- Today’s main news: Funding Circle stops originating loans in Spain.
- Today’s main analysis: LendInvest opens property development academy. FinTech predictions for 2017
- Today’s thought-provoking articles: Yirendai bullish on lending prospects. P2P needs big data.
- VCs in FinTech pivoting toward insurance & RegTech. GP:”We clearly see that the fintech VCs are now focused more on insurtech than on lending. RegTech is not as clear though but I also see the need and applications there.” AT: I’d expect this pivot to lead to a new phase of startups in those two sub-niches.”
- FinTech predictions for 2017. AT: “Interestingly, the pundits are still talking about consolidation. More interesting, I think, is the prospect of foreign investors getting into the U.S. market.” GP:” I continue to be skeptical on consolidation. However, foreign proven models getting in the US market seems plausible due to its size as long as they have a interesting mouse trap, niche, tech, or know how. The best example is probably Klarna.”
- P2P lending, crowdfunding to drive business growth.
- Ilan Investments closes on mixed-use property development.
- LendInvest opens property development academy. GP:” The best way to have customers is to create them.”
- Bricks Finance gets FCA authorization. AT: “Congratulations.” GP: “And another one! Slowly but surely it is happening. When will the big ones get it approved as well?”
- LandlordInvest receives Isa manager approval.
- Welendus kicks off Seedrs campaign. GP:” After Wellesley, it seems like a fashion. Does this mean it’s really hard to get money from VCs now?”
- LendInvest to grow development finance.
- Habito on cusp of realtime lender approvals.
- Funding Circle stops originating loans in Spain. AT: “Interesting. I didn’t see a reason for the decision. It could just be a shift in focus on other markets, which is mentioned in the article.” GP:” We can speculate, without any particular knowledge, that it is likely due to regulation.”
- Influential entrepreneurs. AT: “Several of these are in marketplace lending and FinTech.”
- Yirendai bullish on lending prospects. GP:” Their stock continue to perform unbelieavably. We continue to be unsure about the solidity of their business, default rates and underwriting quality. We seem to be in the minority though. “
- P2P lending needs big data to have a future. GP:” Underwriting, underwriting, underwriting. If one has 5 rating grades and 5 subgrades per grade, that is 25 categories. One needs at least a few hundred defaults per category to know what a default looks like. We are talking 25*300= 7500 defaults. With a default rate of , lets assume 5%, that means 150,000 loans. So one really has data once it originated 150,000 loans. And once you modify the underwriting parameters the counter resets before you know if your modifications worked or not…”
- United States
- VCs in Fintech Pivoting Toward Insurance & RegTech in 2017 (10Fold), Rated: A
- Fintech predictions for 2017 (TechCrunch), Rated: A
- P2P Lending, Crowdfunding to Drive Business Growth in 2017 (Finance Magnates), Rated: A
- Ilan Investments Closes on Mixed-Use Property Development (PR Web), Rated: A
- United Kingdom
- LendInvest opens property development academy (Mortgage Introducer), Rated: AAA
- Exeter-based peer-to-peer lender Bricks Finance gains FCA authorisation (Exeter Express and Echo), Rated: A
- Back innovation and benefit from tax perks (The Times), Rated: A
- Welendus Live on Seedrs (Welendus Email), Rated: A
- LendInvest to grow development finance (Mortgage Introducer), Rated: A
- Digital mortgage adviser Habito on cusp of realtime lender approvals as it secures £5.5m investment (IB Times), Rated: A
- European Union
- Funding Circle Stops Originating Loans in Spain (Crowdfund Insider), Rated: AAA
- Debrett’s 500 List: Entrepreneurs (The Telegraph), Rated: B
- Yirendai bullish on lending prospects despite tighter rules (South China Morning Post), Rated: A
- Peer-to-peer lending needs big data to have a future (The Jakarta Post), Rated: A
VCs in Fintech Pivoting Toward Insurance & RegTech in 2017 (10Fold), Rated: A
The panelists agreed that the fintech market is getting oversaturated and over-funded. This means that the pressure is on to seek original ideas that leapfrog entire processes in financial services as opposed to just digitizing existing services. They pointed to payments and lending as two areas where the market has defined clear winners, but as credit becomes more expensive, this could shake loose new opportunities for entrepreneurs.
But confidence in insurance and regulatory technology (RegTech) is high. Kapoor Collins encouraged entrepreneurs to think about regulations on two levels. At a basic level, founders should factor in regulatory policies and changes into their business plans.
Fintech predictions for 2017 (TechCrunch), Rated: A
2017 will continue to be the year where the top players pull away from the pack. At the beginning of 2016, there were an estimated 400+ fintech lenders in the U.S. – in 2017, I expect the supermajority of the lending to come from just 10 or so platforms.
Fintechs looking to disrupt core banking products like checking and savings accounts, and the products attached to them like debit cards will likely become more prominent in 2017.
Most of this will come in the form of partnerships – fintech front ends, traditional bank back ends – but partnership might not be the “construct du jour” much beyond 2017.
Acquisition will be the answer for some traditional players. I can’t tell you how many transactions there will be, but I can tell you the conditions have never been more ripe.
As investors in newer markets get hip to fintech, they may also want to invest in the U.S., where the fintech market is stable, large, and growing. We’ve already started to see it happen on the equity investment side, and we’ll likely see it happen on the credit investment side too – that is, investment in the loans of fintech lenders. Interest rates in some international markets are significantly lower, making yields found in the U.S. that much more attractive. The stability of the U.S. market remains a large draw relative to local markets as well.
P2P Lending, Crowdfunding to Drive Business Growth in 2017 (Finance Magnates), Rated: A
The P2P business model is starkly different from that of traditional banks. As their name implies, P2P sites began as ways for individuals to borrow from other individuals but now several of the sites have evolved into places where small business owners can borrow from individuals and even institutional investors.
P2P loans are unsecured, so you don’t have to tie up precious collateral, the funding process is faster than a bank and requires less paperwork.
Now that P2P sites are also open to institutional funders, the line between P2P and marketplace lending isn’t as clear as it once was. Marketplace lenders have created websites where small businesses can get offers from multiple funders on a wide range of capital needs, from short-term funding to equipment finance and even long-term loans backed by a guarantee from the U.S. Small Business Administration.
On a crowdfunding site, you can use words, pictures and even videos to sell people—many of whom won’t know you or your business—on your business idea and include how much you need and what you’ll use the money for.
Ilan Investments Closes on Mixed-Use Property Development (PR Web), Rated: A
Capitalization for Ilan’s newest acquisition resulted partially from real estate equity crowdfunding, which as a sub-industry in real estate, topped $2.5 billion in 2015, according to Massolution, an industry research and advisory firm. For this project, Ilan turned to Crowdstreet, a real estate crowdfunding platform.
Ilan’s new property is located within the heart of the Texas Medical Center in Houston and several shopping and dining choices, and is positioned to draw residents employed in the Medical Center, Uptown, Downtown and EaDo areas of Houston, according to Michael Harger, Adara’s vice president of marketing and development.
LendInvest opens property development academy (Mortgage Introducer), Rated: AAA
Online mortgage lender LendInvest launched its second property development academy in London today – a two day course teaching students how to build residential properties.
The non-profit course is provided in collaboration with the University of Reading and covers the whole development process, including land valuation, planning permission and final sale.
Exeter-based peer-to-peer lender Bricks Finance gains FCA authorisation (Exeter Express and Echo), Rated: A
Exeter and East Devon-based Bricks Finance has been authorised by the Financial Conduct Authority.
The peer-to-peer lending business, which made its first loan in May 2015, has a loan book of over £5million and has made loan offers over its first two years of £14million.
Back innovation and benefit from tax perks (The Times), Rated: A
LandlordInvest, a peer-to-peer lending platform, this week received Isa manager approval from Revenue & Customs, even though other platforms, including Funding Circle, Zopa and RateSetter, are still waiting for the go-ahead.
By October 2016 only 15 companies had been approved to offer such Isas to peer-to-peer and crowdfunding investors, although the market finally seems to be growing.
Welendus Live on Seedrs (Welendus Email), Rated: A
Welendus fundraising campaign is now live on Seedrs. You can click here to access the campaign and watch the video.
Welendus are raising £300k for equity.
In short peer-to-peer lending allows investors to make money by helping borrowers to escape the bad practice of payday lenders like Wonga, and the high overdraft rates charged by banks.
This peer-to-peer lending market reached £3.2bn in 2015 and is due to reach £19bn by 2020, fueled by increasing demand and supportive government policies designed for a low interest rate, post-Brexit economy.
The short-term lending market is a huge market that is let down by existing players.
Seedrs do accept international investors with a strong pre-existing connection.
LendInvest to grow development finance (Mortgage Introducer), Rated: A
LendInvest wants to double its development finance lending this year which it views as an underserved and growing area, its chief commercial officer Matthew Tooth has revealed.
Tooth (pictured) said development finance makes up around 20% of its lending by value as it stands, but by the end of the year it should make up a third.
Digital mortgage adviser Habito on cusp of realtime lender approvals as it secures £5.5m investment (IB Times), Rated: A
Habito, the digital mortgage adviser which uses AI technology, has just raised millions in funding from investors in Silicon Valley – and says it is on course to have processed half a billion pounds’ worth of mortgage applications by the end of 2017.
Ribbit Capital, which has invested in Funding Circle and Robinhood among other fintech companies, backed Habito with £5.5m.
Funding Circle Stops Originating Loans in Spain (Crowdfund Insider), Rated: AAA
Following big news of a $100 million funding round, Funding Circle has announced it will stop issuing new loans in Spain. The online lender has made the decision to concentrate its Continental Europe resources on the Netherlands and Germany.
Since launching in Spain, Funding Circle has helped 217 Spanish businesses raise money with the help of 579 active investors. The platform has managed a meager €16 million in loans in Spain, approximately 0.1% of its global volume.
Debrett’s 500 List: Entrepreneurs (The Telegraph), Rated: B
An in-depth look at the most influential people in…
- Dr Ismail Ahmed, Founder and CEO, WorldRemit
- Giles Andrews, OBE, Co-Founder and Executive Chair, Zopa
- Taavet Hinrikus, 35, and Kristo Käärman, 36, Founders, Transferwise
- James Meekings, Co-Founder and UK Managing Director, Funding Circle
- Ambarish Mitra, Co-founder and CEO, Blippar, 37
- Darren Westlake, 46, and Luke Lang, 38, Co-founders, Crowdcube
Yirendai bullish on lending prospects despite tighter rules (South China Morning Post), Rated: A
China’s strict vigil on the peer-to-peer lending sector may have crimped fortunes for several companies, but opened the doors for organised players like Yirendai. The New York-listed firm, unlike its peers, has not only been expanding its business rapidly, but also set its sights on disbursing loans worth 100 billion yuan (HK$112.8 billion) a year by 2020.
According to available information, loan transactions on the Yirendai platform was about 20 billion yuan in 2016, and Tang’s ambition is to achieve annual transactions of 100 billion yuan by 2020.
Peer-to-peer lending needs big data to have a future (The Jakarta Post), Rated: A
When it comes to profitability, Indonesian banks are the envy of Asia. Their robustly handsome margins are a dream for banks in Malaysia, Thailand, Philippines and India.
That’s even more remarkable given that the archipelago of 18,000 islands has almost 120 banks while its peers in ASEAN have merely one-third of that number. Clearly the number of competitors has not impacted profits. After years of peaceful co-existence, it seems finally there is pressure at the periphery. A new phenomenon is underway in Indonesia in the form of peer-to-peer (P2P) banking.
Indonesia is wisely being cautious. The Financial Services Authority (OJK), the regulator, has laid out regulations for the same which includes conditions like foreign ownership being restricted to 85 percent, loan size capped at US$150,000 and the fact that foreigners can only be lenders.