Monday April 3 2017, Daily News Digest

 

United States

Marketplace Lending Securitization Tracker Q1 2017 (PeerIQ), Rated: AAA

• Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.9 Bn this quarter with cumulative issuance now totaling $18.0 Bn across 80 deals.
• The movement towards rated securitizations at larger transaction sizes continues. All deals were rated in this quarter, with record-sized consumer deals from SoFi, a large multi-seller deal from Marlette (where 45% of loans were funded by affiliates of GS and Cross Rive Bank), and the first prime paper deal from Lending Club. All deals this quarter had at least one rating.
• New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.  In 1Q2017, we saw spreads tighten in riskier tranches, indicating strong investor appetite for MPL ABS paper in the market.
• Bank and non-bank platform partnerships continue to emerge. Over 15 banks are purchasing loans from marketplace lenders.
• Our year-end forecasts volumes for new issuance of $11.2 Bn remain on-track. New issuers and repeat issuers are increasing deal activity.
• 3rd party solutions are emerging to improve investor confidence. Originators are relying on 3rd party solutions to address “stacking”, perform data verification, loan validation, and improve investor confidence.
• We expect higher volatility from rising rates, regulatory uncertainty, and an exit from a period of unusually benign credit conditions. Platforms that can sustain low-cost stable capital access, build investor confidence via 3rd party tools, and embrace strong risk management frameworks will grow and acquire market share.

 

Activist Investor Pushes for New Strategy at On Deck Capital (WSJ), Rated: AAA

Marathon Partners Equity Management LLC, a New York hedge-fund firm with about $275 million in assets under management, is pushing On Deck to shed millions of dollars in expenses to get to profitability, said Mario Cibelli, a managing partner at the firm, in an interview. Mr. Cibelli said he would also like On Deck to explore a potential sale or other alternatives that could increase shareholder value.

On Deck in February reported a record loss of $85.5 million in 2016 and burned through half of its cash, ending the year with a balance of $80 million. The New York-based company launched an initiative to eliminate 11% of its workforce, find other cost savings and get to profitability in 2018.

But Mr. Cibelli argued that the proposals don’t go deep enough. “The current strategy is not the right one and needs to be changed,” he said. Marathon has been buying shares in On Deck since last year, amassing a stake of 1.75% of the company as of the end of 2016, according to FactSet.

NEW YORK CASE IS A WIN FOR THE MERCHANT CASH ADVANCE INDUSTRY (Pepper Hamilton LLP), (Pepperlaw.com), Rated: AAA

On March 16, the Supreme Court of New York, Nassau County, issued a decision in IBIS Capital Group, LLC v. Four Paws Orlando LLC. The decision reaffirms the position consistently taken by New York courts that “For a true loan it is essential to provide for repayment absolutely and at all events [and where] the payment or enforcement [of an agreement to repay funds advanced] rests upon a contingency, the agreement is valid even though it provides for a return in excess of the legal rate of interest.”

Under section 190.40 of New York’s Penal Code, a person cannot intend to charge, take or receive interest on a loan greater than 25 percent. In this case, plaintiff IBIS advanced funds to defendant Four Paws under an agreement for the purchase and sale of future receivables. Four Paws subsequently refused to honor its commitment to pay IBIS on the basis that the payments called for a usurious rate of interest. IBIS sued Four Paws for breach of contract, and Four Paws asserted criminal usury as an affirmative defense.

The court further said that, even if the agreement had created a loan, there would be no violation of New York’s criminal usury law because Four Paws could not show that IBIS intended to charge a usurious rate of interest. To this end, in order to commit criminal usury, a person must enter into the agreement knowing that they are charging interest that exceeds 25 percent.

Ex-Xero boss Chris Ridd to lead cloud financial adviser platform Myprosperity (Financial Review), Rated: A

The former Australian CEO of accounting software firm Xero Chris Ridd will join cloud financial adviser platform myprosperity as its new CEO, after he and MYOB founder Craig Winkler backed its first external fund raising round.

The company provides an online platform, which is targeted at helping households manage their finances by using cloud technologies to connect data feeds from numerous sources, and provide a real-time picture of overall wealth and financial health. It sells most commonly to accountants and financial planners, who then use the platform to advise clients.

The company capped its capital raising at $2.5 million, saying it needed to take on the funds to ramp up its sales and marketing efforts, now that it has established itself, with more than 250 advisers and 10,000 subscribers signed up.

The top 10 US tech companies that pay the most when poaching employees (SCMP), Rated: A

3: Lending Club, the peer-to-peer lending site, pays on average a 48 per cent premium to poach. Employees were earning on average US$128,457 at their previous job and increased to US$183,469.

5: Groupon pays on average a 38 per cent premium to poach. Employees were earning on average US$137,390 at their previous job and increased to US$175,233.

Bank of America to commit $ 1.5M to Charlotte’s fintech initiative (Biz Journals), Rated: A

Bank of America Corp. (NYSE:BAC) will commit $1.5 million over three years to Charlotte’s fintech initiative, according to sources close to the matter. The bank confirmed the investment to the Charlotte Business Journal Wednesday.

Will Using Artificial Intelligence To Make Loans Trade One Kind Of Bias For Another? (NPR), Rated: A

Digital lending is expected to double in size over the next three years, reaching nearly 10 percent of all loans in the U.S. and Europe. There are now some 2,000 digital startups, many of which are using artificial intelligence to analyze the troves of data created every day.

Digital lenders are pulling in all kinds of data, including purchases, SAT scores and public records like fishing licenses.

Government research has found that FICO scores hurt younger borrowers and those from foreign counties because people with low incomes are targeted for higher-interest loans. Girouard argues that new, smarter data can make lending more fair.

If artificial intelligence can weed out good borrowers from bad just by looking at things like Web browsing history, suddenly it doesn’t matter if you live in a low-income neighborhood or your family just immigrated. But it does open the door to new, 21st century versions of redlining.

But what if you’re just buying M&Ms or prefer using cash? An algorithm doesn’t know that. Left unchecked, computers could create all sorts of unintended bias.

Some companies have correlated late-night Internet use with bad loan repayment. But does that mean night owls should pay a higher interest rate?

Comparing Costs For A Marketplace Loan Vs. A Bank Loan (NASDAQ), Rated: A

Since the early 1980s, the finance rate on personal loans at commercial banks for a 24-month loan has steadily dropped. At its height in 1981, the average reached 19.21%. Today, borrowers can expect to pay 9.45% according to the Federal Reserve Bank of St. Louis. However, many borrowers will face a higher rate given the average U.S. credit score of 695. At this score, a borrower will likely face an interest rate of 13.5% to 17.5%. Accessing these rates means having a minimum FICO score of 660 in many cases.

Remember, the origination fee is deducted from the loan amount. Therefore, if you borrow $15,000 at a 2% origination fee, you are only getting $14,700. Origination fees can reach as high as 6%.

Online lenders offer speed and flexibility that is not possible with traditional banks. Those in good credit standing can access capital for as low as 5.7% making the loans more competitive than the neighborhood bank.

Some of the most competitive providers like SoFi and Discover Personal Loans require no origination fee and users can borrow up to $100,00. Additionally, there are no prepayment fees. If we compare a borrower with a strong credit score at a bank versus an online lender, then the rates are 9.45% and 5.7% comparatively. Moreover, the absence of fees makes the savings even better.

6 Real Estate Startups Poised To Disrupt The Industry (Forbes), Rated: B

Using public records, comparables and other metrics, Bowery creates custom, data-driven reports that offer in-depth information to find the most accurate property appraisal value possible.

And if you’re on a lease and you need to leave town for a while, subletting your space without stress is just as difficult. Flip aims to make managing or finding subleases a breeze.

Ravti, a Y-Combinator-backed startup, brings intelligent software to building owners and operators reducing costs by 18 to 30 percent on capital replacements through direct procurement.

OnTarget helps construction projects wrap up successfully and on schedule. The cloud-based app allows property investors, managers, contractors and other vendors to connect through an online dashboard. This gives managers a simple and effective option to ensure everything is on track and information to respond appropriately when delays put the project schedule at risk.

Enertiv is focused on giving property owners and managers access to real-time energy use information around the clock. Through its proprietary platform, clients can view energy use by location with live data and prior period comparisons. Its weather overlay shows how a change in temperature translates to an increase or decrease in usage, letting you know instantly if you need to make money-saving adjustments.

As an event management option, the company turns a boring apartment building into a bustling lifestyle center. With fitness classes like yoga, pilates and fitness bootcamps, and a mix of social and professional events, hOM communities see a 15 percent higher tenant retention rate than the national average. Property managers and agents can use hOM to reduce turnover and related costs, helping owners improve overall profitability without overspending on gyms, pools, hot tubs and other amenities.

Venture Capital Funnel Shows Odds of Becoming a Unicorn Are Less than 1% (CB Insights), Rated: A

We followed a cohort of over 1,000 startups from the moment they raised their first seed investment to see what happens to them empirically.

Just over 70% of startups stall at some point in the VC process and fail to exit or raise follow-on funding.

Of the 1,098 tech companies we tracked that raised seed rounds in the US in 2008-2010, less than half, or 46%, managed to raise a second round of funding.

• 306 (28%) of companies that raised a seed round in 2008–2010 exited through an M&A or IPO within 6 rounds of funding.
• Less than 1%, 10 (0.91%) companies from our seed cohort ended up becoming unicorns valued at $1B+. Some of these companies are the most-hyped tech companies of the decade, including Uber, Airbnb, and Slack.
• 61% of companies that raise a follow-on after their initial seed are then able to raise a second follow-on round after that.

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The Evolution of Crowdfunding Could Change Everything (Industry Leaders), Rated: A

According to the annual Massolution Crowdfunding Industry Report, the total equity crowdfunding volume worldwide in 2015 peaked $2.56 billion. The number is expected to triple in 2017 and will be roughly in the neighborhood of $4-5 billion.

While venture capital investment holds a steady $30 billion per year, equity crowdfunding is expected to surpass angel capital by 2020. According to the World Bank, the crowdfunding market as a whole will hit $90 billion in volume by 2020.

The launch of Crowdemand, Inc., has got crowdfunded fashion shopping up and running.

With the launch of crowdfunded insurance by American International Group, we saw the first of kind in the crowdfunding industry. Currently, AIG only sells coverage on the platforms, however, it is soon poised to offer insurance protection to all investors using the platform.

With real estate crowdfunding on sites like RealtyMogul.com, anybody can raise more than $200 million to crowdfund a real estate property.

Pebble E-Paper Watch Kickstarter campaign originally started out as a corporate crowdfunding initiative, raising $10,266,845.

Similarly, IBM has developed its own crowdfunding platform called iFundIT, through which employees in the IT department can develop and pitch potential projects on the company’s internal social network. Employees are given up to $2,000 of IBM money, which they can use to promote their products.

Is regtech the new fintech? (Computer Weekly), Rated: B

With mobile apps, banking automation and blockchain already transforming financial services, financial institutions are now looking to regulation technology, or regtech, to meet compliance requirements.

The key differentiator of regtech is agility. regtech allows the use of advanced technologies to extract, transfer and load data sets that are cluttered and tangled to create consumable information. This is done quickly and efficiently, giving businesses the agility to solve real-world problems and stay ahead of the competition.

Example: Onfido delivers next-generation background checks, helping financial services organisations and other businesses verify the identity of any person remotely using machine learning technologies.

Example: Scaled Risk is a financial software that integrates in-memory analytics and big data to provide real-time, scalable, and flexible risk management solutions for banks and other financial services companies.

Example: FundApps, a cloud-based platform, automates shareholding disclosures by organising regulatory information, combining regulatory compliance content with technology.

United Kingdom

Zopa’s Jaidev Janardana: Here’s Why We’re Building a Bank (Crowdfund Insider), Rated: AAA

“Legacy technology and poor customer service has disappointed consumers. That’s why we’ve seen a wave of start-up banks emerge, with greater focus on delivering a high quality customer experience through technology. This is what Zopa does in the peer-to-peer investment and loans space.”

Jaidev noted that along with the bank, Zopa will be expanding its customer offering as well. He and his team are planning to offer FSCS-protected deposit accounts for savers, P2P investments, including IF ISAs for investors, and personal loans, car finance, and credit cards for people looking to borrow.

P2P Lending Platform Landbay Reduces Product Rates & Fees (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lending platform Landbay has reportedly reduced its product rates and fees. According to various sources, Landbay’s rates are now starting at 3.39% for a 2-year fix and 3.59% for a 5-year fix, with arrangement fees up to 75% on standard products, which were cut from 1.75% to 1.5%.

Landbay’s products are available through the lender’s distribution partners, which are Atom, Brightstar, Complete FS, Connect Mortgages, Mortgage for Business, The Buy to Let Business and TBMC.

Five reasons fintech fears London may lose its crown after Brexit (Financial News), Rated: A

The UK fintech sector represented approximately £6.6 billion in revenue in 2015 and attracted around £524 million in investment, according to EY.

Startups say they are “apprehensive” and “worried” about the possible damage that Brexit may cause.

FN talks to key fintech founders and other entrepreneurs of their top five Brexit concerns and why they worry for London.

1. Talent

Jan Hammer, a partner at venture capital firm Index Ventures, said: “What we fear and are concerned about is that post-Brexit Britain will lose access to talent.”

More than 30% of the 250 chief executives and founders of fintech startups that are members of Innovate Finance are non-British, and others employ many European staff.

2. Funding

Funding has already dipped since Britain’s decision to leave the EU. A survey conducted by Tech London Advocates, a 4,500-strong industry body of key players, found that one in 10 of London’s tech sector has experienced investors holding off or withdrawing from a funding round since last summer.

3. Financial passport trading

Unfettered trade within the European Union is essential for most fintech companies and many worry the loss of the EU financial passport will result in a mountain of red tape.

Many are already looking to open offices in Luxembourg, Ireland and The Netherlands to give their business a European headquarters.

4. Government support

One fintech entrepreneur who asked not to be identified, said the fintech community has lost many of the relationships it had with Downing Street and Whitehall: “There was a proper massacre of the Cameroonians when the regime change happened.”

5. Reducing uncertainty

One company providing software using artificial intelligence to the asset management industry who asked not to be identified said that it experienced a potential German buyer holding off because it wanted to see how Brexit will play out.

HSBC partners with Tradeshift as banks increasingly see fintech as friends (Business Insider), Rated: A

HSBC announced on Thursday that it is partnering with Tradeshift to offer working capital to companies that use its platform. Tradeshift offers a cloud-based software platform to help companies keep track on their entire supply chain in one place. Lanng likened it to Facebook, connecting up all companies that do business together, directly or indirectly, in one place. Founded in 2010, it already has over 1.5 million companies connected to its platform on both the buy and supply side and processes $500 billion in trade over its platform each year.

European Union

EstateGuru launched its third market – Lithuania! (EstateGuru Email), Rated: AAA

In March, EstateGuru funded its first Lithuanian investment opportunity on the platform and thereby launched in the Lithuanian market.

The launch of the Lithuanian market established EstateGuru as the only peer-to-peer lending platform in the entire world to facilitate property-backed business loans in three countries. In addition to the newly added Lithuanian market, the company also provides secured real-estate loans in Estonia and Latvia, with several following destinations under preparation.

Klarna is working on a new personal finance service to rival banks and fintech apps (Business Insider), Rated: A

Swedish fintech giant Klarna is preparing the launch of a new product line that will directly compete with personal finance apps like Qapital and Tink, reports Breakit.

Meeting of Government Pension Fund Managers Considers P2P Lending Allocation (P2P-Banking), Rated: A

At an informal meeting of 21 government pensions funds in Geneva, Switzerland, the topic of alternative lending was for the first time on the agenda. A representative of the Australian Future Fund said, that investing to p2p lending marketplaces might be an interesting strategy in order to reduce the systemic risks that banks pose. However it would be much to all early to take this step now.

Australia

The ‘booming’ NSW economy that 100,000 people have joined (Western Advocate), Rated: AAA

The sale of goods and services via peer-to-peer technologies generated $2.6 billion in revenue for the NSW economy last year, recording growth of nearly 70 per cent, according to the research from Deloitte Access Economics commissioned by the finance department.

But the Deloitte report finds that financial services and peer-to-peer lending are the fastest growing part of the state’s collaborative economy.

Financial peer-to-peer businesses, including lending companies such as SocietyOne, a platform that connects lenders with borrowers more than tripled their yearly revenue last year. The number of people who derived income from collaborative financial services enterprise also rose more than 150 per cent.

An estimated 38,000 NSW homes are listed on the short-term accommodation rental service Airbnb, according to company estimates. The average user earns about $4700 a year from renting out their home for 28 nights a year.

China

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On March 21, Ant Fortune, the investing app of Ant Financial Services Group (Alibaba Group’s finance affiliate), unveiled a B2C platform “Caifu Hao”, which would allow third-party financial institutions to set up shops inside the app.

On March 21, JD Finance announced to launch the blockchain based assets management system, which would be operated within JD Finance’s Assets Cloud Factory. With the aid of the system, consumer finance companies were first to settle in the Assets Cloud Factory.

On March 20, InsurTech Company Xiaoyusan, founded by Tencent, closed on RMB 100 million in Series B funding led by Matrix Partners and Tasly Capital. Its first two rounds of financing were led by Sequoia Capital and AV Capital.

India

Unicorn India Ventures makes maiden investment in fintech with SmartCoin (India Times), Rated: AAA

Early-stage venture fund Unicorn India Ventures, which is set to close its maiden fund in the range of Rs 100 crore, has made its first investment in the fintech space, leading a round of about half-a-million dollars in Bengaluru-based microlending startup SmartCoin.

The startup offers loans starting from Rs 1,000 and is targeting individuals beyond the salaried class, including cab drivers, delivery persons and kirana store owners, and has tied up with a few nonbanking finance companies (NBFCs).

Can’t Pay Your Car Loan? Here’s What To Do So You Don’t Default (Lifehacker), Rated: B

If you’re in danger of defaulting on your car loan, you’re not alone. Subprime borrowers are falling behind at the highest rate since 2010 . Before you default, make sure you’ve explored these possible options , though.

• Talk to your lender: See if you can extend the length of your loan for a smaller monthly payment, negotiate your interest rate, or even get a 30-day deferral (which is basically more time to pay off your loan).
• See if you can sell it or trade it in: Do you have equity? Check the car’s value. If it’s higher than the amount you owe, yes, you have equity and you may be able to sell your car and pay off your loan.
• Find someone to take over your payments: There are peer-to-peer lease exchange sites like Swapalease andLeaseTrader .
• Refinance your car loan: There are also peer-to-peer lending sites likeLending Club and Prosper where you may be able to get a better loan than you’d get with most traditional lenders.

Asia

Singapore stock exchange inks partnership with P2P lending company, wants to educate about access to capital (Yahoo! News), Rated: AAA

Aimed at helping startups find access to capital, Singapore’s stock exchange (SGX) signed two separate Memorandums of Understandings (MOUs) with separate stakeholders in the startup economy.

The agreement that can be considered unique to our modern economy is an MOU signed with Crowdo, a regional lending platform with P2P and equity crowdfunding options. To date, it has financed about 2,000 projects.

PwC is a global professional services company. The firm brands Venture Hub as a ‘one-stop shop’ for entrepreneurs and investors to find solutions and services to help build partnerships.

The MOU with SGX is meant to promote Singapore as an attractive hub for startups and educate global players about the opportunities in Asia (with Singapore as a hub). The two sides will also arrange dialogue and thought leadership in the ecosystem.

Yo Shibata, Co-Founder of Crowdport, Updates on “Social Lending” Status in Japan (Crowdfund Insider), Rated: A

According to a recent article in TechinAsia, 52% of Japan’s personal assets, or more than $15 trillion, are held as cash.

Yo Shibata: Marketplace lending in Japan started around 2008 as peer-to-peer lending, where borrowers were primarily individuals.

The default rate has been very low (close to zero among major CFPs for three years).  Annual investment amount has grown from $140 million USD in 2014 to $540 million USD in 2016.

Yo Shibata: Interest rates of bank savings in Japan is around 0.01〜0.1% (ARR). On the other hand, Japanese consumers are concerned that they might not be able to have a large enough pension after they have retired.

Yo Shibata: I had little knowledge of lending before starting Crowdport. To me, 8% ARR in Japan with close-to-zero default rate was “too good to be true”.

Yo Shibata: We are starting by providing quantitative and qualitative analytics on CFPs and their funds. On the quantitative analysis, we collect all the public data from all the funds released every day and provide free-to-use tools to investors to compare against historical data points.

Orchard Platform: Asia Is ‘Light Years’ Ahead In Innovation (Benzinga), Rated: A

Among the 27 “unicorn” companies in the planet, eight of them are based in China and valued at a combined $96.4 billion. Ant Financial, Alibaba Group Holding Ltd BABA‘s affiliate, leads the group with a $60 billion valuation.

By comparison, 14 fintech unicorns are United States-based and valued at a combined $31 billion.

Law Firms in Singapore and Malaysia Launch FinTech Practice (Cryptocoins News), Rated: B

Singapore-based Allen & Gledhill and Malaysia-based Rahmat Lim & Partners, which is also an associate firm of Allen & Gledhill, announced that they would be establishing fintech practices for both countries.

Last November, it was reported that U.K. law firm, Addleshaw Goddard, was offering free mentoring and legal advice to fintech startups through a new scheme worth up to £500,000.

Global law firm Steptoe & Johnson LLP, is another law practice that has embraced the legal issues fintech companies experience by launching a multidisciplinary blockchain practice with lawyers involved across the globe.

Africa

Kenyan fintech startup Alternative Circle raises $ 1.1m funding (Disrupt-Africa), Rated: AAA

Kenyan fintech startup Alternative Circle has raised US$1.1 million in funding from international credit risk management company Creditinfo Group to help it achieve a wider geographical footprint.

Alternative Circle will in July launch its mobile-based credit facility app Shika, which allows users to access mobile loans and uses a decision engine to identify creditworthy borrowers.

The funding arrangement with Creditinfo will see the startup benefit from the larger firms expertise in classic and alternative credit risk management.

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