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Friday July 14 2017, Daily News Digest

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United States

DBRS Assigns Provisional Ratings to SoFi Professional Loan Program 2017-D (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of notes issued by SoFi Professional Loan Program 2017-D (SoFi 2017-D):

— $245,000,000 Class A-1FX Notes at AAA (sf)
— $266,000,000 Class A-2FX Notes at AAA (sf)
— $40,000,000 Class B-FX Notes at AA (sf)

DBRS Student Loan ABS report (DBRS), Rated: AAA

In this commentary, DBRS provides the following:
— A review of Q1 2017 student loan ABS performance and H1 2017 student loan ABS issuance.
— An outlook for future student loan ABS issuance and the trends expected in H2 2017.
— Analysis and highlights of student loan collateral performance.

Download the full report here.

IEG Holdings Highlights the Urgency of LendingClub Correcting its Flawed, Slim Margin “Broker” Business Model and Weak Underwriting Standards (Sys-Con), Rated: AAA

IEG Holdings yesterday announced the commencement of a tender offer to exchange four shares of IEG Holdings’ common stock for each share of LendingClub common stock, up to an aggregate of 40,345,603 shares of LendingClub common stock, representing approximately 9.99% of LendingClub’s outstanding shares as of April 28, 2017, validly tendered and not properly withdrawn in the offer.

IEG Holdings Corporation (OTCQB: IEGH) (“IEG Holdings”) cautions shareholders of LendingClub Corporation (“LendingClub”) against dismissing IEG Holdings’ tender offer. IEG Holdings believes that the LendingClub board of directors should be held accountable by its shareholders for continuing to pursue a flawed, slim margin “broker” business model. IEG Holdings urges LendingClub to enter into negotiations with IEG Holdings, rather than simply dismissing the tender offer.


Despite brokering more than $26 billion of loans since inception, LendingClub still reported a loss of $29.8 million for Q1 2017 and loss of $146.0 million for the 2016 full year. Transitioning to a balance sheet lender likely would significantly increase gross margins, without a significant change in customer acquisition costs.


A recent media report by Bloomberg indicates that:

  • LendingClub only verified income about a third of the time for one of the most popular loans it made in 2016, and
  • If LendingClub finds errors in a loan application, it may still approve the loan.


LendingClub doesn’t hold individual state lending licenses and instead utilizes the services of a Utah-based bank. This raises regulatory risks around issues such as the potential breaking of individual state interest rate caps and compliance.


LendingClub’s share price has decreased 79% since its initial public offering in December 2014, dropping from $25.74 in December 2014 to $5.39 yesterday, after reaching a low of $3.51 in May 2016. In addition, LendingClub has never paid, and has no reported intention to pay, a dividend to shareholders.

IEG Holdings’ Reasons for the Offer

IEG Holdings believes that changing LendingClub’s business model to a balance sheet lender model would enable the company to generate significantly higher gross margins, provide significantly higher long duration cash flow from customers, build increased customer goodwill with customers and enable increased customer refinancing. The longer duration cash flow would provide more flexibility in reducing lending volumes during periods when underwriting risk levels are rising, as the company would be less dependent on brokering new loan deals every day to provide revenue.

  • IEG Holdings intends to encourage LendingClub to undertake substantial costs cuts by terminating excess employees, achieving substantial cuts in advertising/marketing costs and other significant cost cutting measures;
  • IEG Holdings intends to encourage LendingClub to transform its broker business model with low gross margins and high volumes to focus on high gross margin unsecured loans to near prime clients with strong underwriting, company owned individual state licenses and retention of loans on its balance sheet to secure long duration cash flow from longer term loans; and
  • The acquisition of LendingClub shares would be substantially net asset per share accretive for IEG Holdings stockholders and substantially increase shareholder equity.

New partnership turns PayPal into Apple App Store payment option (Banking Tech), Rated: A

This week the company announced a partnership with Apple to allow shoppers pay for their purchases at the App Store using PayPal. The feature will be available for users of a variety of Apple devices including iPhone, iPad, Apple TV, Apple Watch, and iPod.In addition to the App Store, PayPal will be a payment option for a variety of Apple services including Apple Music, iTunes, and iBooks.

Finicity and JP Morgan Chase pair for data share (Banking Tech), Rated: A

Data aggregation provider Finicity has signed an agreement with JP Morgan Chase to let the bank’s customers choose data to share with apps.

The companies will use a direct API to allow Chase customers to share information with the apps and services that Finicity supports. According to the firms, this tokenised access will eliminate the need for customers to share their Chase credentials with third-party apps.

Paypal Holdings Inc (NASDAQ:PYPL): Beginning of Market Dominance (Library for Smart Investors), Rated: A

Paypal Holdings Inc (NASDAQ:PYPL) is getting investors attention after the stock touched fresh highs amid a new partnership with Apple.

The stock is up over 43% since the start of the year.

In the first quarter, PayPal saw a jump of 10.3% in monthly active users on year-over-year basis. The total number of transactions also increased by 22.5% in the period.

In the first quarter, Venmo processed $6.8 billion in total payments, a 100% growth on year-over-year basis. Venmo is slated to grow more as the company expands to small businesses.


WealthTech companies are targeting inefficiencies that span the entire wealth management value chain, from client prospecting to investing to portfolio management and reporting. Benefits include more efficient workflows, improved client experiences and greater transparency. Regardless of their value proposition, WealthTech companies are seeking to improve overall wealth management and investing.

This report highlights a number of key trends within the broader WealthTech industry such as…

  • Growing number of advisors joining the independent channel
  • Incumbent financial institutions are entering the robo-advice space
  • Increased demand for alternative investments
  • Financial planning trending towards goal-based approaches
  • Higher levels of active risk management
  • Commoditization of portfolio management software is leading to expanded offerings
  • RIA custodians evolving into more holistic roles

WealthTech FT Partners

Download the full report here.

Wells Fargo trims auto loans as market cools, risk overhaul kicks in (Reuters), Rated: A

Wells Fargo & Co (WFC.N) is scaling back and remolding its auto lending business in response to growing stress in the market, as well as a bank-wide push for more centralized risk controls.

Wells, which was the No. 2 U.S. provider of auto loans less than a year ago, has already cut quarterly originations by nearly 30 percent over the nine months leading into March 31, according to a May 11 company presentation. It has also begun consolidating the collections operation in a move that people familiar with the business say could eliminate hundreds of jobs, after a new head of auto finance took the reins in April.

5 Fintech Startups Under the Radar (Bank Innovation), Rated: A


This New York City-based startup facilitates micro-loans between borrowers and lenders, allowing users to set up pretty much all the parameters of a loan themselves: users can control the amount, the interest rate, the payback period, and the way they are reimbursed for the loan themselves.


Ledger might be able to help out there: this San Francisco-based startup allows users to “open tabs with friends,” boiling down a transaction to just 3 clicks. By connecting with a user’s financial accounts (protected by “military-grade” cybersecurity, according to the company), users are able to aggregate all of their transactions in one place, as well as receive notification about when transactions are due.


More and more companies are striving to solve the main problem when it comes to personal finance management services: how do you make a user actually take the financial advice that is being offered?

Wallio starts off the week by giving a user an allocated amount of money they can spend for that week, on whatever the user wants (expenses and savings are already factored into this amount). If a user underspends, great: Wallio will allow that user to put that money towards a goal. If a user overspends, Wallio will simply allocate less money for the user to spend next week.


This robo-investing startup allows users to turn their existing brokerage account into an autonomous investing account using machine learning algorithms.


Invest, and make a difference in the world at the same time: that’s the dream of OnePebble, an online investment broker/dealer that puts each investment toward companies “doing good in the world.”

3 Investing Trends to Keep on Your Radar (Morningstar), Rated: A

Trend: Passive products continue to gain assets.

This is the trend shaping the investment management industry today. Asset flows to passive products, both traditional index mutual funds and exchange-traded funds, began in earnest following disappointing active-fund performance during the financial crisis.

Trend: New ways to hire–and pay for–financial advice. 

Robo-advisors provide automated advice for a low annual fee as low as 0.25% or even less. Meanwhile, mutual fund companies and brokerage firms may provide advice for customers who have amassed sufficient assets at the firm. For example, Vanguard Personal Advisor Service charges 0.30% and is available to investors with at least $50,000 in assets at the firm. (The service combines human financial advisors with robo-advisor technology.)

What to watch out for: The profusion of different business models means that the business of selecting an advisor is more complicated than ever. Robo-advisor fees might look like a screaming buy relative to the fees that a full-service human advisor charges, but the robo won’t be able to give you advice on nonportfolio matters like whether to pay off your mortgage or purchase long-term care insurance.

Trend: An increased emphasis on behavioral factors that can affect investor outcomes.

What’s to like: Many robo-advisors have also embedded behaviorial research into their services.

What to watch out for: Behavioral finance is trendy right now, and with any trend comes the opportunity for gimmickry. Beware of advisors who are using behavioral finance as their main hook to snag clients; high-quality advisors have been employing behavioral finance into their practices for years.

US Tax Professionals Tackles the Tax implications of Crowdfunding (Digital Journal), Rated: A

It’s important to understand that all the income a person receives, regardless of the source, is considered taxable income in the eyes of the IRS. That includes crowdfunding dollars.

Even if the campaign only raised the projected $15,000 and no gifts were offered, the money would still be considered taxable income and need to be reported as such on a tax return.

Generally, crowdfunding revenues are included in income as long as they are not:

  • Loans that must be repaid;
  • Capital contributed to an entity in exchange for an equity interest in the entity; or
  • Gifts made out of detached generosity and without any “quid pro quo.” However, a voluntary transfer without a “quid pro quo” isn’t necessarily a gift for federal income tax purposes.

Morgan Stanley digital chief: AI to help advisers, not ‘cyborg bots’ (Financial-Planning), Rated: A

Advisers tasked with processing a “mountain of information” will get a reprieve through artificial intelligence, according to Morgan Stanley Wealth Management’s chief digital officer.

“What we want to do is, with one click of a button, they can take action on that research report to all their clients within minutes, not hours, not phone calls,” Hassan said. “That’s the promise of what we’re trying to build.”

Rival firms have shown they’re headed down a similar path. Like Morgan’s planned offering, the UBS-SigFig service will save advisers’ time through automated messaging to clients on important dates, according to Richard Steinmeier, the head of the UBS Wealth Advice Center.

Congress Should Use Congressional Review Act to Strike Down Ill-Advised Arbitration Rule (Daily Signal), Rated: B

Cutting through the hyperbole that the arbitration rule protects consumers from “unfairness” that would deny them “their day in court,” this rule is in fact highly anti-consumer and harmful to innovation.

This regulation could have particularly harmful effects on FinTech innovations, such as peer-to-peer lending.”

How much money do Arizonans spend playing the lottery? Less than most Americans (AZ Central), Rated: B

Arizonans on average shelled out $100.85 per capita on lottery tickets in 2015, according to the study by LendEDU, based on preliminary data for state government finances collected by the Census Bureau. For Americans overall, the per-capita figure was $206.69.

United Kingdom

UK setting the bar for fintech regulation, bank execs say (SNL.com), Rated: AAA

U.K. authorities have created a world-leading regulatory environment for the burgeoning fintech industry that is being emulated elsewhere, according to bankers.

The Financial Conduct Authority’s “sandbox,” a program launched in 2015 to let companies test innovative ideas under close regulatory supervision, has been particularly helpful, she said.

Meanwhile, initiatives such as FCA-organized hackathons — or “TechSprints” as it prefers to call them — have been particularly appreciated by the industry, according to Sophie Guibaud, vice president of European expansion at Fidor Bank AG, a German online lender that was bought by Groupe BPCE in 2016. These events invite market participants to come up with technological solutions to certain problems, such as financial issues faced by people with mental health problems.

The U.K. is home to more fintech companies valued at more than $1 billion than the rest of Europe put together, according to an April 2017 report by technology investment bank GP Bullhound. Three U.K.-based companies, Funding Circle, Paysafe and Transferwise, have crossed that threshold, and GP Bullhound said that it does not expect London to relinquish its lead, due to its prominence in international financial services.

Comparison site GoCompare invests in mortgage robo-adviser (AltFi), Rated: A

Financial comparison site GoCompare is hoping to transform the UK’s mortgage application process by investing in MortgageGym, a digital mortgage robo-adviser.

Users can complete a free application within 15 minutes on MortgageGym and receive matches within 60 seconds, as well as robo advice and access to live advisers. The website will use automated algorithms to match applicants with the best mortgage providers.

The House Crowd hits £50m via mix of P2P and crowdfunding (P2P Finance News), Rated: A

THE HOUSE CROWD has hit the £50m funding target it set out to achieve in October last year.

The Manchester-based property platform started targeting institutional money at the end of last year to achieve its first £50m of funds channelled to property and buy-to-let borrowers, through both its peer-to-peer side and its crowdfunding arm.

The firm raised over £15m in the six months to early 2017, while a loan it closed last month added another £600,000.

Fintech CurrencyCloud tapped up investors months before Google raise (Business Insider), Rated: A

CurrencyCloud, which provides a platform to process international payments, raised £9.5 million from its existing investors in December 2016. The company had £10.5 million in the bank at the end of the month, accounts show, suggesting the platform had around £1 million left at the time of the fundraising.

The volume of payments jumped by 110% to 1.5 million but net revenue from currency transactions increased by just 10% to £3.2 million. Meanwhile, administrative expenses rose by 54% to £13.9 million as CurrencyCloud invested in “recruiting staff, developing our technology infrastructure and operations services, and moving to new office premises.”

P2P fund share issues boost investment trust sector (P2P Finance News), Rated: A

FUNDRAISINGS by Honeycomb and the Funding Circle SME Income Fund (FCIF) helped push share issues to record levels in the investment trust sector for the first half of 2017.

Secondary issuances raised £3.3bn in the first six months of the year, trade body the Association of Investment Companies has revealed, up from £1.8bn at the same time in 2016.

FCIF raised £142m in conversion shares in April, the largest total in the specialist debt sector, while the Honeycomb investment trust raised £105m through a ordinary share issue.

Alternative Credit funds drive record cash raise (AltFi), Rated: A

Assets in investment trusts have hit an all time high thanks in part to a huge swathe of secondary issuance in closed-ended funds’ shares.

In the first half of 2017, the most poplar area of the investment trust market was Infrastructure – in terms secondary issuance – raising £1.2bn. This was followed by Alternative Credit at  £514m. Funding Circle SME Income raised the largest total in the sector securing £142m via its C share issue, followed by Honeycomb Investment Trust (£105m).


The number of Online Financial platforms in China Exceed 19,000, ranking the first place of the world. (Xing Ping She), Rated: AAA

According to data from National Institution of Internet Financial Risk Analysis &Technology,there are more than 19,000 online financial platforms across China, including over 6000 online lending platforms, nearly 3500 online assets managers, and 800 crowdfunding platforms. The total cumulative volume of internet loans, crowdfunding and internet payment have reached to 70 trillion RMB (US$ 10.33 trillion). Zhou Hongren, director of the National Committee of Internet Finance Professional Technology, claimed that, “No matter in terms of quantity or scale, China has already become the largest international finance marketplace around the world.”

European Union

Rocket Internet Sells Stake in Lendico Startup (Handelsblatt), Rated: AAA

Incubator firm Rocket Internet has sold its majority stake in peer-to-peer lender Lendico to Arrowgrass, Handelsblatt has learned, as the British hedge fund acquired complete ownership of the Berlin startup.

The partners to the transaction agreed to keep the purchase price confidential. Rocket Internet, which specializes in helping online startups get off the ground, most recently valued its 50-percent-plus stake in Lendico at €140 million ($159 million).

Funding Circle Germany Takes a Fresh Start (Crowdfund Insider), Rated: AAA

Germany is a huge SME and VSME (very small business) credit market. But it is not as mature a market for online marketplace lending as the UK, the US, or even the Netherlands. This partly explains why Funding Circle Germany’s early loan book underperformed. Now the platform is starting afresh to match its market’s reality.

With offices and business in Germany, the Netherlands and Spain, Zencap had originated €35 million in loans to 500 SMEs at the time of its acquisition. Its operations were very small in comparison with the more than $1.5 billion originated by Funding Circle in the US and the UK at the time (meanwhile Funding Circle passed the $3 billion mark).

The second reason for starting afresh, was a need to revisit the credit model. Since January, the new German team has been busy recalibrating and restarting the German operations.

Loan origination resumed at previous level in the first half of 2017 and is expected to grow again in the second half of this year.

Spanish Fintech Industry Comes into its Own (Finance Magnates), Rated: A

The Spanish fintech ecosystem has been a steadily growing force over the past few years, swelling from just fifty financial technology startups in 2013 to well over three hundred in 2017. This rapid surge is only going to continue with this number estimated to hit four hundred companies by 2018.

In terms of the value of the operations, this sector passed rose from just €35 million in 2014 to €206 million in 2016, justifying a 600 percent growth in just two years.

According to the Spanish Association for Fintech and Insurtech (Asociación Española de Fintech e Insurtech – Aefi), companies operating in this space in Spain are going to create a total of 10,000 jobs in 2017 alone.

While the value offintech operations in Spain is increasing, two areas that constitute the most focus are the crowdfactoring or invoice factoring crowdfunding platforms – these saw a total of €120 milion euros in 2016, that concentrate most of the operations domestically, followed by crowdfunding with €43.5 million and crowdlending or p2p lending with €42 million.


Visa Expands Its Footprint in Europe (Market Realist), Rated: AAA

In May 2017, Visa announced that in order to give consumers more control and make transactions transparent, the company will create digital card management experiences for its partners. Visa’s partners include financial institutions. Since the new offerings will lead to more transparency, Visa expects to see volume growth in fiscal 3Q17. Market analysts expect Visa to report revenues of $4.36 billion in fiscal 3Q17—a decline of 2.7%.

Visa revenues


What Can Visa Expect from Russia, China, Japan, and India?

In fiscal 2Q17, there was growth in Visa’s cross-border business due to Russia’s developed economy. Visa implemented ~1,600 point-of-sale terminals. As a result, payment volumes are expected to grow in fiscal 3Q17.

Management thinks that obtaining a domestic license in China is a time-consuming process. Visa is expected to witness lower revenues and payment volumes from China due to discontinued dual branded cards.

Management has a positive outlook on Japan’s economy due to digitization. Japan’s government has become more inclined to use digital and electronic payments.

In fiscal 3Q17, India could be a major contributor to payment volume growth.

Visa has delivered a return on equity of 16.2% on trailing 12-months basis. Other consumer financial peers (XLF) have delivered the following return on equity on a trailing 12-month basis:

  • American Express (AXP) – 25.1%
  • MasterCard (MA) – 75%Discover Financial Services (DFS) – 21.10%

Visa Expects to Benefit from Its European Business

Visa’s (V) acquisition of Visa Europe allowed the company to enhance its global reach. The main agenda behind the acquisition was to bring innovation to the European market. Visa had been working closely with its partners and clients. The company also plans to create new services and products.



The country that gave the world smart drip irrigation and the Epilady has also been an early and enthusiastic adopter of financial technology, as in mobile banking apps, digital wallets, online lending and other services that manage moola. In fact, a survey of selected industrialized countries shows that:

Israel fintech

As for the specifics, 50 percent of Israeli adults use mobile banking apps at least once a month. In the U.S., it was 38 percent; the U.K., 37 percent; in France, 35 percent; and in Germany, a surprisingly anemic 28 percent.

The five largest banks in Israel control more than 90 percent of the market, and as Sandra Octaviani, research lead for fintech at the University of Utah’s Center for Innovation in Banking and Financial Services, notes, traditional banks tend to serve low-risk, highly profitable clients, which creates an opportunity for nimbler fintech firms to swoop in and serve the underserved.


RBI wary of first loan default guarantee cover (India Times), Rated: AAA

The Reserve Bank of India is learnt to be wary of peerto-peer lending platforms offering any FLDG, or first loan default guarantee, cover to institutional lenders for any lending they do through these technology startups, said sources familiar with the discussions.

While various lending entities are keen on exploring this space as a cheap source of customers, they often look for a security cover against loans going bad. Experts say such guarantees or covers might go against the intentions of the central bank.

SME Lending Based on Payment History is the Next Big Wave in Fintech (BW Disrupt), Rated: A

ftCash aims to empower micro-merchants and entrepreneurs with the power of electronic payments and loans with zero upfront cost and no monthly rentals. Merchants are able to offer their customers multiple payment methods including credit cards, debit cards, net banking, mobile wallets, PayPal and more.

Nonethless, credit lending is the next big wave of Indian fintech. Lodha explains, “SME Lending based on payment history will be next big wave in fintech. On an active basis, it allows a lender to decide the paying ability of a merchant/business and the recollection of these loans can be done from the payment platform itself. The combination of the payments data along with GST data provides deeper insights into a business. We at ftcash are heavily invested in this idea and believe there is a great potential for scale here.”

Latin America

Venture fund for Latino entrepreneurs, fintech in Mexico  (ImpactAlpha), Rated: AAA

Financial technology, or fintech, startups offering digital payment, remittances and lending services, could capture 30% of Mexico’s banking market within 10 years, according to Finnovista, a fintech accelerator. Six in 10 Mexicans are unbanked. Financial exclusion is a problem but “also an opportunity,” Francisco Meré, the director of Bankaool, one of the first online-only banks in Mexico, told the Financial Times[paywall]. “The cost of engaging a customer through technology is a fraction of using a branch.” Clip has grown to become one of Mexico’s largest digital payment providers (Accion sold its stake in February). Kubo Financieroprovides peer-to-peer lending; Albo, mobile-based banking; and Kueski, a digital micro-lender — all have secured venture backing. More than 150 fintech, or financial technology, firms now operate in Mexico, giving Mexico 35% of fintech companies serving the under- and un-banked in Latin America.


Afluenta (www.afluenta.com), a leading online credit platform for the people of Latin America, announced the addition of Mexican venture capital fund IGNIA to its group of shareholders. IGNIA is a venture capital fund specializing in investments in entrepreneurial companies with great potential for growth, whose services meet the needs of the emerging middle class.

In Mexico, where local credit to the private sector is below 35% of GDP, compared to 68% in Brazil, Afluenta aims to revolutionize the market with its human approach to credit and investment.

Afluenta connects borrowers with investors who can be individuals or companies, eliminating intermediaries such as traditional financial institutions. Its technology allows investors to receive competitive returns on their contributions in a simple, fast and efficient way, while applicants obtain loans faster, without bureaucracy and at a lower interest rate than in a bank.


Katipult CEO finalist for the prestigious EY Entrepreneur Of The Year 2017 (Digital Journal), Rated: A

Brock Murray, CEO of Katipult, a SaaS company that enables firms to design, setup, and manage an investment crowdfunding, Peer to Peer lending, or investor management platform, has been named a finalist in Ernst & Young’s Entrepreneur of the Year in the Emerging Technology category in Prairies.


George Popescu
George Popescu
Allen Taylor
Allen Taylor


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