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Friday April 21 2017, Daily News Digest

mobile payments

News Comments

United States

  • Wealthfront to lend money. GP:”A very interesting move. SoFi is moving from lending to wealth management. Wealthfront from wealth management to lending. The vision is likely to be a single point of contact for all financial needs of the population segment which prefers to interact digitally with their financial institutions. Other potential services that could be added : life insurances ( SoFi has it), other insurance (nobody has it to my knowledge), payments (combine Paypal and your accounts), checking or cash management, savings, mortgages (SoFi has it again), credit cards for payments (UpLend has it for example for non primes), etc. The opportunities in fintech/online lending are still immense. ” AT: “Personally, I’ve never understood the concept of borrowing your own money, but there is a market for it, I suppose. Life insurance policies and retirement accounts can do it, so why not robo-advisors?”
  • Three steps lenders can take to mitigate synthetic ID fraud. GP:”A must read especially for new lenders. Fraud rings tend to attack new lenders first and the most”. AT: “This may very well be the biggest threat to the online lending industry. I have confidence that some very smart people will figure out how to defeat it. My crystal ball says it will likely be a machine learning algorithm that does the trick.”
  • Avant Loans Funding Trust 2017-A. GP:” ABS market continues to be healthy and growing.”
  • Key trends in equipment finance. GP:” Supply chain financing is relatively untouched and I think a great opportunity for digital lenders.”
  • Yieldstreet surpasses $100M loans funded in less than 8 quarters. GP:”Congratulations.” AT: “Great achievement. Congratulations.”
  • Americans may not know which real estate investment types have performed best. AT: “The general population probably doesn’t know, but I would hope that real estate investors know.”
  • Brelion acquires PeerRealty. GP:” A real estate tech company acquiring a real estate crowd funding company, a very interesting move. Not sure if the acquisition was for cash or just a token acquisition.
  • Harvard recommends consumer finance policy overhaul. AT: “When you have a paradigm shift in technology and business practices, a new look at regulation is necessary.”
  • 4 Fintech tools coming out of New York Tech Day. GP:”Very interesting innovation.” AT: “I like the concept of a kid’s bank.”
  • eOriginal names Brian Maddocks CEO.
  • Trust Stamp invited to Money 20/20 Startup Challenge.

United Kingdom

European Union

  • Orange is launching a bank. GP:”This is a very interesting move for a large company. GE and other large companies have and have had banks to help in their b2b sales of equipment usually. I am not aware of many B2C companies with small ticket items ( phones, phone bills, ISP, etc…) who offers a bank. I do think that they can leverage the data they have , brand, customer reach and much more. Imagine if each Orange cell phone cutomer receives pre-approved offers underwritten by the data from their bill payment history, their phone usage and their meta data…”




News Summary

United States

Robo-Adviser Wants to Lend You Money, Not Just Manage It (Bloomberg), Rated: AAA

Wealthfront Inc. said in a blog post Wednesday that it will offer loans, calling the move a first among robo-advisers, which are known for wealth management using automated investing platforms. By providing clearing and custody services with RBC Capital Markets LLC, clients with at least $100,000 in a taxable account can take out loans of as much as 30 percent of their account value, using their portfolios as collateral.

To get a loan, Wealthfront’s clients must meet the balance requirement in a taxable account, which eliminates the majority of its customers. The credit program could introduce more risk for the firm, according to George Pearkes, an analyst at Bespoke Investment Group LLC.

Other robo-advisers have looked into lending as well, but decided to focus on different services first.

Three Steps Your Lending Operation Should Be Taking to Mitigate Synthetic Identity Fraud (Biz Journals), Rated: AAA

Synthetic identity fraud is emerging as a key migration point in the post-EMV era, as criminals refocus on application fraud and exploit easy access to sensitive consumer data.

At an alarming rate, fraudsters are using that data to create fake personas – hybrids of stolen and fabricated personal information – and open new lines of credit. In fact, the share of financial losses stemming from application fraud, which includes the creation of synthetic identities, grew by 42% in the fourth quarter of 2016, according to ACG data. Fraudsters’ migration to application fraud is particularly impactful because perpetrators behave like true customers for months or even years before “cashing out,” leaving lenders with massive losses and little recourse for collection and recovery. To make matters worse, a single fraudster can cultivate tens or even hundreds of high-value accounts, greatly increasing financial exposure.

The lending community is mobilizing against synthetics. But a series of obstacles stand in the way: With no true customer, fictitious accounts can be virtually impossible to pinpoint; conventional countermeasures are ineffective; and reporting is underdeveloped, obscuring the true scope of the problem.

A potential solution – cross-checking applicants’ information against Social Security Administration (SSA) records – is out of the industry’s reach, at least for now. The SSA’s existing verification service requires the written consent of the SSN holder, an impractical condition when dealing with synthetic identities. Regulatory reform to open up SSA records, either to lenders or the credit reporting agencies (CRAs), is moving slowly, and there’s no guarantee it will make the legislative agenda.

“SSA validation is considered the holy grail,” said Ira Goldman, Director of ACG’s Synthetic Identity Fraud Working Group, “but it could take years to orchestrate. In the meantime, the industry needs to find other solutions to mitigate mounting losses.”

Without collaboration with peer institutions, mitigating systemic fraud at this scale is virtually impossible. The good news is that the lending community is banding together to find solutions, as it has with more traditional fraud types. In March, ACG’s Synthetic Identity Fraud Working Group held its second meeting to promote industry collaboration on the issue. The introductory sessions have brought together fraud prevention managers and government relations personnel from more than 20 leading credit card lenders, along with payment network risk executives, the national credit reporting agencies, and industry trade associations.

Here are three risk mitigation strategies from the session you can apply to your lending operation:

1.   Strengthen Front-End Detection and Prevention

Massive credit losses aren’t the only financial risk associated with synthetic identity fraud: By the time a synthetic account defaults, the lender has invested potentially years’ worth of marketing, servicing, and other operational costs. Meanwhile, the fraudster has moved on to the next identity. While collections and fraud departments usually deal with the aftermath, lenders are increasingly looking to marketing, acquisitions, and underwriting teams as the first lines of defense.

“Risk detection is vital at each stage of the account lifecycle,” Goldman said, “beginning with more intelligent prospecting to avoid booking bad accounts in the first place.”

Lenders are refining their pre-screening processes to look for anomalies in applicants’ credit profiles and considering supplementing traditional, credit-based criteria with more robust data. The existence of employment information, payroll accounts, and utility records, for instance, can increase confidence that an identity is legitimate. There’s also a push to strengthen identity verification at account opening with knowledge-based authentication (KBA) and enhanced know-your-customer (KYC) techniques. Based on risk tolerance, lenders may queue suspicious applications for manual review, request additional proof-of-life documentation, or decide not to offer credit.

Lenders are also stepping up monitoring at the acquisition and account management stages to detect high-risk behavioral patterns. Warning signs include the velocity of applications submitted under a single name, requests to add a high number of authorized users to an account, and suspicious retail transaction patterns and money movement activity.

2.   Use Data Analytics to Learn from Synthetic Accounts

While synthetic identity fraud is not a new phenomenon, lenders are still developing and refining data-centric identification strategies. Collections and fraud departments are turning to reverse engineering – analyzing confirmed bad accounts to determine how synthetics are constructed and to identify behavioral patterns that signal malicious activity. This postmortem analysis can shed light on attributes lenders can use in fraud modeling and portfolio scoring to strengthen detection. It can also uncover a wealth of data elements – identity, location, and device information – that can be shared with front-end teams for use in pre-screening (a bad IP address, for instance, may be linked with multiple fictitious identities).

3.   Enrich Reporting and Information Sharing

With more robust internal reporting in place, the next logical step is to share information on bad accounts. In the near term, lenders should document known or suspected synthetic identities and report them to law enforcement and the CRAs, which can use the data to cleanse the ecosystem of known synthetics and investigate fraud rings.

“For lenders, there’s mutual benefit in removing bad accounts from the system,” Goldman said. “Information sharing is key.”

In the long term, fraud prevention managers envision a consortium model housing bad account data across industries, from banking to telecommunications, that lenders can use to cross-check applicants. This type of widespread data sharing, which ACG is working with charter members to develop, will require unprecedented collaboration across the industry and with external stakeholders.

Avant Loans Funding Trust 2017-A (SEC), Rated: AAA

We have performed the procedures described below, which were agreed to by Avant, Inc. (the “Company”) and J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC (collectively, the “Other Specified Parties” and, together with the Company, the “Specified Parties”) related to their evaluation of certain information with respect to a portfolio of unsecured consumer loans in conjunction with the proposed offering of Avant Loans Funding Trust 2017-A, Asset Backed Notes.

On April 14, 2017, representatives of the Company provided us with a computer-generated data file and related record layout containing data, as represented to us by the Company, as of the close of business April 13, 2017, with respect to 41,250 unsecured consumer loans (the “Initial Loan File”). At the Company’s instruction, we randomly selected 200 unsecured consumer loans from the Initial Loan File (the “Sample Loans”).

Further, on April 18, 2017, representatives of the Company provided us with a with a supplemental data file containing, as represented to us by the Company, the “representative mix indicator” and the “payment to discretionary income (PTDI (Looker)) percentage” for each of the Sample Loans (the “Supplemental Loan File”). We were instructed, by representatives of the Company, to append the Initial Loan File with the information set forth on the Supplemental Loan File. The Initial Loan File, as adjusted, is herein referred to as the “Statistical Loan File.”

From EX-99.1.

Key Trends in Equipment Finance – by the Alta Group’s Patricia Voorhees (LendIt), Rated: A

Watch the presentation on the LendIt USA 2017 website.

The Alternative Lending Report – April 20, 2017 (The Alternative Lending Report Email), Rated: A

Gloves Come Off in Colorado ‘True Lender’ Cases

Recent lawsuits highlight the ongoing legal ambiguity of marketplace lenders using the bank-partner model. Attorneys familiar with the legal issues say the impact won’t be immediate, but should cause banks and non-bank partners to scrutinize their contractual arrangements.

Online Platforms Have Changed Brokering Dynamics

Online lenders have revolutionized the way small businesses seek credit. In the process, they’ve also changed the way traditional “offline” brokers interact with capital sources.

Bankrupt NuLook Now Facing RICO Lawsuit

Suspending merchant cash advances may be the least of NuLook Capital’s worries as it now faces a RICO lawsuit from one of its creditors in the midst of Chapter 11 bankruptcy.

Addressing the Lack of Transparency in Small Company Lending

In this editorial, the publisher of The Alternative Lending Report talks about innovations in finance and technology, legal and regulatory dynamics, and strategies within the alternative lending segment.

With SBA Budgets on the Chopping Block, What’s the Lending Environment Going Forward?

At a time when small business owners are bullish on the U.S. economy, the Trump administration is pulling back on federal funding for smaller companies. We evaluate what this means for lenders.

Recent Litigation Illustrates Why Merchant Cash Advances are not Loans

Mark Dabertin of Pepper Hamilton summarizes two recent MCA cases brought before New York courts and explains why an understanding of deal structure is essential for both recipients and providers of capital.

New Technology & Product Launches

Coverage of all the relevant platform announcements, new software and services, and notable product releases.

Industry News

A recap of recent news of importance to lenders, brokers, and service providers operating in the small company loan sector.

Loan Tape

Small business lending information, equities with exposure to SME loans, SBA funding trends, macro-economic data, recession indicators, new investment tracking, and all the M&A and partnership deals in the sector.

YieldStreet Surpasses $ 100M of Loans Funded in Less Than 8 Quarters (Yahoo! Finance), Rated: A

YieldStreet, the alternative asset based investment platform founded by Milind Mehere and Michael Weisz, has surpassed $100M in loans funded in less than 8 quarters from accredited investors and single family offices. The company had a strong 2016, growing its monthly investor sign ups by 1700% and loan origination by 300% from January to December.

YieldStreet closed 2016 with a $19.8M short-term corporate receivables offering. After launching the offering, which had a target annualized yield of 20%, YieldStreet saw $19.8M invested within eight hours. In Q1, the demand has continued to increase with several multimillion dollar offerings selling out in minutes.

Over 79%1 of institutional investors are already invested in alternatives, and as the market continues to open to individual investors, there is an appetite for more. Accredited investors seem to be specifically attracted to low market correlation and historical performance. With zero principal loss thus far, the average YieldStreet investor invests over $150K in their portfolio, and over 65% of investors have already made more than one investment. Further, with minimums as low as $5K on YieldStreet, many more investors can have the opportunity to dip their toes in the alternative investment market.

Americans May Not Know Which Investment Types Have Performed Best in Real Estate (Crowdfund Insider), Rated: A

Real estate marketplace lending platform RealtyShares, announced on Thursday findings from its new Real Estate Investing Survey, which was conducted online among over 2,000 U.S. adults in March 2017 by Harris Poll on its behalf. The report revealed Americans’ interest in real estate investing.

According to RealtyShares, the survey finds that 40 percent of Americans aren’t sure what type of investment has performed the best since 2000 when asked to choose among stocks, real estate, commodities, bonds, cash equivalents such as oil, gold and cotton, and other. One-quarter of Americans (25%) thought that stocks have been the top-performing asset class since 2000, while only 16 percent of Americans believed it has been real estate. Among the remaining asset classes, 9 percent believed commodities have performed the best, 6 percent chose cash equivalents, while 3 percent of those polled thought bonds have performed the best.

Brelion Announces Acquisition of PeerRealty (PRWeb), Rated: A

Today, the real estate technology experts behind Brelion announced the completion of the acquisition of PeerRealty, a leading crowdfunding service provider and marketplace out of Chicago. The acquisition strengthens the core offerings of both companies, creating a more robust resource for real estate investors and commercial developers looking to participate in the growing crowdfunding space.

Specifically, PeerRealty members will benefit from an expanded offering of real estate projects. In the future, PeerRealty will integrate with Brelion technology to launch new reporting and communication features, a welcome benefit for investors looking to track and manage their investments more efficiently.

In announcing the acquisition, Brelion also named Eugene Blumin as PeerRealty CEO, Andre Temnorod as CTO and Boris Gringauz as Director of Finance.

Harvard Study Recommends Policy Overhaul as New Lending Sources Transform Consumer Finance (Yahoo! Finance), Rated: A

The proliferation of peer-to-peer (“P2P”), marketplace, and most importantly online lending brings a competitive challenge for existing financial institutions that is here to stay. Its meteoric rise has provoked regulators around the world to deliberate on the new models of oversight needed to benefit consumers and contain credit risk ahead of the next financial downturn, according to two researchers at the Harvard Kennedy School of Government’s Mossavar-Rahmani Center.

In their latest paper, “When Markets Quake: Online Banks and Their Past, Present, and Future,” Marshall Lux and Martin Chorzempa write the first comprehensive study of the evolution of online lending and grapple with the question of its sustainability.

The report advocates that consumer protection laws avoid legalistic compliance with an alphabet soup of regulatory bodies’ often contradictory guidance and excessive focus on disclosure. Instead, regulators should focus on the end impact for the consumer, leveraging new technologies to empirically test new products through pilot programs.

They recommend online lenders and their advocacy organizations engage with organizations like the Conference of State Banking Supervisors to harmonize lending laws as much as possible.

Some states should also consider raising usury caps and simplifying usury laws, according to Lux and Chorzempa.

Rules that try to ensure that lenders are not implicitly discriminating against certain borrowers, like the Equal Credit Opportunity Act (ECOA), lack clarity and pose serious risks for online lenders and those using machine-learning algorithms to improve their underwriting, according to Lux and Chorzempa.

Lux and Chorzempa argue an interagency body should study the use of leverage in the purchase of marketplace-originated loans and follow the flow of funds to ascertain their ultimate source.

4 Fintech Tools Coming Out of NY Tech Day (ThinkAdvisor), Rated: A

People Joy launched about 15 months ago with the goal to work with employers to help pay off employees’ student loans.

Student loan debt is at a record high $1.3 trillion, impacting 7 in 10 graduates and growing at a rate of $2,726 per second, according to People Joy.

One in two U.S. workers with student loans would prefer company student loan repayment assistance over a 401(k) retirement plan match, according to People Joy.

UPMONTH rethinks how the investment community organizes its knowledge.

UPMONTH, which works primarily with institutional investors, endowments and family offices, soft-launched at the beginning of this year and has signed on 11 clients already.

Kidfund is a private, social savings platform that allows parents to open a savings account for their child.

These accounts are free and insured up to $250,000, with 3% interest on first $500.

Qplum is an online investment advisory firm, offering A.I. and machine-learning based portfolios.

Qplum charges a flat fee that is a percentage of assets under management, rather than paying per trade. The fees vary based on the portfolios, for example, the fee of qplum’s Flagship portfolio is roughly $4.75 per 10,000 per month.

The firm handles retirement planning, IRA accounts, 401k rollover, personal investing accounts, joint investment accounts, and more.

eOriginal Names Brian Madocks Chief Executive Officer (Benzinga), Rated: B

eOriginal, Inc., the digital transaction expert, is pleased to announce that Brian Madocks has been named chief executive officer of the Baltimore-based software company. eOriginal is experiencing hyper-growth and recently completed a funding cycle led by LLR Partners to support market demand, expand its product offerings, accelerate hiring and invest in customer services.

Atlanta FinTech Startup invited to Money 20/20 Startup Challenge (Hub GA), Rated: B

Trust Stamp, an Atlanta Technology Village based FinTech startup, will join a cadre of the world’s top fintech startups at Money 20/20’s Startup Challenge.

Founded in January 2016, Trust Stamp has created a new paradigm for online identity & trust using proprietary AI powered facial biometrics with proof of life to establish user identity .

United Kingdom

RateSetter: Investors Have Lent More Than £400 Million to Small & Medium Sized UK Businesses (Crowdfund Insider), Rated: AAA

P2P lender RateSetter announced on Thursday its community of investors have lent more than £400 million to small and medium-sized businesses throughout the UK. The online lender revealed on Twitter the exciting milestone news.

RateSetter also reported that makepositive has already expanded its workforce from 80 to 125 thanks to the £1 million raised, £800,000 was used to form equity shares, and the remaining £200,000 was provided as a RateSetter Loan.

BlackRock and Aberdeen up stakes in Funding Circle SME Income fund (AltFi), Rated: AAA

BlackRock’s stake in the Funding Circle SME Income fund has risen to more than 15 per cent as the world’s largest asset manager bought up more exposure to the UK’s second largest fintech lenders’ closed ended- fund.

The now £300m Funding Circle SME Income fund, which is listed on the London Stock Exchange and is headed up Sachin Patel, has nearly doubled in size thanks to a C-Share round in recent weeks. Aberdeen saw its stake rise above 11 per cent of assets before the C-Share issue and therefore this will have lowered relative to the size of its portfolio by approximately half.

Funding Circle SME

Peer-to-peer lender FundingSecure launches IFISA (AltFi), Rated: A

FundingSecure, a fully authorised consumer lending platform, has launched its Innovative Finance ISA product after receiving approval from HMRC.

FundingSecure’s loans are secured against a wide range of assets, including jewellery, property, classic cars, fine art and yachts. The platform advertises gross interest rates of 12-16 per cent per annum to investors.

Fintech challenger Revolut to take on mortgages (AltFi), Rated: A

Revolut, the banking challenger best-known for its fee-free money exchange tool, has partnered with online mortgage broker Trussle. The two firms’ integration will allow Revolut’s 360,000 UK users to secure or switch mortgages through the app.

FCA hands advantage to human advice with robo risk warning (Citywire), Rated: A

The way advice firms assess the amount of risk a client should take with their investments came under the spotlight this month, as the Financial Conduct Authority (FCA) published its latest guidance consultation on the financial advice market review (FAMR).

COBS rule 9.2.2R(2) says a client’s investment objectives ‘must include, where relevant, information on the length of time for which they wish to hold the investment, their preferences regarding risk taking, their risk profile, and the purposes of the investment’.

Kay Ingram (pictured above), director of public policy at national IFA LEBC Group, said getting a full appraisal of a client’s circumstances is a difficult task for fully automated services.

The best-known automated investment provider is Nutmeg. Responding to the FCA’s remarks it was adamant its own process was not flawed.

‘Robo advice is fine if you just want to put £4,000 into your grandchild’s ISA or put away £50 a month in savings,’ she said. ‘But for transactions that need more thought, such as ensuring you have enough money to retire, you need someone opposite you challenging the thought process. If not, how do you know the person filling out the form was concentrating?’

Many P2P platforms to reduce development finance activity, predicts lender (Bridging and Commercial), Rated: A

Last week, Funding Circle revealed it would be stopping all property development lending by mid-2018 as it looked to focus its resources on its core small business lending products.

The announcement has led professionals to question whether we will see other peer-to-peer platforms exiting the property finance lending market altogether.

However, Stuart Law, CEO of Assetz Capital, said property development loans were the most difficult types of loans for platforms to successfully facilitate.

Michael Dean, principal at bridging and development finance lender Avamore Capital, felt that the key issue for peer-to-peer lenders on development finance was the subsequent drawdowns required by the developer.

“Peer-to-peer lenders either have to hold all the commitment from the lenders from day one (which will be dilutive to their investor’s internal rate of return) or run the risk of failing to fund subsequently when required, which can be potentially ruinous.”

Sam Howard, COO of Regentsmead, didn’t think it was a huge surprise to see Funding Circle announce its withdrawal from the property development lending market due to its focus on SME lending, but did not expect a large number of lenders to leave the market.

European Union

Orange is launching a bank because reasons (Tech Crunch), Rated: A

French telecom company Orange is launching a bank this Summer in France. Orange CEO Stéphane Richard listed some of the features behind Orange Bank this morning at a press conference. And let’s just say that it doesn’t sound as groundbreaking as the company thinks.

Just like N26, Revolut and others, you’ll be able to control your payment card directly from your phone. Transactions will show up instantly in the app and you’ll be able to block and unblock the card in a couple of taps in case you can’t find it.

You’ll also be able to send money with a text message. So you can expect a peer-to-peer payment service like Lydia, Venmo, etc. Finally, Richard hinted at NFC payments with your phone. Orange already supports NFC payments on Android with Orange Cash, and using Apple Pay on iOS.


10 Sizzling Points From thePwC Fintech Report 2017 (SEPA for Corporates), Rated: A

PwC recently published their Global FinTech Report 2017 titled Redrawing the Lines: FinTech’s Growing Influence on Financial Services.

  1. FinTech Companies and Financial Services are Starting to Collaborate
  2. FinTech Isn’t Just About Tech
  3. Incumbent Institutions WANT Disruption
  4. Emerging Technologies are Enabling Collaboration
  5. FinTech and Incumbent Differences in Tech investments over the next 12 Months
  6. FinTech and Incumbent Differences in Emerging Technologies over the next 12 Months
  7. Blockchain – From Hype to Reality…?
  8. The Ying Yang of Regulation
  9. Regulatory Barriers to FinTech Innovation
  10. Six Point Plan to Cultivate Innovation

Yirendai Makes Incremental Progress in Facilitating Loan Products With Asset-Backed Security Structure (Crowdfund Insider), Rated: AAA

Chinese marketplace lending platform Yirendai (NYSE: YRD) announced on Thursday it has made incremental progress in facilitating consumer loan products with asset-backed security (ABS) structure. This news comes just a couple weeks after the online lender entered into an agreement of intent with the Beijing branch of PICC Property and Casualty Company Limited (PICC P&C).

Yirendai reported that during fiscal year 2016, it facilitated a trust to extend loans with an aggregate principal amount of RMB300 million to borrowers on Yirendai’s online marketplace.

Alipay, Wechat enabled payments increase 20-fold in four years (The Asset), Rated: AAA

Alipay and WeChat Pay enabled US$2.9 trillion digital payments in 2016. This represents a 20-fold increase in the past four years, according to a recent report by UN-based Better Than Cash Alliance.

The percentage of cash payments is forecast to halve in the decade from 2010, from 61%, to 30% in 2020. The percentage of cash payments in 2015 was 40%, with cards (44%), internet payments (8%), and mobile payments (8%) accounting for the rest. Mobile payments are predicted to be about 12% of the market in 2020, with internet 16%, and cards 41%.

mobile payments

AliPay, WeChat Processed $ 3 Trillion in 2016 (Bank Innovation), Rated: AAA

Chinese consumers sent about $3 trillion in payments through Alibaba and Tencent payment services in 2016.

According to a new report released by the UN-based Better Than Cash Alliance, users sent $1.7 trillion in total payments through Alibaba’s Alipay service last year, compared to only $70 billion in 2012; Tencent’s WeChat users sent about $1.2 trillion in 2016, up from $11.6 billion in 2012.

digital payments china


First Blockchain Platform for Supply Chain Finance (Dianrong Focus Email), Rated: A

Dianrong and FnConn recently announced the market launch of Chained Finance, the first-ever blockchain platform for supply chain finance.

The new platform leverages advanced financial technology to meet the hugely underserved needs of supply chain finance in China.

Supply chain finance companies have been limited by existing technology and, to date, have only served about 15 percent of suppliers needing financial resources. As a result, the vast majority of the 40 million SMEs in China remain unserved.

Chained Finance is initially targeting three major industries: electronics, auto and garment manufacturing.


Regulation of Fintech in Canada (Lexology), Rated: AAA

The financial technology (Fintech) industry, driven primarily by innovative technology companies and startups, is transforming the financial services and banking sector. New Fintech products and services, such as crowdfunding, peer-to-peer lending platforms, online lenders, algorithm-based wealth management and advisory services (robo-advisors), online money transfer services, e-wallets, digital currencies and distributed ledger technology, have taken advantage of powerful computing resources, cloud-computing technologies, mobile devices, artificial intelligence, machine learning and big data analytics to reduce transaction costs, increase speed and efficiency, and improve the consumer experience.

The excitement around Fintech has been accompanied by concerns that the industry is unregulated or less regulated than the traditional banking and financial services industry. Regulatory gaps and risks certainly do exist, but the Fintech industry is not necessarily the Wild West.

The regulation of financial services in Canada is fragmented, uneven, overlapping and complex. Both the federal and provincial governments share jurisdiction for regulating financial services. As such, various regulators and government agencies are responsible for overseeing the regulation of different aspects of the industry, including investor protection and securities law, consumer protection, anti-money laundering, privacy and data security, and payment processing. The rules and regulations in these areas may apply to certain Fintech-related activities.

Given the broad definition of securities, Fintech companies that engage in any of the following activities may have to comply with securities law:

  • Crowdfunding platforms that connect investors with companies or individuals looking to raise capital;
  • Peer-to-peer lending platforms that allow lenders (investors) to fund loans or portions of loans (securities);
  • Robo-advisors that recommend and/or facilitate investments (e.g., Exchange Traded Funds).

Online lenders offering innovative credit solutions to consumers must be aware of consumer protection requirements regulating their lending practices, credit disclosure requirements, as well as caps on interest rates and fees that they can charge to borrowers.

In Canada, federally-regulated financial institutions (FRFIs) must adhere to payment rules and standards established under the Bank Act and are subject to oversight by the Office of the Superintendent of Financial Institutions (OSFI). Since OSFI regulates FRFIs and not the services that they provide, other entities that provide payment processing services, such as Fintech mobile payment providers, are not subject to OSFI oversight.

The speed and convenience of many Fintech products and services are based on the remote and non-face-to-face nature of transactions. This runs straight into know-your-customer (KYC) requirements imposed on the banking and financial services industry to protect against money laundering, criminal activity and terrorist financing.


George Popescu
George Popescu
Allen Taylor
Allen Taylor


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