Daily News Digest Featured News

Monday May 22 2017, Daily News Digest

cumulative net trigger loss

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

Barbados

News Summary

United States

DBRS Confirms SoFi Professional Loan Program 2016-B LLC (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today reviewed and confirmed the four outstanding publicly rated classes from SoFi Professional Loan Program 2016-B LLC. All four classes were confirmed because performance trends are such that credit enhancement levels are sufficient to cover DBRS’s expected losses at their current respective rating levels.

RATINGS

Issuer Debt Rated Rating Action Rating Trend Notes Published Issued
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class B Confirmed A (high) (sf) May 19, 2017  US

Weekly Industry Update: Prosper Marketplace Issuance Trust (PMIT 2017-1) (PeerIQ), Rated: AAA

Prosper priced its first unsecured consumer deal of 2017 on May 19th, representing the sixth deal consisting of Prosper collateral, and the first deal backed by Prosper’s consortium of institutional investors. The deal was structured by Credit Suisse and co-led by Jefferies.

The Consortium appears on track to deliver the $5 Bn loan purchasing commitment to Prosper as evidenced by i) size of the deal size ($470.8 Mn), ii) average age of the portfolio (two months), and speed to marketing th deal. The deal generates incremental revenue for Prosper which holds unrestricted cash and cash equivalents of $22.3 MM.

prosper chai

We note that Kroll has added 4.5% points for base case loss range reflecting the somewhat higher path of losses on CHAI 2016-PM1 than initially expected. (CHAI 2016 PM-1 has a revised base case loss range of 12 to 14% from 10.61% initially). 

 The deal’s excess spread is substantially tighter, reflecting higher coupons, improved market conditions, and stronger investor appetite for MPL ABS bonds. The attractive excess spread of ~10% implies a significant return for residual tranche investors assuming base case loss estimates are borne out.

Improved Predictive Risk Model PMI-7 

Prosper made a significant change in the in the credit underwriting by switching from Experian to TransUnion, the dominant credit bureau in the FinTech sector. The switch to TransUnion affords Prosper access to trended bureau data, more diverse credit attributes, and alternative data. Trended data provides lenders with a longitudinal view rather than merely a snapshot into a borrower’s credit behavior.

Prosper rolled out a new proprietary credit risk model PMI-7 on December 20th based on the TransUnion dataset. Although the trended bureau data is a significant long-term enhancement, it will take some time for Prosper to re-calibrate models based on new performance data. Investors and Prosper will be monitoring the vintage performance from PMI-7 closely to assess the smoothness of the transition.

roc curve PMI FICO
Source: PeerIQ

Bond investors in the deal benefit from credit enhancement consisting of over-collateralization, subordination, reserve accounts, and excess spread. For PMIT 2017-1, the A, B, and C tranche has a total credit enhancement of 43.9%, 31.1%, and 10.4%.

Pricing Tighter

The Prosper deal priced tighter than a recent LendingClub prime deal ARCT 2017-1, in part due to the much higher initial credit enhancement in PMIT as compared to other recent deals.

We observe a parallel shift in the credit curve: For instance, PMIT 2017-1 A (A-rated) has about 44% credit enhancement and 0.8 year WAL; ARCT 2017-1 A (BBB-rated) has about 29% credit enhancement with a similar WAL. PMIT 2017-1 A was priced 95 basis points tighter than the senior class in ARCT 2017-A.

Walking down to lower junior tranches, PMIT 2017-1 C (B-rated) was priced about 40 basis points wider than ARCT 2017-1 B (BB- -rated). The steepening in the pricing curve again reflects demand for senior rather than equity-like risk profile.
personal loan abs pricing spreads

Trigger Talk

We continue to observe a pattern of higher CNL triggers in recent deals, reflecting conservative outlook from market participants. Exhibit 4 shows several cumulative net loss (CNL) trigger profiles in recent personal loan ABS deals. Here, we summarize the cumulative loss trigger profiles from recent deals and contextualize the CNL triggers of the new Prosper deal with those of CHAI 2015-PM1.

cumulative net trigger loss

All Is Forgiven? The Bond Buyers Return To Online Lenders (PYMNTS), Rated: AAA

After the rather spectacular fireworks display that Lending Club had going on this time last year, it was not great surprise when the bond buyers who had been snapping up P2P marketplace debt suddenly got a case of cold feet and starting fleeing those marketplace lending platforms.

Since April of this year, over $2 billion in securities backed by loans have either been sold or are being prepared for an imminent sale, according to credit-rating firms and people familiar with the matter.

That is some much needed good news for the segment, as it represents more than was issued in the entire second quarter of 2016, according to data tracker PeerIQ.

And it seems to be a continuation of recent activity that saw $3 billion in bonds backed by online loans that were issued in the first quarter of 2017, double the amount from the same period a year earlier.

Bonds backed by online loans is a small part of the securitization market — as of 2016, $7.8 billion of bonds backed by online loans were issued, compared with $191 billion in total issuance of asset-backed securities, according to S&P Global Ratings.

New Fed Mortgage rolls out the “Fast Track Mortgage” (PRWeb), Rated: A

NewFed Mortgage Corp., a multi-state residential mortgage lender is excited to announce their “Fast Track Mortgage” loan origination technology integration with BeSmartee, an online mortgage automation company based in Huntington Beach, California. This smart technology platform utilizes intuitive artificial intelligence targeting the specific needs and qualification of borrowers.

Fast Track is an online self- serve platform offering mortgage shoppers the convenience of 24/7 access to obtain a personalized rate and cost quote with the option to continue to apply and obtain a conditional loan approval in less than 15 minutes. Fast Track streamlines the application process by allowing the borrower online to pull their own credit report, calculate costs, obtain loan disclosures on the spot and receive an automated loan approval and along with the option to order their home appraisal. The ease of Fast Track Technology allows borrower to send documents right through their specially created account.

Nuance Strengthens Biometrics Security Portfolio and Attacks Fraud with Advanced, Multi-Modal Offering (NASDAQ), Rated: A

Nuance Communications, Inc. (NASDAQ:NUAN) today took a major step towards reducing the risk of consumer fraud by announcing a new suite of biometric security solutions, driven by the latest in artificial intelligence (AI) innovations.  The new Nuance Security Suite includes not only the company’s award-winning voice biometrics technology, but also new advances in facial and behavioral biometrics that combine to provide advanced protection against fraud, across customer service channels.

Applying deep neural networks (DNN) as well as advanced algorithms to detect synthetic speech attacks, and integrating facial and behavioral biometrics means the Nuance Security Suite takes fraud prevention to new levels.  By combining a range of physical, behavioral, and digital characteristics to provide secure authentication and more accurately detect fraud across multiple channels – from the phone to the Web, mobile apps and more – Nuance’s new Security Suite allows enterprises to attack fraud head-on, while at the same time offering an improved customer experience.

With its latest Security Suite, Nuance can equip an organization with one or more of the following options to fight fraud, improve security and boost the customer experience:

  • Voice biometrics – authenticates the customer when they say a predetermined phrase like “My voice is my password,” or during the course of normal conversation with an agent to determine if the customer is indeed who they say they are.
  • Facial biometrics – utilizes the camera on a smart phone to verify the person in real time.
  • Behavioral biometrics – tracks how users interact with Web and mobile applications, (e.g. scrolling, mousing, or tapping), creating a pattern against which to compare.
  • Additional biometric modalities – In addition to offering support for voice, facial, and behavioral biometrics, the Nuance Security Suite can also accept plug-ins for other emerging authentication technologies such as retinal scans.

The mortgage search goes digital (American Banker), Rated: A

Interest rates on the rise and a lower inventory of homes on the market are tightening access to the housing market. At the same time, nonbank, online-only lenders have boomed, accounting for 73% of loans originated, according to the Federal Housing Authority.

This trend is likely to continue in the coming years. And members of the digital-native Millennial generation, who rely on online search to find home loans–and everything else–are taking over as the primary home-purchasing segment of the population–Millennials accounted for 84% of closed home loans in January 2017, according to the Ellie Mae Millennial Tracker™ report. In this environment, an effective organic local search strategy is no longer just beneficial for traditional mortgage lenders; it’s existential.

Of 5,849 loan officers whose online presence Yext studied across the online ecosystem (including sites like Google, Facebook, Bing, Yelp, and many others), 64% of their business listings contained incorrect addresses, 42% had phone number errors, and 46% had errors in business names. 9.25% of loan officer listings were duplicates, and 57.8% of loan officers studied had no online presence at all.

CFPB Explores Ways to Assess the Availability of Credit for Small Business (CFPB), Rated: A

The Consumer Financial Protection Bureau today launched an inquiry into ways to gather and use new and existing information to identify the financing needs of small businesses, especially those owned by women and minorities. Small businesses typically need access to credit to take advantage of growth opportunities, yet public information on this lending market is inconsistent and incomplete. The Request for Information asks for public feedback to help the Bureau better understand how to bridge this information gap. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB to collect data about small business lending to help identify needs and opportunities in the market and to facilitate enforcement of fair lending laws.

500 Startups Creates Pooled Investment Fund for Fintech (Crowdfund Insider), Rated: A

500 Startups has filed a Form D 506(c) for a pooled investment fund targeting Fintech. The 500 Fintech LP is seeking $25 million according to a filing with the Securities and Exchange Commission.

The Silicon Valley based operation has committed over $350 million in early stage investments. Over 1,800 companies have benefited from both funding and support around the world since the global seed fund was launched in 2010.  Some of the better known investments include Twilio, Credit Karma, Maker Bot and more.

TSB offers online consumer lending (The Mountain Press), Rated: A

PIGEON FORGE — Tennessee State Bank is excited to announce online consumer lending, powered by Lending Club, the world’s largest online credit marketplace, is now available.

These loans range from $1,000 to $40,000, are unsecured (which means no collateral is required), and can be used to eliminate high interest debt, kick-off a home improvement project, or make a major purchase.

JPMorgan formally quits R3 (LinkedIn), Rated: A

Not subscribing to a consortium like R3 is not the same as banks not leveraging blockchain/DL. Here is a link to an excerpt from a report we did on a bankers perspective (former head of digital banking at Deutsche Bank) on blockchain which may provide some insights: https://techvisionresearch.com/project/blockchain-level-set-banking-executives/

At the same time, Ripple is posting amssive gains, overtaking Etherium on market cap: https://cointelegraph.com/news/ripple-overtakes-ethereum-to-become-second-largest-crypto-after-japanese-bank-consortium-formed

First Federal Lakewood invests in Boston startup Numerated Growth Technologies (Cleveland Business), Rated: B

The mutual bank, with $1.6 billion in assets, has announced an investment partnership with Boston’s Numerated Growth Technologies Inc., a fintech (the term ascribed to programs and technology that support financial services) startup spun out of Boston-based mutual Eastern Bank own in-house fintech accelerator, Eastern Labs.

Numerated’s platform focuses on small-dollar loans, allowing the loan process to be managed in real-time — reportedly conducting the process in as quick as five minutes, according to the firm — in addition to automating marketing to existing and prospective bank customers, which helps feed the loan pipeline as fewer consumers visit brick-and-mortar bank branches.

Nicki Minaj Is Starting An ‘Official Charity’ To Pay Off Student Loans (Huffington Post), Rated: B

Last weekend, hip-hop living legend Nicki Minaj made waveswhen she decided ― seemingly spontaneously ― to start making tuition and student payments for straight-A students who reached out to her via Twitter.

Most notably, Minaj announced that she was in the process of launching an “official charity for Student Loans/Tuition Payments,” meaning kids who are having trouble paying their way through school could soon get some much-needed help.

United Kingdom

HSBC tech chief on digital challenger banks: ‘We are building similar stuff ourselves’ (Business Insider), Rated: AAA

One of HSBC’s most senior technology executives says that the big bank is not far behind digital-only challenger banks when it comes to consumers offerings.

Raman Bhatia, HSBC’s head of digital for retail banking and wealth management in the UK and Europe, told Business Insider that while startups enjoy a technological advantage, HSBC is working hard to catch up.

Bhatia pointed to HSBC’s SmartSave app as an example of how the bank is keeping pace with digital rivals. The app helps people automatically put money into savings based on pre-set rules. It evolved from Nudge, an internally developed and trialled savings app HSBC worked on last year. SmartSave was trialled with around 2,000 HSBC customers in December.

Assetz Capital reaches quarter of a billion lending milestone (P2P Finance News), Rated: AAA

ASSETZ Capital announced that it has now lent £250m to UK businesses.

The peer-to-peer lender said it has provided up to £25m of secured loans a month since its launch in 2013, with more than £55m lent so far this year.

Stuart Law (pictured), chief executive of Assetz Capital, said investors have earned more than £21m with actual rates of between 3.75 per cent and 18 per cent.

Sub-prime vehicle finance provider bought out of administration (AM Online), Rated: AAA

Peer-to-peer lending company RateSetter has acquired sub-prime vehicle finance provider Vehicle Trading Group out of administration.

The Leicester-based operation has now been sold to RateSetter, which is planning to rebrand the business, but Insider Media reported that the deal “will not impact its day-to-day operations”.

Linked Finance receives full authorisation from UK regulator (The Irish Times), Rated: AAA

Linked Finance, a peer-to-peer lending platform, has received full authorisation by the UK’s financial conduct authority to enter the UK lending market.

Figures from the first quarter of 2017 show that the company’s Irish platform increased lending activity by more than 326 per cent on the same period a year earlier.

Since its launch in 2013, Linked Finance has facilitated more than 870 loans and more than €25 million in funding for Irish small to medium enterprises.

Deloitte Launches Enhanced Digital Banking Offering (PR Newswire), Rated: A

Deloitte today announced the launch of its enhanced Digital Bank offering to further accelerate a bank’s digital transformation. Based on the Salesforce Intelligent Customer Success Platform and utilizing the Salesforce Financial Services Cloud, Digital Bank helps banks create exceptional experiences by providing tailored banking capabilities with accelerated implementation and realization of value.

Digital Bank’s capabilities and potential benefits include:

  • Augmented Salesforce Platform with many technologies, fintech solutions and AppExchange partners, as well as personalized channel engagement through automated marketing using Salesforce Marketing Cloud
  • Ability to expand relationships by having full visibility into bank relationships across business units
  • Established customer trust through multifactor secured cloud banking platforms and improved onboarding for customers through a fully mobile process enabled by many technologies
  • Increased speed and agility to meet customer needs, as well as the regulatory needs of the banking industry, using predictive analytics based on account behavior to recommend next best offers and next best actions
  • Accelerated implementation allowing banks to generate ROI faster, including linking newly created accounts in Salesforce to a blockchain secured digital identity

The job creation contradiction in fintech (AltFi), Rated: A

It got me thinking about the broader impact of fintech lenders in the UK, especially those built to fund businesses. Companies like Funding Circle – the country’s largest marketplace lender for SMEs – regularly reference their impact on job creation in corporate updates. The logic is that the loans that Funding Circle and other platforms like it facilitate help small businesses to grow, and so too to hire more staff.

Leading US firm OnDeck released a report in late 2015 analysing the economic impact of the first $3bn lent through the platform. The report found that OnDeck loans had powered $11bn in business activity, creating 74,000 jobs across the country. Similarly, Funding Circle published findings last summer suggesting that its lending had supported the creation of 40,000 jobs in the UK since 2010, boosting the economy by £2.7bn.

In this way, they are unquestionably killing jobs, as well as creating them – but nobody ever talks about that.

Barely a month goes by without news of a fresh round of bank branch closures. In March, for example, we learnt that RBS and NatWest would be cutting 158 branches and 400 jobs across the country.

Welsh start-ups can become unicorns with a $ 1bn plus valuation (Wales Online), Rated: A

As a result, Improbable has become one of the few UK start-ups to achieve the so-called ‘unicorn’ status, namely having a valuation of over $1bn.

Since then, their numbers have grown to nearly 200 firms globally and that are collectively valued at £523bn. The most valuable is Uber, the online taxi company that, in only four years, has reached a valuation of over £50bn.

A recent article in Forbes Magazine suggested that investors, with few places to put their money during an era of near zero interest rates, are fuelling the growth in unicorns as they look for better returns.

Property is top pick less than a year after funds gated (FT Adviser), Rated: A

According to research from peer-to-peer lending platform Kuflink, conducted in the first week of May, nearly a third of UK investors are planning to direct their attention to traditional asset classes such as property over the course of the financial year.

This comes after some of the largest property funds in the UK temporarily stopped investors from cashing-in their money last summer when thousands of people panicked after the European Union referendum and pulled out of the asset class.

The Kuflink survey, which questioned 1,100 investors across the UK, also found that Brexit and the snap election have impacted UK investment decisions more than any other political event in their lifetime.

Almost 40 per cent of investors are taking a more cautious approach by favouring ‘safe-haven’ asset classes, while 38 per cent are waiting until after the 8 June election to make any further investment decisions.

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA

Belt and Road Forum for International Cooperation, also known as the Belt and Road Initiative, was held in Beijing on May 14-15.

On May 12, the State Council Information Office of China announced that China has reached a series of agreements with U.S. related to agriculture, investment, energy and especially in financial service area.

Key points of the Initial Agreements of the China – US Economic Cooperation 100-Day Plan in financial service area:

  1. By July 16, 2017, China is to allow wholly foreign-owned financial services firms to provide credit rating services in China, and to begin the licensing process for credit investigation.
  2. The People’s Bank of China and The U.S. Commodity Futures Trading Commission (CFTC) are to work towards a Memorandum of Understanding (MOU) concerning the cooperation and the exchange of information related to the oversight of cross-border clearing organizations.
  3. By July 16, 2017, China is to issue further necessary guidelines and allow wholly U.S.-owned suppliers of electronic payment services (EPS) to begin the licensing process.

The hotly anticipated initial public offering of Alibaba’s finance arm, Ant Financial, has reportedly been delayed until at least the end of 2018 because of the need to secure regulatory approval and to focus on building the business.

E-commerce giant Alibaba Group and affiliated online payment service Alipay are aiming to use facial recognition technology to help retirees simplify pension authentication. Shenzhen is chosen to be the first pilot city.

The Peoples Bank of China (PBOC), the country’s central bank, announced that it has set up a Fintech committee to enhance research, planning and coordination of work on financial technology.

Happigo Home Shopping Co. Ltd., a leading Chinese multichannel e-retailer, announced that the company had the local government approval to build a small loan company.

The new micro-credit company will be named “Happy Tongbao”, which has about RMB 300 million in registered capital. It will focus on online micro-credit and expects to start its business in Hunan Province, lending to merchants in desperate need of a loan, then gradually expand to the entire Chinese market. Entrusted loans, bill business, financial advisory and other online business models is said to be covered in its future development.

To reduce lending risks, Happigo said it had developed a cloud system for tracking merchants on its online shopping platform to help it keep a record of the business of would-be borrowers’ cash flow.

IFRM: A Risk Control Model keeping No Bad Debt! (Xing Ping She Email), Rated: A

IFRM ( Internal Financal Risk Management) is a unique method created by Xeenho, focusing on the operation modes of platforms. In the IFRM Solution, the risks of P2P lenders are evaluated through three indicators: FOW (qualitative indication system), TOS (quantitative indication system) ,O2O Due Diligence, and Big Data Supervision. By using the model, Xeenho has been keeping the Zero Bad Debt since 2014 with a business volume up to $400M.

FOW ——qualitative indication system
FOW means Forbidden, Observation and Warning. FOW detects and prevents P2P fraud, if a platform is categorized as Forbidden, Observation or Warning then it won’t proceed to the next step.

TOS ——quantitative indication system
TOS means Transparency, Operation and Safety. TOS thoroughly evaluates a platform, from its basic information to its UX, and the risk is ranked thereafter.

O2O ——due diligence from online to offline
O2O means making due diligence from online to offline, in order to ensure a platform that passed FOW and TOS is as good as it seemed to be.

Big Data——Analytics & Observation System
This dynamic surveillance system continuously over watches the performance of a platform, and adjusts the rating accordingly.

The Business Model of Xeenho
The Business Model of Xeenho
European Union

Alternative Lending Index Unveils European Cross-Border Lending Opportunities (Crowdfund Insider), Rated: AAA

Twino, one of the leading Baltic lending marketplace, has produced in conjunction with KPMG Baltics a report called Alternative Lending Index which assesses the potential of alternative finance in 23 European countries based on a set of economic credit data. While the report does not pretend to exhaust the analysis of the drivers and hurdles of alternative finance across Europe, it presents a very useful snapshot of the Pan-European credit landscape that should help support international strategies.

The first platform to tackle cross-border lending was Estonian pioneer Bondora in 2009. Since then, and particularly in the past two years, international lending marketplaces have mushroomed in the Baltics. There are now more than a dozen of them, with a strong dominance of consumer lending platforms. Leaders such as Mintos and Twino have long passed the €100 million mark in cumulated loan funding. They currently grow at a rate of between €10 to €20 million worth of new loans funded a month. If you operate a lending marketplace in the UK, France or Germany you should know these platforms because they are targeting your smartest investors:

Together, these platforms have funded over €500 million in cumulated loan volume – which would make the Baltics, if it were a single country, the 4th largest online alternative lending market in Europe after the UK, France, and Germany.

Together, these platforms have funded over €500 million in cumulated loan volume – which would make the Baltics, if it were a single country, the 4th largest online alternative lending market in Europe after the UK, France, and Germany.

The ALI ranks 23 European countries. It concludes that countries with the highest gaps and inefficiencies in traditional lending, hence the highest potential for alternative lending in Europe are, in that order:

  • Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland.

Conversely, the countries where the existing sources of financing available to households and corporate borrowers are sufficient and the potential for the development of alternative lending is therefore considered low, leaving little room for alternative lenders are:

  • France, Germany, Netherlands, Austria, Finland and Sweden.

Read the full report.

International

US Anniversary and the (Possible) Regulation of Crowdfunding in Ireland (Lexology), Rated: AAA

The US has just celebrated the first anniversary of its regulated crowdfunding regime, known as “Regulation Crowdfunding”. It was by all accounts a very happy anniversary for many US start-ups, as Regulation Crowdfunding reportedly raised $40 million in its first year. US advisory and education firm, Crowdfund Capital Advisors report that the average successful crowdfunding campaign raised around $282,000 from around 312 investors. Regulation Crowdfunding allows companies to raise up to $1,070,000 over a 12-month period.

An unregulated environment brings with it its own set of benefits and drawbacks:

  • On the positive side, the absence of a regulatory framework means there are no restrictions on who can invest, or on the amounts that can be raised or invested. In contrast, the Regulation Crowdfunding regime in the US has strict limits on the amount which a person may invest through crowdfunding each year. These limits are determined by an individual’s annual income and net worth.
  • On the negative side, the lack of regulation means that many investor-protection mechanisms are simply not available. For example, the Central Bank’s codes of conduct and client asset rules do not apply to crowdfunding platforms.

The Department of Finance (the “Department”) and the SME State Bodies Group have issued a public consultation paper on the possible ‘Regulation of Crowdfunding in Ireland’. They are considering how to facilitate the development of crowdfunding in Ireland for the benefit of the economy while also ensuring adequate protection for small investors and consumers.

The objective of this consultation is to invite the views of interested parties on whether a regulatory regime would be appropriate for the crowdfunding sector.

Breaking Banks: Small-business fintech around the globe (American Banker), Rated: A

How do we get money to small businesses that make the economy work for most people around the world? What kind of systems do we need to create? And how do we make them flexible so multiple cultures can utilize them?


A ‘paradigm shift’ is taking place in financial technology (Business Insider), Rated: A

Venture capital firms, which poured $117 billion into fintech startups from 2012 to 2016, have been pulling back on their investments.

Financial technology companies experienced a surge in funding from 2012 to 2015, during which time venture capital firms poured $92 billion into the space.

In 2016, global venture capital investment in fintech companies dipped to $25 billion, from $47 billion in 2015.

According to Morgan Stanley, there are a number of factors that will push legacy financial firms to step up their investments in fintech companies. The most obvious factor is the fear of disruption.

Deregulation is another trigger. If the Trump administration follows through on its promises of Wall Street deregulation, then incumbent firms won’t have to spend as much cash on regulatory compliance. That would free up money for fintech investment initiatives. Legacy firms’ focus on lowering cost also provides an incentive to invest in fintech.

vc fintech

Online Financial Advice Lacks The Human Touch (iexpats.com), Rated: B

Robo-advisers can do more or less the same job, but without the human touch and the expensive fees that go with it.

Now, anyone can find financial advice 24/7 as long as they have an internet connection, cash to invest and a smartphone or other gadget to access the web.

The recommendations that come out of the robo-advice process should be similar to those suggested by a human adviser.

Some would argue robo-advisers are less likely to make mistakes, but if a consumer keys the wrong information the ‘rubbish in, rubbish out’ rules applies.

Australia/New Zealand

Big banks pay $ 60m in advice refunds (Financial Standard), Rated: AAA

AMP, ANZ, CBA, NAB and Westpac have to-date repaid $60 million out of an estimated $204 million for charging clients for financial advice that was not provided.

On a per-institution basis, AMP has paid $3.8 million out of an estimated $4.4 million; ANZ paid $43 million out of an estimated $52 million; CBA paid $5.8 million out of an estimated $105 million; NAB paid $4.4 million out fan estimated $5 million; and Westpac has paid its estimated total compensation of $2.6 million in full.

Robo adviser to get access to Westpac’s Panorama platform (Financial Review), Rated: AAA

Small-balance investors that financial advisers usually avoid will now get a chance to use BT Panorama, Westpac’s $500 million integrated banking and wealth operating system, after the bank inked a deal with Barry Lambert-backed robo adviser Ignition Wealth.

Currently the platform has about $110 billion under administration and 800 advisers are using it.

Via Ignition Wealth, which rich lister Mr Lambert took a minority stake in in 2016, customers can go fully advised, use a hybrid model where they control their investments with an adviser, or go fully DIY. Fees slide up and down depending on how it’s used.

Ignition Wealth has announced it is partnering with BT Panorama to offer its digital advice solution to accountants, advisers, and investors using the BT Panorama platform.

The digital advice provider said its 360 advice offering would offer a post-Future of Financial Advice (FOFA) compliant solution for accountants and financial industry professionals who did not hold an Australian financial services licence (AFSL) but were looking to source financial advice for their clients in a post-FOFA environment.

Advisers, accountants, and investors using BT Panorama would have access to digital and full service financial advice powered by Ignition Wealth from Q3 of 2017.

DIY investors reject advice, says ASX study (ifa), Rated: A

The main reason some Australian investors do not use financial advice is because they prefer “to be in control” and are not convinced that advice adds value, recent research from the ASX has shown.

According to the 2017 ASX Australian Investor Study report, which looked at the behaviour and attitudes of 4,000 Australian investors, around 60 per cent of all investors use some form of professional financial advice.

For those not using advice, 90 per cent said it is because they “prefer to be in control”, while 56 per cent said they were “not convinced advice adds value”. Close to 40 per cent said advice was “too expensive” while around 30 per cent said their “investment is too small to need advice”.

Borrowers could save more than $ 3000 a year by switching to an online lender (News.com.au), Rated: A

AUSSIE borrowers could save up to $3184 a year by switching to an online lender, but unfamiliarity and lack of face-to-face customer service are keeping them away, according to Mozo.

The financial comparison website examined 504 home loans from 89 providers, finding nearly two thirds of the best-value home loans on the market are from online lenders, which were 0.7 per cent cheaper on average than the big four for a typical 25-year, $350,000 loan.

Online lenders iMortgage, loans.com.au and UBank scored the highest marks in Mozo’s Experts Choice Awards, while Homestar was named Non-Bank Home Lender of the Year.

But according to a survey of 1000 consumers, Australians are less likely to apply for a home loan online than other financial products despite the huge savings on offer. Australians are twice as likely to purchase car insurance online versus a home loan.

The biggest barrier for applying for a home loan online was lack of familiarity with online lenders, with 56 per cent of respondents saying they simply don’t know enough about them, while 43 per cent said they would prefer to discuss their needs face-to-face with a mortgage expert.

More men than women would consider applying for a home loan online. Of those who said they would, half were aged between 25-44.

OnDeck business loans help franchise businesses get on with it (Professional Planner), Rated: B

Small business loan specialist OnDeck announced a partnership with the Franchise Council of Australia (FCA), the peak body for the franchise sector in Australia. The agreement underscores OnDeck’s go-to-market approach for its joint flagship product with partner MYOB – ‘MYOB Loans Powered by OnDeck’.

By partnering with the FCA, OnDeck aims to reach the thriving $146 billion franchise sector as a supplier of choice for small business loans, which can be approved online in as fast as one business day with minimal paperwork. OnDeck aims to fill a serious gap in the market for franchise owners by satisfying more of their unsecured lending requirements that go beyond equipment financing to renovation, relocation and working capital needs.

India

Fintechs to drive financial inclusion or will banks save the day? (India Times), Rated: AAA

Disintermediation of the lending value chain – Banks would traditionally source, acquire, underwrite, onboard, collect and service customers. Most would do some parts well, and a few parts not so well. This is increasingly now being solved by the entry of new ‘customer owning’ entities into the game, who will acquire, owners of data who can underwrite, and the lenders who can lend and collect. This makes partnerships key.

Alternate data – Lending to the bottom of the pyramid and micro SMEs has always been the problem to solve for financial institutions, due to lack of documented income and collateral. Non-traditional data promises to come in and provide an alternative.

However, most such data algorithms do not seem to be working out. Many fintechs across India, Africa etc, are running NPAs upwards of 8-10%, including some of the flagbearers of the phenomenon, but that is not out in the public domain, and typically shoved under the carpet. The main reason for this is that the algorithms are raw and untested. They have not run their credit cycles yet.
Payments – Payments as an innovation is done. It’s commodity now. Fintechs who continue to invest in incremental experiences will find it difficult to scale. The trend to watch for will be digital ecosystems. What I mean is digital marketplaces, the likes of Ping-an and Alipay, serving the integrated needs of the digital consumer a.k.a the millennials, enabled through digital payments and leveraging financial services cross-sell sitting on top of all of this, as the revenue driver.
alternative lending data

Fintech firm Telr gets $ 3 million funding (The Hindu), Rated: A

Financial technology start-up Telr said that it had received an investment worth $3 million from Innovations East fund as part of its series-B funding round.

Telr, which is a payment gateway aggregator of multiple payment methods such as cards and online banking, has operations in West Asia, South East-Asia and India.

The Rainmakers (Business Today), Rated: A

Year ago, Captain Pankaj Kumar, owner of a New Delhi-based shipping solutions company, was looking to raise Rs 20 lakh. He approached banks for a loan, but soon realised it would be anything but smooth sailing. Then, his former banker suggested that he approach CoinTribe, a Gurgaon-based online lending platform that connects creditworthy micro and small enterprises (the company helps individuals as well) with potential lenders such as banks and non-banking financial companies (NBFCs). This time, paperwork was minimal, and the entire process moved fast.

Then, his former banker suggested that he approach CoinTribe, a Gurgaon-based online lending platform that connects creditworthy micro and small enterprises (the company helps individuals as well) with potential lenders such as banks and non-banking financial companies (NBFCs). This time, paperwork was minimal, and the entire process moved fast.

At present, the company caters to small businesses with Rs1-50 crore turnover; anything below that is treated as a micro business. The ticket size varies from Rs5-30 lakh (the company also offers unsecured loans starting from Rs20,000 to cement dealers, for shorter tenure) with interest rate pegged at 18-20 per cent. So far, it has helped disburse close to Rs170 crore loans, servicing over 500 customers and 250-odd dealers through its marketplace.

Harnessing the power of data, CoinTribe has come up with a three-step screening process that ascertains an applicant’s identity, analyses its ability to repay and gauges its intent to pay. To determine a borrower’s identity, the company checks all available online data and social media footprint. To analyse any given applicant’s ability to pay, it has identified 180 sub-industries and places the potential client in the right category to run it past all relevant data points.

Asia

Singapore Fintech Startup StashAway Raises US $ 2.2 Million in Series A (Crowdfund Insider), Rated: A

According to TechinAsia, StashAway, a Fintech startup based in Singapore focused on providing wealth management, announced it had secured US $2.15 million in funding for its Series A round.

StashAway is a software solution for individual investors to manage their investment portfolio.

Why should security professionals pay attention to the rise of fintech? (MIS Asia), Rated: A

The rise of financial technology (fintech) may result in increased cybersecurity threats and attacks, said Chia Hock Lai, President, Singapore Fintech Association, at the Computerworld Singapore Security Summit 2017.

He highlighted the five areas of fintech that introduce cybersecurity risks:

  1. According to a report by Accenture and CB Insights, global investments in fintech rose from 2012 to 2016 to reach US23 billion.
  2. More than a third (34 percent) of banks globally said they are open to collaborating with a fintech company, according to a study IDC did on behalf of SAP last year.
  3. According to the World Bank Group, only 50 percent of adults in ASEAN have bank accounts. The availability of mobile or peer-to-peer payments from fintech startups will thus enable more underserved to access financial services, said Lai.
  4. “[Gartner predicts that] in the next four years, the number of IoT devices [that will be in use in the consumer sector] will reach 13.5 billion,” said Lai. With every device generating data, machine learning will be required to analyse the large amounts of data generated to churn meaningful insights.
  5. According to Aite Group, banks will increase their investment on blockchain over the next few years to reach US$400 million in 2019.
Canada

futureshare Launches to Help Canadian Homeowners Unlock Their Real Estate Wealth (Marketwired), Rated: A

There is more than $2.9 trillion in unmortgaged real estate equity in Canada (CREA), and today fintech platform futureshare launches to help Canadians unlock that real estate wealth without taking on new debt. The company was founded in 2016 as an alternative to home equity loans, home equity lines of credit (HELOCs) and reverse mortgages and gives homeowners a lump sum free of ongoing payments and interest rates in exchange for a percentage of the home’s appreciation, which can be paid out without penalty at any time or once the property is sold. futureshare’s online platform is the first of its kind in Canada and is now live in beta and accepting online applications for homes within Ontario with plans to launch in Alberta, Manitoba and British Columbia by the end of 2017.

The average Canadian owes $1.67 for every dollar in income (StatsCan), and futureshare is designed to help homeowners access the equity tied up in their home without adding to their ongoing debt burden. Unlike a reverse mortgage or HELOC, futureshare doesn’t require homeowners to have perfect credit scores or to fall within a specific income bracket, and it doesn’t increase monthly payments. A homeowner’s eligibility is based primarily on their home value and whether they have at least 25 per cent equity ownership in their home. Homeowners will be able to access on average up to 10-20 per cent of their home equity using futureshare’s platform, and unlike a loan, there’s no ongoing payments or interest rates.

Barbados

COMPANY AIMING TO PUT IDLE MONEY TO USE (Barbados Advocate), Rated: A

SOME of the $3 billion sitting idle at commercial banks in Barbados will soon be better utilised so as to earn higher returns for depositors and to help grow this country’s economy.

Those funds will be utilised under a new facility known as Peer-to-Peer lending, which was officially launched by finance company Carilend on Thursday night, at the Limegrove Lifestyle Centre, Holetown, St. James.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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