created Equal (PYMNTS.com), Rated: A
According to Julia Rivers, manager at online marketplace lending platform Personal Money Service, awareness among SME owners is lacking.
When asked how educated the site’s SME clients are when it comes to the types of loans they have access to, Rivers stated, “not really.” She assessed search terms on the site and found “small business loans” and “small business loan calculator” are the most frequently searched.
The best source of education, according to Rivers, is to clarify and describe what each product is that SMEs can access through the portal.
Alternative lenders do come with higher fees, she admitted, but if a company’s top priority is accessing financing as quickly as possible, then an online lender comes out on top (though, the executive added, collaboration between alternative and traditional lenders is certainly offering a “win-win” for borrowers and lenders alike).
Peer-to-Peer Lending: 7 Things Investors Should Know (The Motley Fool), Rated: A
The peer-to-peer, or P2P, lending industry has experienced significant growth since the first major P2P platforms were established in 2006 and 2007. The total amount of money lent through P2P platforms grew more than 80% a quarter from 2007 through 2014, according to research by the Federal Reserve Bank of Cleveland. And a separate report by PricewaterhouseCoopers sees that growth continuing, with the volume of P2P loans in the U.S. projected to grow to $150 billion annually by 2025 from the $5.5 billion issued in 2014.
But just because an industry is growing, it doesn’t mean there are no risks to investors. In fact, some argue that while investors may expect steady returns from lending money through peer-to-peer platforms, they should also be prepared to lose their entire investments.
- The type of loans you can choose to invest in vary widely.
- The higher the interest rate, the riskier the loan.
- Major U.S. platforms don’t guarantee loans.
- You can invest in partial loans.
- Diversification helps mitigate risk…if you can afford it.
- Be aware of fees.
- It’s unclear what will happen to P2P loans during a major downturn.
5 Ways Technology Can Help in Funding Your Small Business (Newswire), Rated: B
You too can be a beneficiary of fintech; all you have to do is learn how to take advantage of the existing (and abundant) technologies in getting funds for your business. Here are 5 options you should consider:
With over $34 billion raised via crowdfunding in 2015 alone, you can bet this powerful funding option is one every small business and startup serious about funding should consider.
5. Bitcoin P2P Lending Services
P2P (or peer-to-peer) lending is definitely one of the most innovative new financial services in the fintech sector.
P2P lending enables individuals or businesses to borrow and lend money through online services that match lenders directly with borrowers – without the use of an official financial institution as an intermediary.
Bitcoin P2P lending services like Bitbonds give businesses access to financing that they may not have otherwise gotten approval for by traditional financial companies or intermediaries.
FCA crackdown: UK crowdfunding will get harder, but your money will be safer (The Memo), Rated: AAA
Is lending money to a small family business via a small platform like Folk2Folk more or less risky than putting your money into a larger platform like Zopa?
How safe is your money if the business or platform goes bankrupt? What about the risk of investing in businesses via SyndicateRoom or Seedrs?
The Financial Conduct Authority (FCA) today said it found that in crowdfunding it was hard for investors to compare different platforms, different businesses raising money. It’s also difficult to easily compare crowdfunding to other investment opportunities, like buying stocks or shares.
That’s good new for someone looking to invest or lend money through Crowdcube or Zopa, but probably bad news for businesses and some crowdfunding platforms as they could have more rules and hoops to jump through.
Today’s FCA announcement (Zopa), Rated: AAA
We believe that an effectively regulated peer-to-peer lending industry is the best way to help us reach more customers, treat them fairly and help them build richer lives. Zopa has lobbied hard for our sector to be regulated, and we look forward to working with them through the consultation process to ensure regulation is fair and appropriate for consumers.
When our industry’s interim regulatory permissions were announced in 2014, the FCA planned to perform a post-implementation review after two years. They called for input into this process over the summer, and we spent a week working closely with their representatives to help them gain a better idea of our business and how it operates.
Assetz Capital’s Record-Breaking Month: Lends £26 million in November 2016 (Crowdfund Insider), Rated: A
Assetz Capital announced on Friday that November 2016 was officially the peer to peer lender’s most successful month ever. The website confirmed it lent £26 million to users, £100 million for 2016.
Some UK peer-to-peer lenders are buying each other’s loans and the watchdog is worried (Business Insider), Rated: A
Britain’s Financial Conduct Authority (FCA) has found some peer-to-peer (P2P) lending platforms are using customer money to buy loans on rival platforms, rather than fund loans over their own platforms.
Interview: Wellesley Pitches to Raise GBP 1.5M from the Crowd (Info-Europe), Rated: A
UK marketplace Wellesley is currently pitching to raise 1.5M GBP in a convertible from the crowd.
- Lenders can achieve higher risk adjusted returns than are available in traditional deposit accounts.
- Property development lending is asset backed.
- Funding is being put to good use, helping to build homes in the UK.
FinTech communications specialist opens in Cambridge (Business Weekly), Rated: B
A dedicated financial and corporate communications agency with Wall Street affiliates has opened in Cambridge to help life science & technology companies engage more effectively with investors and the financial markets.
The business marked its Cambridge launch by winning a new and sector-leading client, Zopa. Zopa, a UK company and the world’s first peer to peer (P2P) lender, is the market leader in the fast-growing FinTech sector. Anagallis has been retained to advise Zopa on communications around the company’s application for a banking licence.
PEER-TO-PEER LENDING MARKETPLACE VIVENTOR RELEASES MOBILE APP (Labs of Latvia), Rated: A
Peer-to-peer lending marketplace Viventor has released its mobile application for iOS and Android, becoming one of the first marketplace lenders in Europe to offer such tool to its investors. Thanks to the mobile app, investing is now available anywhere, anytime.
How overseas regulators are dealing with fintech problems (Finder.com.au), Rated: AAA
In the US
The OCC has recently announced a change in regulation which something the fintech industry has been lobbying for for some time. Fintech companies will now be able to apply for federal charters which will allow them to become “special purpose national banks”. Currently, fintech companies need to seek permits state by state or partner with a bank in order to operate nationally.
In the UK
Peer-to-peer (P2P) lenders are the focus of regulatory concerns lately in the UK, with Britain’s Financial Conduct Authority (FCA) finding some P2P lenders using customer money to buy loans on rival platforms rather than funding loans on their own. CEO of the FCA Andrew Bailey told Business Insider there were a number of risks with this practice.
Chinese regulators have had a seriously tough time with the country’s P2P lending boom, a sector worth more than US$60 billion. In September, the problem went so far as police raided the properties of two P2P lenders, both of which are now defunct. new regulations were introduced by authorities in October, after a long delay which may have been caused by economic fears for small businesses, with SME lending outside of P2P largely non-existent.
How to decide if crowdfunding is right for your business (Business Insider), Rated: A
Crowdfunding can represent a large and diverse equity pool that harnesses the interest of existing and future customers to give you a leg up in return for some kind of “reward”. Alternately, it can be a term that represents the acquisition of debt sourced from individual private investors rather than a big, faceless bank or the sale of equity shares in your business in exchange for routine returns.
Alan Crabbe is one of the founders of Australian crowdfunding site Pozible. He says the easiest way to think about the different types of crowdfunding is like this: offer investors a perk or incentive to back your idea, or offer a stake in your business in return for their investment.
Sometimes a combination of the two is the way forward, but it can depend largely on your specific goals.
New Rules for Chinese P2P Lenders Designed to Minimize Fraud, Slow Industry Growth (NASDAQ), Rated: AAA
Financial regulators in China have issued regulations to put the brakes on the fast-growing P2P sector a couple of times in the last year or so, but have seen limited success. China watchers have noted that the relatively minimal efforts at regulation of marketplace lenders by authorities to date may relate to the fact that lending to small businesses has largely dried up outside the P2P sector, and Chinese economic planners don’t want to see economic growth drop too low.
That said, these new regulations are more comprehensive, and represent a more serious effort by Chinese regulators to slow growth and crack down on the notable amount of fraud in the sector. Financial analysts also suggest that these new rules will help standardize offerings in the sector and discourage P2P platforms from making excessively risky business decisions.
These prohibitions alone will winnow out a lot of the newer entrants into the field, as many firms were basing their business models on making substantial profits from providing other financial services besides facilitating loans between peers.
Evaluating borrower’s default risk in peer-to-peer lending (Taylor and Francis Online), Rated: A
P2P Lending Platform Rupaiya Exchange Secures $ 200K Funding (Inc42), Rated: A
As per an official statement, the startup has facilitated loan originations worth $10 Mn (INR 70 Cr) and disbursements in excess of $1 Mn (INR 8 Cr) since its launch.
Malaysia: ASEAN’s First Country to Regulate P2P Financing (Crowdfund Insider), Rated: AAA
Malaysia’s Securities Commission (SC) announced last month that six P2P platforms were registered and would continue to be overseen by the Government of Malaysia, making Malaysia the first ASEAN country to regulate P2P financing. The six platforms include B2B FinPAL, Ethis Kapital, FundedByMe Malaysia, ManagePay Services, Modalku Ventures, and Peoplender.
How to use open data to benefit your business (MIS Asia), Rated: A
Show Me the Money was designed to add transparency to build trust among lenders and borrowers. The team behind the project collected data from the three largest peer-to-peer lending platforms in the UK – Zopa, RateSetter and Funding Circle – to create an infographic showing how much money was lent to and from different people, with the details mapped across the country.
Privacy protection must not be sacrificed. Regulations around data ownership and sharing must be adhered to, so legal disasters are avoided, and Show Me the Money avoids revealing personal details of lenders and borrowers. To protect privacy, ensure that any identifiable information remains concealed, or that the information is aggregated to obscure it.
Top 10 Fintech Companies in Mexico (TechBullion), Rated: AAA
Fintech is thriving in Mexico. With over 158 fintech start-ups, Mexico is the largest fintech market in Latin America, surpassing other big markets such as Brazil (130 start-ups) or Colombia (77 start-ups).
Founded in 2013, Konfio is a leading platform that assists underserved micro-enterprises to obtain affordable and convenient loans via a propriety algorithm that measures creditworthiness using technology.
Kueski is the fastest-growing micro-lending service in Mexico and Latin America.
Founded in 2011, Prestadero is a leading P2P lending platform that is transforming the banking system to make investing more rewarding and credit more affordable.
Kubo financierois a P2P lending platform that provides affordable and accessible loans to borrowers.
UNIKOis an innovative company that provides the couple an opportunity to experience something different by changing gifts into cash.
In 2013, Bankaoolreceived the approval of the Comisión Nacional Bancaria y de Valores of Mexico (CNBV) that allowed it to be a multi-service bank.
Conektaenables developers and companies to create a payment solution with their own flow and design for any app and website.
Launched in 2010, Sr.Pagois a mobile point of sale that allows small businesses and individuals to receive card payments through tablets and smartphones.
Founded in 2014 by Marco Nery, Saldo is a digital wallet that enables customers to pay bills to businesses in Mexico using tablets or smartphones.
Bitso is the first bitcoin exchange in Mexico, providing a platform for selling and buying bitcoin with Mexican Peso.