Daily News Digest Featured News

Thursday March 23 2017, Daily News Digest

insurtech

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United States

United Kingdom

European Union

Australia

Canada

China

India

Asia

Latin America

News Summary

United States

Kabbage looks to raise money for acquisitions (Reuters), Rated: AAA

Small U.S. business online lender Kabbage Inc is in talks to raise a new round of equity funding that could be used for potential acquisitions at a time when many of its peers face funding challenges, people familiar with the matter said.

One of the acquisition targets under consideration by Kabbage is rival On Deck Capital Inc, which has market capitalization of $321 million, according to one of the sources.

Ron Suber on Fintech & Fraud: A Global Challenge (Crowdfund Insider), Rated: AAA

How fraud occurs is a never-ending, shape-shifting challenge for individuals, companies and public authorities. There will always be another Ponzi or Madoff looking to separate hard-earned money from honest people via duplicitous actions. As all types of business shift online, fraudster’s will inevitably adapt to pursue their malevolent objectives.

Some of the challenges that impact online lenders include:

  • “Shotgunning” – taking out multiple loans from multiple platforms in under ten days
  • Loan stacking – multiple unsecured loans over several months

Ulysses S. Grant fraud

Download Ron Suber’s special report “Fintech & Fraud” here.

U.S. Bank’s Dominic Venturo on creating a model for innovation (Tearsheet), Rated: AAA

Every institution innovates differently. Our approach is to work with the businesses to understand their objectives and strategies. We want to keep a long-term eye on emerging technology and how consumers and businesses interact with technology. We’ll blend that into the product development roadmaps for the businesses. In some cases, emerging technology will look like it has a lot of potential but then you really have to see how it applies to a business, whether it solves a customer problem or pain point, and whether it can scale to a company our size. I don’t know if this is different than others, but it’s definitely our approach.

Ondeck announces extension, upsize of revolving credit facility with Deutsche Bank (Reuters), Rated: A

On Deck Capital Inc – amended its asset-backed revolving credit facility with Deutsche bank to extend facility’s maturity date to march 2019

On Deck Capital Inc – amended credit facility to increase facility’s borrowing capacity by about $52 million to a total of up to approximately $214 million

Online small-business lending recovering (Biz Journals), Rated: A

For online business lenders, 2016 was a rough year.

Two prominent fintech companies saw their market valuations drop. One small-business lender abruptly stopped issuing loans temporarily due to performance issues, while another was forced to shut down.

Lifshitz offers his view on the subject:

1. Fintech loan originations will surge in 2017.

It’s clear to me that the fintech space’s long-term themes are unchanged. The credit gap remains, and fintech companies still provide a much-needed service. Plus, they’re doing so in a far easier and seamless way than has been available to customers in the past.

Those who reacted to the negativity of 2016 are going to be surprised. Fintech companies will recover from the sector’s downbeat view. Demand and originations will continue to grow. I predict that market sentiment will come back as confidence returns.

2. Fintech companies will adapt by diversifying products and target markets.

Fintech also will get a boost from a secular trend. More millennials are joining the workforce and consuming more services online, including financial services. The generational change favors fintech companies.

3. Fintech companies could form partnerships with banks.

4. Fintech will dominate the user experience.

How one startup aims to help ‘credit invisible’ foreign workers in the U.S. (Tearsheet), Rated: A

For millions of immigrants and temporary foreign residents in the U.S., establishing a financial identity here can be complicated and expensive. Since credit reports don’t cross borders, an immigrant with an exceptional credit score in his home country may arrive in the U.S. as ‘credit invisible’ — a status that may render him ineligible for loans or long-term housing.

Nova Credit is an alternative score to assess foreign residents’ creditworthiness based on their home country credit data. It can also be used for Americans returning to the country after years working abroad. The company obtains the data through agreements with major foreign credit bureaus, a process that can only be initiated with the customer’s consent, Esipov said. Though Nova Credit is initially focusing on India and Mexico, it’s entered into arrangements with credit bureaus in Europe, Canada, Australia and the Philippines. Its revenue model is based on fees to lenders who request the reports.

BP Podcast 219: Private Lending, Turnkey Investing, and Crowdfunding Real Estate with Dr. Kenyon Meadows (Bigger Pockets), Rated: A

If you are looking to make your real estate more passive, this is one show you can’t afford to miss!

Humans to Robos: You Can’t Touch This (Think Advisor), Rated: A

Over the past five years, robo-advisors that provide algorithm-based financial advice and online portfolio management have skyrocketed in popularity. Once the robots take over, the argument goes, humans will be no more.

A commoditized approach to investing cannot incorporate potentially high-impact life events in the same way a knowledgeable human advisor can. Humans offer expertise throughout the life cycle of a client’s investments, while a robo-advisor often reduces a client to a formula. Moreover, the human advisor offers another invaluable service that the robo-advisor can’t replicate – emotional intelligence.

Industry research supports our view. The Financial Planning Association and Investopedia found that investors want a low cost, automated platform combined with personal advice from a human adviseor. Moreover, they noted that 40% of the investors surveyed revealed they are very uncomfortable with automated investing during periods of extreme market volatility.

MyPrivateBanking estimates that hybrid human/automated solutions will accumulate AUM of nearly $3.7 trillion by 2020, and $16.3 trillion (slightly more than 10% of all investable wealth) by 2025. They estimate that pure robo-advisors will have a market share of only 1.6% of total investable wealth by 2025.

New US insurtech Fabric targets parents (Business Insider), Rated: A

The number of insurtechs in the life insurance space has been growing, and now another new player, Fabric, is entering the fray with an offering that aims to provide coverage for new and expecting parents.

Fabric will offer two products to start: an accidental death policy, called Fabric Instant, which users can obtain in two minutes online; and Fabric Premium, a more comprehensive 20-year term policy. As of Tuesday, Fabric is live in 32 US states, with license applications in the remainder pending approval. Fabric recently raised a $2.5 million Seed round led by VC firm Bessemer Venture Partners, and is using the capital to drive its launch and product development.

insurtech

 

Evolve Capital Partners Advises on Acquisition of LeaseDimensions (Yahoo! Finance), Rated: A

Evolve Capital Partners Inc., a specialized investment bank, today announced its client, LeaseDimensions, has been successfully acquired by GenPact (NYSE: G), a global professional services firm focused on delivering digital transformation for clients.

Founded in 1995, LeaseDimensions is a technology-enabled business processing management and information technology services company that specializes in providing finance process and technology domain expertise to equipment, vehicle finance and renewable energy companies. By acquiring LeaseDimensions, GenPact will unlock synergies across its core equipment financing businesses, offering enhanced growth and scalability opportunities while effectively providing onshore servicing capabilities.

Financial Stress Suggests Consumers are Making Impulsive Decisions in the Home Buying Process (Yahoo! Finance), Rated: A

Owners.com, an innovative online brokerage, recently commissioned a survey of more than 1,200 consumers considering a home purchase this year. The theme of this year’s spring real estate season? Stress. In fact, according to the study, 72 percent of potential home buyers stated that they expect stress in the home buying process, with many citing financial aspects as the most concerning. Additional key findings are included below.

When asked about concerns and issues when buying a home, leading financial aspects included:

  • Fear of losing earnest money deposit (64 percent)
  • Becoming “house poor” (61 percent)
  • Bidding wars driving up the price (59 percent)

Despite these financial stressors, when potential home buyers were questioned about their willingness to go over budget in a competitive bid to get into a dream home:

  • More than half (55 percent) said they were willing to go beyond their budget
  • For those willing to stretch their dollars, on average, consumers stated they were willing to go $37,809 over budget

Given these monetary pressures, savvy consumers are considering real estate models that offer opportunities to cut costs in the transaction. When asked about their propensity to handle the home buying or selling process themselves if they would be charged a lower commission, 85 percent said they were likely to consider this opportunity if it meant they had access to some of the more complicated transaction services like the appraisal or legal documents. Nearly one-quarter (23 percent) indicated that they would be motivated to work with a real estate agent or broker who would reward them financially for the work they do on their own. These consumers should look for opportunities to work with a brokerage that offers a buyer rebate or sellers an opportunity to save on traditionally high agent commissions.

Detroit Fintech Startup Autobooks Closes $ 5.5M Series A Round (Xconomy), Rated: A

Autobooks, the Detroit-based startup spun out of Billhighway in 2015, has closed on a $5.5 million Series A funding round. The investment was led by Pittsburgh-based Draper Triangle, with participation from CU Solutions Group, Baird Capital, Detroit Venture Partners, and Invest Michigan.

Autobooks, he explains, has created a set of digital tools to automatically handle a range of accounting tasks, including collecting payments owed to a business and disbursing money a business owes to others. The company licenses its software to banks and credit unions, and they in turn make the technology available to their small-business customers.

Autobooks sprang from Troy, MI-based Billhighway, a financial technology company serving large enterprise customers.

Banks are Back in the Game (Forbes), Rated: A

The introduction of online and small business lending has forced banks to rethink their strategies, but banks are now starting to play ball and shift the industry again.

In the lending industry, there’s a perception that extreme competitiveness has developed between banks and non-bank lending, but I don’t believe that’s the case. By working together, they can help small businesses – the backbone of the American Dream.

JPMorgan Chase and Bank of America took two different approaches to building out online small business lending. They were able to learn from non-bank lenders and emulate the customer experience, or partner with a non-bank lender, to improve their own offerings. Non-bank lenders like OnDeck have reinvented the customer journey. Combine that with the advantages banks have with cost of capital, customer base, underwriting credit cycles and access to data, and you have a good recipe for the future of small business lending.

But as Tufail pointed out, the migration from baby boomers to millennials will further emphasize digital channels. Tech savvy folks will want even quicker lending decisions, and that starts online.

5 ways banks are using Snapchat (Tearsheet), Rated: A

American banks have also amped up their Snapchat recruiting efforts. Not long after their launch of Snapchat Spectacles, Citibank employees began shooting videos with them to offer insights of life as a Citibank worker.

Dutch bank ABN Amro launched a Snapchat customer service capability (Snapchat “webcare”), a feature that’s yielded them 2000 followers since its launch a year ago. The bank posts stories to engage users who can ask questions using photos, videos, emojis and filters.

Through Snapchat, banks are affiliating themselves with causes close to customers’ hearts. For example, CIBC, Canada’s fifth-largest bank, launched a Snapchat pride filter to mark LGBTQ pride festivities last summer.

The Bank of Ireland pulled in celebrity influencers who use the Snapchat offer financial tips and advice to younger customers — a part of the bank’s FeelFree student reward program.

Bank of America’s Llama was used as a Snapchat lens was released last summer in conjunction with the MLB All Star Game to promote the bank’s mobile app.

Small Change Announces First Los Angeles-Based Real Estate Offering (Crowdfund Insider), Rated: B

Real estate crowdfunding platform Small Change announced on Wednesday the launch of its first Los Angeles-based offering.

Small Change describes Rosewood as a urban-minded development of four single-family units that are designed to achieve net-zero energy usage and further vitalize the area. Each of the units is designed with energy efficiency and resource conservation in mind and will also be pre-wired for solar panels with sufficient roof space to achieve net-zero energy living.

Small Change added a 10% return is projected on this investment.

Conference of State Bank Supervisors Releases Statement to Congress on OCC FinTech Charters (Buckley Sander), Rated: B

Ryan stated that the OCC’s Proposal “sets a dangerous precedent [by demonstrating that] the OCC has acted beyond the legal limits of its authority [and has] bypassed and ignored bipartisan objections from Congress, [thereby] creat[ing] new risks to consumers.” He asserted that the proposed charter would “preempt existing state consumer protections without a comparable mechanism to replace them. It also exposes taxpayers to the risk of inevitable [F]inTech failures.”

United Kingdom

Goji launches P2P lending bond (FT Adviser), Rated: AAA

Goji’s Diversified Peer-to-peer Lending Bond claims to be the UK’s first diversified peer-to-peer lending proposition with a portfolio of loans from a variety of lenders.

It is targeting returns in excess of 5 per cent over a one or three-year term.

The bond is eligible for inclusion within the Innovative Finance Isa.

HNW Lending unveils Innovative Finance ISA targeting 7% – 15% (AltFi), Rated: AAA

HNW Lending has received full approval from the Financial Conduct Authority approval to offer Innovative Finance ISAs (IFISA), with minimum investments of £5,000 per loan.

It will target returns of between 7 per cent per annum and 15 per cent per annum depending on the risk of the loans in which the investors choose to invest.

Property Crowd launches IFISA with target returns of 7-10% (AltFi), Rated: AAA

Property Crowd, the real estate crowdfunder that’s owned by global secondary market platform Global Alternatives, has launched its Innovative Finance ISA offering just days prior to the April 5th tax cut-off. The product offers investors returns of up to 10 per cent.

The minimum invest amount for the IFISA offering is £5k.

Pollen Street Capital-backed alternative lender Capitalflow has secured a new round of funding valued at £50m to finance its loans to Irish SMEs.

P2P platform Landbay is turning to crowdfunding for capital. The buy-to-let mortgage lending platform, is hosting a £1.5m equity crowdfunding round on SeedrsLandbay is already overfunded, with more than £1.7m invested so far.

Innovative Finance ISA offers sweet deal for investors – if they know it exists (The Investment Observer), Rated: A

The survey, which focused on understanding investors’ intentions for the year ahead, found priorities for savers included a fixed income (17%), the opportunity to self-select how and where their money is invested (18%) and tax efficiency (24%) were top of their list of investment priorities.

Whilst the IFISA aims to meet all of these needs, half of investors questioned said they had never heard of it. 29 percent said they do know the name but don’t know what it is and only one in 20 said they know enough about what an IFISA is to be able to explain it clearly to other people.

However, the survey also found that those that do know about IFISAs and have invested in them have invested more on averagethan in traditional Cash ISAs.  The average amount of £7,013 per person has been invested in Crowdstacker’s IFISA to date; this is compared to £5,810 in cash ISAs between 2015 and 2016.

Master Investor Show: Setting the Standard for Investment Events (Yahoo! Finance), Rated: B

The Master Investor Show brings together private investors of all portfolio sizes to hear keynote talks from celebrity investors and gain access to new investment opportunities.

Ordinary investors will get the opportunity to speak to the CEOs and founders of 100 companies from multiple investment sectors, including equity funds and retirement saving, crowdfunding, life sciences and FinTech, and alternative finance such as film funding and peer-to-peer lending.

This year’s main-stage celebrity line-up:

  • Gonçalo de Vasconcelos, CEO of SyndicateRoom, the innovative online investment platform
European Union

Alternative finance for SMEs is even more urgent (Irish Examiner), Rated: AAA

While recent Central Bank figures found that perception by Irish SMEs of the willingness of banks to provide them with credit have improved considerably in the past three years, other surveys show access to finance is still a high concern for about one-third of Irish small businesses.

This is why SMEs are looking beyond their banks for alternative sources of funding.

Among these options is peer-to-peer lending. The largest platform Linked Finance launched in 2013 and rival Grid Finance arriving the following year.

Ms Kenneally was getting frustrated with the 10-week wait for a decision on an application for a bank overdraft when a friend pointed her towards Microfinance Ireland, a government initiative to provide loans to small businesses. She received a loan of €25,000 and was impressed with the fast turnaround.

Another source is crowdfunding. The idea behind crowdfunding is to pair donors with small businesses, charities or arts events who want to raise funds for a project or campaign. Platforms include Fundit, iDonate, and Seedups.

Warburg Pincus buys stake in Swiss fintech group Avaloq (Financial Times), Rated: A

Warburg Pincus has agreed to pay close to SFr300m for a minority stake in Avaloq, Switzerland’s largest software provider to banks.

The acquisition of a 35 per cent stake by the private equity group values the company, which already serves key financial centres, in excess of SFr1bn ($1bn), the private equity group said.

Avaloq has more than 2,000 employees and serves 155 banks and wealth managers in financial centres, including London, Frankfurt and Paris. It generated revenues of SFr533m in 2016, which represented a 10 per cent increase from a year earlier.

The private equity group has recruited several leading banking figures to sit on the Swiss company’s advisory board. Among them are Javier Marín, the former chief executive of Santander, Stefan Krause, former chief financial officer at Deutsche Bank and Jacques Aigrain, former chief executive officer at Swiss Re.

Here’s why fintech will make banks stronger (City A.M.), Rated: A

Brian McCabe, who chairs the fintech working group at the Fintech and Payments Association of Ireland, says existing banks and financial players won’t get weaker at the expense of new entrants.

Collaboration will be a feature of fintech’s next phase as traditional banks, financial institutions and insurance companies in Europe seem to recognise the importance of becoming smarter, more efficient and customer-focused.

Now is the chance for banks to take what fintech pioneers have to offer, and use it to make themselves more competitive.

Australia

Commonwealth Bank of Australia and Austrade sign fintech collaboration agreement (Finextra), Rated: A

The Commonwealth Bank of Australia (CBA) and Austrade have signed a new collaboration agreement to support the flow of fintech innovation between Australia and the UK.

The agreement will be used to target and attract fintech investment to Australia, and assist Australian fintech companies to access the UK market.

Canada

Investing in the Fintech Revolution: How Glance Technologies is innovating mobile payments (OTC Markets), Rated: A

Now, the creator of PayByPhone parking app has set his eyes on the restaurant industry, creating the Glance Pay Mobile Payment App under Glance Technologies Inc. (CSE:GET) (OTCQB:GLNNF) to revolutionize a C$650 Billion restaurant bill payment industry. Glance Pay allows diners to pay their restaurant bill in seconds using their mobile phone while automatically receiving exclusive restaurant rewards. Gone are the days of waiting for the server to bring around the card machine. Restaurant owners benefit from automatic bill collection, built-in loyalty programs, turn-key in-app marketing and valuable customer experience feedback.

China

Jail sentences for P2P lending scam (Shangai Daily), Rated: AAA

FORTY-ONE people in the city’s first and high-profile P2P fraud case involving nearly 700 million yuan (US$10.2 million) have been jailed, according to Yangpu District prosecutors.

The 41 were staff members from five outlets of Baiyin Wealth Co, including one in downtown Xintiandi area. Sentences ranged from six to eight months in prison, with some granted a reprieve.

Other suspects are either being investigated or are waiting to be tried.

India

Peer to Peer Lending Advantages and Disadvantages [Case Study] (Scalar), Rated: A

Peer to Peer lending advantages and disadvantages – lenders perspective

Advantages

  1. Higher interest

For example, a 5 year bond with a fixed rate interest of an Indian bank offers 3% AER, while the same amount has the potential to earn 6.32% to 30% p.a. through a peer to peer website, on the same tenure.

  1. Diversification
  2. Freedom to commit

Disadvantages

  1. Waiting period
  2. No legal laws
Asia

How transparency is driving Asian asset managers to technology (The Asset), Rated: A

The need for improved transparency is pushing Asian asset managers to use more sophisticated technology than they’ve ever used before in the management of their portfolios and to boost the overall efficiency of their businesses.

Another trend among Asian asset managers is using technology as a way to drive transparency between what their internal stakeholders and investment teams are actually reading and what is driving their investment decision.

Asset managers are also using this technology to look at broker performance which involves having all their data, primarily data on trading positions and transactions, on one buyside platform.

Latin America

Latin American Venture Capital Firms Invest in MPOWER Financing (NBC12), Rated: AAA

VARIV Capital, a Latin American venture capital firm, and Chilango Ventures, an investment firm with offices in San Francisco and Mexico City, have invested in MPOWER Financing (http://www.mpowerfinancing.com) to help the innovative fintech firm expand its presence in Latin America and attract a greater number of high-potential students to America’s best colleges and universities.

Latin American students already represent 25 percent of MPOWER’s outstanding loan portfolio, with Mexico representing the third-largest student population currently studying in the U.S. through MPOWER’s financial support.

With the addition of these two new equity investors, MPOWER Financing has assembled a diverse global investor base that is enabling the firm to fulfill its mission to provide educational loan support to high-potential, international students who do not fit within traditional credit assessment models. Currently, MPOWER Financing, founded in 2014, has a pipeline of more than $120 million in loan applications from students in Asia, Europe, Latin America and Africa which it expects to fill in 2017. The recent investments are part of the closing of MPOWER Financing’s Series A funding.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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