- Today’s main news: SoFi battles its first PR crisis. Small businesses braced for higher costs post-Brexit. ID Finance sees potential in Brazilian market, sees 82% revenue growth in 2017 first half.
- Today’s main analysis: Pullback in subprime loans. Prosper’s Q2 numbers.
- Today’s thought-provoking articles: New fintech lenders encroaching on business banking turf. Pullback on subprime loans. Hongling Capital the worst victim of China’s P2P lending regulatory crackdown. Where is China’s Silicon Valley?
- SoFi battles its first major PR crisis. AT: “Based on the press received so far, there doesn’t seem to be that much interest, but it could be because the news was overshadowed by other current events. Whether this truly develops into a PR crisis for SoFi or not depends on whether it continues to make headlines. It’s still early development, but it seems complicated because of the nature of the allegations. One thing that doesn’t make sense is the canceling of loan applications. I’m not sure why SoFi would reward employees for that.”
- Pullback on subprime loans observed. AT: Data from TransUnion. This is a must-read.”
- Prosper reports strong Q2 results. AT: Analysis from Lend Academy.”
- New fintech lenders encroaching on business banking turf. AT: “Much of this has been seen before, but the survey data is still interesting. It does suggest that community banks and credit unions should not give up small business lending.”
- Goldman tops banks betting on new type of hedging. AT: “If you consider adopting new and innovating technology as a type of hedging.”
- Personal Capital manages $4.9B for people who provide their bank logins.
- What you should know about financial services fraud.
- Community banks can gain from pooling resources into the blockchain. AT: “The only reason I can see not to right now is cost effectiveness, but if any bank show can profitability by using the blockchain, then that will be proof that it is a viable delivery system for financial services. We’re still looking for that first use case.”
- Top and best P2P lending sites for online loans.
- CFPB says tribal online lender case should be in Illinois.
- HoneyFi lets couples hide finances from each other.
- Small banks’ fintech efforts held back by Volcker Rule.
- Buying a Surface through Klarna financing.
- Alan Gellman joins Credible as CMO.
- RealtyeVest chosen for townhome project.
- Small businesses braced for higher costs.
- House Crowd hits 50M GBP.
- 4thWay criticizes other comparison sites for publishing inaccurate information.
- The Start Up Loans Company, NatWest to help UK firms access alternative finance.
- Restricted advice like buying an ill-fitting suit.
- Why Hongling Capital is a victim of China’s P2P lending regulation.
- Where is China’s Silicon Valley?
- Hitting the moving fintech target in China.
- ID Finance reports 82% revenue growth, sees potential in Brazil.
- Uber talking to SoftBank, Tencent about funding.
- Five trends shaping commercial real estate’s future.
- United States
- SoFi battles its first major PR crisis (Tearsheet), Rated: AAA
- Start of a New Trend? Pullback in Subprime Loans Observed (GlobeNewswire), Rated: AAA
- Prosper Reports Strong Q2 Numbers – Is Cash Flow Positive Again (Lend Academy), Rated: AAA
- New Fintech Lenders Encroaching On Business Banking Turf (The Financial Brand), Rated: AAA
- Goldman Tops Banks Betting on a New Type of Hedging (Bloomberg), Rated: A
- A hot fintech startup has amassed nearly $ 5 billion from people willing to hand over their bank logins (Business Insider), Rated: A
- What you need to know about financial services fraud (Tearsheet), Rated: A
- Community banks stand to gain from blockchain — if they work together (American Banker), Rated: A
- Top and The Best Peer-To-Peer (P2P) Lending Sites For Online Loans (FX Daily Report), Rated: A
- CFPB Says Tribal Online Lender Case Belongs In Illinois (Law360), Rated: A
- Why fintech startups love advertising on the New York City subway (Tearsheet), Rated: A
- Charlotte fintech startup targets couples who don’t merge finances (Charlotte Agenda), Rated: A
- Small banks’ fintech efforts held back by Volcker Rule (American Banker), Rated: A
- I bought a new Surface with the Surface Plus program (onmsft.com), Rated: A
- Alan Gellman Joins Credible as Chief Marketing Officer (PR Web), Rated: B
- New Leaf Communities, in Partnership With RealtyeVest, to Build 35 Unit Townhome Project Near Amazon Fulfillment Center (GlobeNewswire), Rated: B
- United Kingdom
- Funding Circle: Small businesses braced for higher costs after Brexit (P2P Finance News), Rated: AAA
- Buy-to-let property platform hits £50m milestone (Property Industry Eye), Rated: A
- 4thWay Criticizes Competitors: “Comparison Websites Display Wildly Inaccurate Information About Peer-to-Peer Lending” (Crowdfund Insider), Rated: A
- The Start Up Loans Company and NatWest to help UK firms access alternative finance (Startups.co.uk), Rated: A
- Robo roundtable: Restricted advice like buying an ill-fitting suit (Citywire), Rated: A
- Hongling Capital: The Worst Victim of China’s P2P Lending Regulatory Crackdown (Lend Academy), Rated: AAA
- Where is China’s Silicon Valley? (SCMP), Rated: AAA
- Fintech In China: Hitting The Moving Target (Oliver Wyman), Rated: A
- European Union
- Review of My Linked Finance Investment After 6 Months (P2P-Banking), Rated: A
- The Destiny of European Corporate Banking (TechBullion), Rated: A
- ID Finance sees “huge potential” for online lending in Brazil as it reports 82% revenue growth in first half of 2017 (ID Finance Email), Rated: AAA
- Captain’s Log, Aug 16 (e27), Rated: A
- Five trends that will shape commercial real estate in future (Lanka Business Online), Rated: B
- Tic:Toc Wants To Bust The Big Bank Myth About Online Home Loans (Which-50), Rated: AAA
- Capital Float in advance talks to raise Rs 300-crore (India Times), Rated: AAA
- Funding Societies is First P2P Lender to Join International Association of Credit Portfolio Managers (Crowdfund Insider), Rated: B
- The future of banking in Southeast Asia (HERO), Rated: A
SoFi battles its first major PR crisis (Tearsheet), Rated: AAA
In a wrongful dismissal suit filed last week, a former employee reportedly claimed he was let go after he told management he had seen female employees subjected to lewd and inappropriate comments and that managers canceled loan applications when internal errors were made — a tactic to secure quarterly bonuses of up to $15,000. There’s also talk of a second class-action lawsuit alleging broader mistreatment of employees at the company.
But experts said the extent of the damage to the SoFi brand will center on whether other employees come forward to corroborate the allegations.
Jim Prosser, vp of communications and policy at SoFi, said the company carried out an internal investigation into the matter and challenged the notion that loan applications could be arbitrarily cancelled.
Based on sentiment expressed on Twitter, the lawsuit hasn’t made a big dent in SoFi’s brand reputation. Since the news broke Friday, 119 tweets mentioned the SoFi Twitter handle, 53 percent of which were positive and 47 percent were negative, according to Brandwatch. Compared to the past month, the SoFi handle attracted 920 mentions, 75 percent of which were positive. Still, Terry maintains that it’s not a massive conversation, and the news may have gotten less play with the violence in Charlottesville, Virginia, capturing headlines.
Start of a New Trend? Pullback in Subprime Loans Observed (GlobeNewswire), Rated: AAA
For the first time since 2012, originations to subprime consumers declined year-over-year for a number of major credit products, according to TransUnion’s (NYSE:TRU) Q2 2017 Industry Insights Report. The report, powered by PramaSM analytics, found that 4.63 million subprime consumers originated an auto loan or lease, personal loan or credit card in Q1 2017. Comparatively, 4.89 million subprime consumers originated one of these products in Q1 2016.
In Q1 2017, subprime personal loan originations declined 10.6% year-over-year, compared to a positive annual growth rate of 11.0% in Q1 2016. This marks three straight quarters of year-over-year declines in originations. More than 100,000 fewer subprime consumers opened a personal loan in Q1 2017 than in Q1 2016.
In fact, personal loan originations declined for all risk tiers, but at lower rates than for subprime originations. Total originations dropped 6.9% from 2.99 million in Q1 2016 to 2.78 million in Q1 2017.
In the credit card market, subprime originations declined by 1.8% to start 2017, the second consecutive quarter of decline. Since 2014, subprime originations had increased at a rapid rate, averaging growth of 29.2% in the first quarters of 2014, 2015 and 2016. In Q1 2017, subprime originations declined at nearly the same rate as total originations (down 1.9%).
As subprime consumers gained access to credit cards, lenders kept subprime credit lines low. In Q1 2017, subprime consumers held just 2.6% of total credit lines.
Auto loan originations declined 8.9% year-over-year from Q1 2016 to Q1 2017. Originations to subprime consumers dropped to 1.10 million in Q1 2017, down from 1.20 million in the first quarter of 2016. At the same time, total originations declined just 2.9% to 6.73 million in Q1 2017.
Mortgage Delinquency Rate Drops to New Low since Recession
The mortgage delinquency rate reached the lowest level since the recession in the second quarter of 2017, dropping below 2% for the first time in almost 10 years. The mortgage delinquency rate was 1.92% in Q2 2017, down 16.5% from 2.30% in Q2 2016.
Viewed one quarter in arrears, mortgage originations remained relatively steady year-over-year in the first quarter of 2017. Up slightly from 1.46 million in Q1 2016, mortgage originations reached 1.49 million in Q1 2017. Largely due to the rise in interest rates, originations declined 28.3% between Q4 2016 and Q1 2017. A year prior, originations only declined 9.4% between Q4 2015 and Q1 2016.
More than 83% of mortgage originations were in the prime and above risk tiers in the first quarter of 2017. Market share of prime and above risk tiers has remained roughly in that range since Q4 2013.
The average new account balance, also viewed one quarter in arrears, declined 1.6% from $223,262 in Q1 2016 to $219,743 in Q1 2017.
Total Credit Card Balances Rise Following Rich Credit Offers in 2016
The latest TransUnion Industry Insights report found that total credit card balances continued their steady year-over-year increase in the second quarter of 2017. Total card balances reached nearly $714 billion, up 7.8% from $662 billion in Q2 2016. The average balance per consumer grew 3.3% to $5,422, up from $5,247 in Q2 2016.
The credit card delinquency rate reached 1.46% in Q2 2017, up 13.2% from 1.29% in Q2 2016. This brings the card delinquency rate above the average Q2 delinquency reading of 1.27% for the last three years.
Auto Delinquency Rate Rises after Years of Non-prime Origination Growth
TransUnion’s latest Industry Insights Report found that the auto delinquency rate reached 1.23% in Q2 2017, an increase of 10.8% from 1.11% Q2 2016.
Viewed one quarter in arrears, auto originations declined to 6.73 million in Q1 2017, down 2.9% from 6.93 million in Q1 2016. This marks the third consecutive quarter of year-over-year declines in auto originations and the first decline in origination growth in any first quarter since 2010.
Total auto balances achieved a new high in Q1 2017, reaching $1.145 trillion. The total balance was up 6.9% from $1.072 trillion in Q1 2016.
Personal Loans Reach New Milestones as Balances Grow and Delinquencies Drop
In the second quarter of 2017, the personal loan delinquency rate declined to the lowest level since 2009. The delinquency rate was 3.02% in Q2 2017, an 8.5% decline from 3.30% in Q2 2016.
Personal loan balances achieved a new milestone of nearly $107 billion in Q2 2017, growing 10.8% over Q2 2016, when total balances were $96 billion. While balances increased, the growth rate was lower than the average Q2 growth rate of 24.7% for the past three years. The average balance per consumer also reached a new high at $7,781 in the second quarter, up slightly from $7,745 in Q2 2016.
Personal loan originations, viewed one quarter in arrears, declined 6.9% to 2.78 million in Q2 2017, compared to 2.99 million in Q2 2016.
Please visit http://www.transunioninsights.com/IIR for more charts and details about TransUnion’s Q2 2017 Industry Insights Report or to register for TransUnion’s Q2 2017 Industry Insights Webinar.
Prosper Reports Strong Q2 Numbers – Is Cash Flow Positive Again (Lend Academy), Rated: AAA
As you can see in the graphic above Prosper had a rocky 2016. They went from a quarterly origination high of over $1.1 billion in Q4 2015 to a low of $312 million in Q3 2016. Since that time they have shown some solid growth with originations in Q2 2017 coming in at $775 million up from $586 million in Q1. They still have a long way to go before they reach record levels but growth has returned to the first US marketplace lender.
- Total originations from inception through June 30, 2017 was $9.7 billion.
- Transaction fee revenue rose to $35.4 million, up 32% quarter-over-quarter and 84% year-over-year.
- Whole loans represented 94% of total loan volume in Q2.
- Adjusted EBITDA was $6.7 million up from a loss of $11.6 million in Q2 2016.
New Fintech Lenders Encroaching On Business Banking Turf (The Financial Brand), Rated: AAA
Small and micro businesses struggle to get the cash they need. According to the Federal Reserve’s small business credit survey, 60% of applicants obtained less financing than they needed.
And they need money. The top challenge facing small businesses, says the Fed, is credit availability or securing funds for expansion (44%), followed by paying operating expenses (36%), making payments on debt (25%), and purchasing inventory or supplies to fulfill contracts (17%).
Unfortunately, size makes these loans unattractive to many banking providers. More than half (55%) of small businesses needed $100,000 or less and three-quarters sought $250,000 or less.
Can Smaller Banks and Credit Unions Compete? And Should They?
First, while online lender websites may be alluring, small business owners are still concerned about data security and privacy — particularly with these neo-lender startups. Second, the product features among fintechs are not always clearly stated, making it difficult to compare product offerings and costs.
These issues mean many small businesses still prefer to get a loan from a bank. Half (50%) seek financing from a large bank, and 21% from online lenders. And their preference is for loans not credit cards; 86% say they applied for a loan or a line of credit vs. only 31% who just applied for a credit card.
Smaller loans can be profitable, if you approach them in new ways using new tools.
- Reengineer the Process with Big Data. With so much data available on small business owners and more computing power, banks can use big data in innovative ways to decision loans. No longer limited to a credit score, big data can analyze the behavior of the business and predict its ability to pay back the loan. Big data also means that fewer applications must be sent to a human for decisioning. Real-time decisioning cuts costs for the bank and since so much customer data is already digitized, there’s less need to require borrowers to submit reams of documentation.
- Partner with Fintech. Rather than try to compete with online alternative lenders, consider joining them. IN 2015, J.P. Morgan Chase & Co. announced a partnership with On Deck Capital to create online small business loans. Called Chase Business Quick Capital, it provides Chase customers with faster access to cash than a traditional bank loan. Chase states that the capital can be available in the same day. In the past, a small business loan could take weeks to decision and then fund.
Goldman Tops Banks Betting on a New Type of Hedging (Bloomberg), Rated: A
Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading big banks in plowing record funds into outside ventures trying to disrupt their industry, a role typically dominated by venture capital firms, according to a report from Opimas, a management consultancy.
Goldman Sachs has invested in about 15 so-called fintech firms focusing on capital markets businesses this year, while JPMorgan has bet on nine, the report shows. Altogether, banks and other established companies will probably pump a record $1.7 billion into the sector through 44 deals in 2017, Opimas estimated.
A hot fintech startup has amassed nearly $ 5 billion from people willing to hand over their bank logins (Business Insider), Rated: A
- Personal Capital is a startup known for its free platform, which allows people to plug in their bank and investment accounts to see all their financials at once.
- CEO Jay Shah says Personal Capital has been monetizing the business by getting richer clients to pay for financial advice.
- The startup recently raised an additional $40 million in outside funding.
The company is managing assets for Americans worth about $4.9 billion, and increasingly the customers are more affluent, Personal Capital’s CEO, Jay Shah, told Business Insider in a recent interview.
Shah declined to say how many of the company’s estimated 1.5 million free users convert to paying for financial advice from the free platform.
What you need to know about financial services fraud (Tearsheet), Rated: A
In finance, there are three distinct patterns of fraud: transaction fraud, application fraud and account takeover fraud.
Card issuers lost $15.72 billion (72 percent) in gross fraud losses in 2015 and merchants and acquirers lost the remaining $6.12 billion (28 percent), according to the Nilson Report.
Application fraud is the fastest-growing type of fraud in financial services and happens when a fraudster actually pretends to be you using actual account credentials to open new lines of credit. We can break it down even further into three types:
- Third party fraud: when someone gets enough of someone’s personal information from a compromised data set to go to a bank and pretend to be that person to apply or a loan or credit card
- First party fraud: when the person coming to the bank (or other service) really is the person he or she claims to be but intends to not pay back the loan or credit card; in instances of first party fraud, the bank or business is the victim, not the customer
- Synthetic fraud: when someone creates a persona using fake or borrowed information, like a social security number, and adds other, made-up elements of personally identifiable information like a name, address or date or birth
Account takeover fraud is the final type of fraud (for the purposes of this primer, at least). It happens to people when fraudsters obtain their various user IDs and passwords to be able to access other accounts that involve financial transactions.
Did those new chip cards I got help?
Kind of! Account takeover incidents increased 61 percent to $2.3 billion from 2015 to 2016, according to research by Javelin published in February. Victims pay an average of $263 out of pocket and spent 20.7 million hours to resolve it in 2016 – six million hours more than in 2015.
Community banks stand to gain from blockchain — if they work together (American Banker), Rated: A
Blockchain is most widely known as the platform to house virtual currencies such as bitcoin,ethereum and litecoin. But the uses for blockchain are going well beyond virtual currencies. The Republic of Georgia, for example, voted in April 2016 to implement a land ownership registry that relies on blockchain to verify ownership of property. If the United States did something similar with blockchain, banks could close real estate loans more quickly. Think about a world where ownership interests in real estate can be verified immediately and with certainty.
In this world, the expansive role of the title agent would essentially dissipate (or be greatly minimized), the time taken to verify title would be eliminated and, most important, the cost associated with confirming a title interest through title insurance would be dramatically reduced. All of these results would improve the closing process, both from an efficiency standpoint for banks and from a cost standpoint for the customer.
Technologists are also using blockchain to try to replace our needlessly difficult residential mortgage loan origination processes so that the process, from application to closing, can be reduced from a few weeks to a few days.
To realize these kinds of opportunities, community banks in a region should collaborate on strategies to bring blockchain into the banking industry.
Top and The Best Peer-To-Peer (P2P) Lending Sites For Online Loans (FX Daily Report), Rated: A
A PriceWaterhouseCoopers report noted that though the P2P industry is in its infancy loans to the tune of $5.5 billion have been disbursed by the P2P websites in the U.S. in 2014 alone. According to PriceWaterhouseCoopers, P2P lending could be more than $150 billion by 2025.
#1: Funding Circle
Funding Circle has disbursed more than $1 billion in loans to over 8,000 businesses in the world. Along with the growth in terms of the number of businesses borrowing from the company, Funding Circle has seen a substantial growth in the number of investors too. In fact, Funding Circle’s investor base includes banks, other financial institutions, and more than 40,000 retail investors. Even the U.K. government is an investor.
#2: Lending Club
As leading online lending marketplace, the company that connects borrowers and lenders has disbursed loans to the tune of $11,167,217,348 as of mid-2015.
The minimum amount you can borrow is $3,000 and the maximum is $35,000. The annual percentage rate or APR starts at 4.7 percent. They offer loans for just about everything.
#4: CircleBack Lending
Loans are offered by CircleBack Lending for tenures of 3 or 5 years and amounts ranging from $3,001 to $35,000. The APR ranges from 6.63 percent to 36 percent.
#5: Prosper Marketplace
The company has registered tremendous growth since its inception and currently has a client base of more than 250,000. Prosper has disbursed loans worth more than $4 billion so far.
This popular lending marketplace offers 3-year loans ranging from $1,000 to $25,000 with an APR of 7.12 percent to 29.99 percent. Peerform does not look at the FICO score alone in order to measure the risk of lending. The company’s Loan Analyzer carries out the evaluation on a case to case basis. According to Peerform, the Loan Analyzer was developed in consultation with leading economists and it follows a differentiated method for determining the creditworthiness of each borrower. As a result, even individuals whose credit scores are in the range of 600 may be able to secure loans.
SoFi’s offers loans starting from $5,000 and up to $100,000, which is higher compared to the standard amount of $35,000 offered by many other players in the peer-to-peer marketplace.
CFPB Says Tribal Online Lender Case Belongs In Illinois (Law360), Rated: A
The Consumer Financial Protection Bureau urged an Illinois federal judge Monday not to transfer a suit claiming four Native American tribe-owned companies charged excessively high interest for online loans, saying there’s much more reason to keep the suit in Illinois than to move it to the companies’ preferred Kansas venue.
Golden Valley Lending Inc. and three other online lenders owned by the California-based Habematolel Pomo of Upper Lake Tribe had asked U.S. District Judge Thomas M. Durkin in June to transfer the CFPB’s suit to Kansas,….
Why fintech startups love advertising on the New York City subway (Tearsheet), Rated: A
For a consumer fintech startup, it’s the perfect place to put some advertising dollars. TransferWise has built its business around the ability to let people send money overseas at a low cost. Sixty percent of its users are immigrants; 40 percent are American-born. Its employees represent more than 50 countries. Its user base and prospective customer pool looks a lot like the people of New York.
Even if they’re American-born, theres still a chance they moved to New York from someplace else. TransferWise wants to send the message that it celebrates that diversity.
The subway is a hot destination for startups in general, looking to stretch their marketing budgets. E-commerce startups like Thinx and Casper both love advertising on the subway, calling them “conversation starters” and a way to be in a city where “trends are set.” They’re also effective, say these companies: David Zhang, Casper’s CMO, told Tearsheet’s sister site, Digiday that subway ads are highly effective to target local audience because when riders get stuck on the train, they have nowhere to look except at those ads.
Three years ago Venmo ran an ad campaign around the New York subway featuring an everyday millennial called “Lucas” (who, it turns out, was a Venmo engineer). Venmo’s message to subway riders was the same (although less nostalgic and bittersweet): we do the same things you do, we understand you. The campaign sparked a lot of frustration and confusion for consumers — but the company was engaging with them.
Charlotte fintech startup targets couples who don’t merge finances (Charlotte Agenda), Rated: A
Couples today are getting married later.
And when they do get hitched, they’re much less likely to combine their finances. Only one-third of millennial couples are putting everything in a joint bank account and fully merging their money. That’s down from about half of couples overall, according to research from TD Bank.
Honeyfi, an app planning a formal beta launch later this week, is designed to allow couples to blend finances to the extent they’re willing to — and figure out how to manage things accordingly.
Both sides load in all their financial accounts but can choose what’s visible to their significant other — both at the account level and at the individual transaction level. If you want to keep your shopping spree under wraps, you can do that with Honeyfi.
Small banks’ fintech efforts held back by Volcker Rule (American Banker), Rated: A
The Dodd-Frank Act’s Volcker Rule was meant to protect the financial system by prohibiting banks from engaging in certain risky activities. But it may also be stopping community banks from being able to reap significant benefits from the fintech revolution.
I bought a new Surface with the Surface Plus program (onmsft.com), Rated: A
Here’s a couple of things to note: In order to be considered for the Surface Plus Program, you are required to purchase Microsoft Complete and you will be required to do a credit check through KLARNA. KLARNA handles the financing and you will have to make your monthly payments through KLARNA and NOT Microsoft. After choosing the Surface Pro (fan-less Intel Kaby Lake i5 processor, 8 GB RAM, 256 SSD)I found that my 24-month payment plan is similar to a AT&T phone payment plan.
I have not started making payments yet, but my payments will be about $63 a month, with an option to upgrade after 18 months.
Funding Circle: Small businesses braced for higher costs after Brexit (P2P Finance News), Rated: AAA
MORE THAN two thirds of small businesses that import goods and services expect costs to increase when Britain leaves the European Union, Funding Circle claims.
A poll of 1,325 small business borrowers by the peer-to-peer platform found 69 per cent of firms expect their average costs to increase by £5,300 per month resulting in £60,000 per year of extra spending.
Businesses were also deflated by the overall result of the general election with only 12 per cent stating that they feel positive about the outcome, while 41 per cent were concerned.
Buy-to-let property platform hits £50m milestone (Property Industry Eye), Rated: A
Founded in 2012 with an initial focus on Manchester, the House Crowd claims to offer investors returns of 8-10% to fund property projects, known as peer-to-peer (P2P) lending.
There have been 307 projects funded so far, all of which are secured on the underlying property.
4thWay Criticizes Competitors: “Comparison Websites Display Wildly Inaccurate Information About Peer-to-Peer Lending” (Crowdfund Insider), Rated: A
The worst inaccuracies were found to be:
- Five of the six are presenting peer-to-peer lending as “savings” rather than “investing” a year after the Financial Conduct Authority expressed well-founded concerns about this practice.
- The two money sites that compare P2P investments in their comparison tables include P2P lending in savings account comparison tables rather than separate investment comparison tables.
- Risk of fraud and negligence were not mentioned by any of the money sites.
- Just one of the six mentioned the risks to investors of concentrating their pots on just one P2P lending platform.
- Risks identified in behavioral investing theory (such as poor investing results from those who are too greedy or fearful) were not mentioned by any of the sites.
- None of the six explained the full costs to investors of using P2P services, typically covering just a smaller part of the costs (the lending fee), while sometimes leaving the impression that lending is completely free. (It is never free for investors due to hidden costs.)
- No money sites made clear the vast difference in risks between the various P2P lending platforms.
- Just one generic money site explains that bad debts might be higher in a financial downturn.
- While all showed the risk of losses if a P2P lending platform goes out of business, five did not explain that you could experience delays in getting your money back.
- Five out of six relied heavily on provision funds and on the level of interest rates to assess whether a P2P lending platform is safe, assuming safety is always correlated. (Interest rates are an unreliable measure of risk and provision funds are a secondary risk-control or risk-measurement devices. Much more important factors include such things as solid underwriting and credit-risk models, good security and low bad debt history.)
- Some of the money sites did not explain that provision funds might not always be sufficient to cover losses.
- All six fail to mention that you might not in all circumstances be able to get your money back as soon as you expect, even if there is an option to sell your loans and exit early.
The Start Up Loans Company and NatWest to help UK firms access alternative finance (Startups.co.uk), Rated: A
The government-backed Start Up Loans Company joins six other finance providers on the Capital Connections scheme including Seedrs, Funding Circle, Assetz Capital, iwoca, Together and NatWest Social & Community Capital.
Robo roundtable: Restricted advice like buying an ill-fitting suit (Citywire), Rated: A
New Model Adviser® sat down with the heads of three robo firms, or ‘digital wealth managers’.
- Adam French, chief executive, Scalable Capital
- Johann Bornman, director of product, ETFmatic
- Giovanni Dapra, chief executive, Moneyfarm
Hongling Capital: The Worst Victim of China’s P2P Lending Regulatory Crackdown (Lend Academy), Rated: AAA
The platform now has over 20 billion yuan ($3 billion) assets to settle, which includes 5 billion yuan ($750 million) of non-performing assets and 800 million yuan ($120 million) of bad debts. As of August 12, Hongling Capital has had 1.85 million investors and the accumulated trade volume is 274.7 billion yuan ($41 billion).
Established in 2009, Hongling as one of the oldest P2P platforms in China and they have created many innovative practices in P2P lending. However, some of these practices were later banned by the new regulatory rules. The large loans model was one of them.
Before the P2P lending industry took off in China, there were few explicit regulatory rules. However in August 2016, regulators released new rules on the loosely regulated industry, capping the size of loans at 1 million yuan ($149,000) for individuals and 5 million yuan ($743,000) for companies.
Although Hongling is one of the largest P2P platforms measured by trade volume, it has barely made a profit and even began to make loss recently: Hongling Capital made a loss of 183 million yuan ($27.4 million) in 2016 whilst in 2015 their business was still in the black.
This is largely because Hongling has a tradition of guaranteeing principal and interest on loans it facilitates – this is another common practice in the P2P lending industry in China that was initiated by Hongling and later banned by the new regulations.
Where is China’s Silicon Valley? (SCMP), Rated: AAA
When Ben Hu and his ex-Google partners wanted to build something to completely disrupt the traditional language teaching industry by artificial intelligence, it was not Silicon Valley they turned to for help, but Shanghai.
Unlike the United States, where some of the most powerful companies are concentrated within the 1,854 square miles (4,801.8 square kilometres) Silicon Valley, with some spilling into nearby San Francisco, in China, tech hubs are scattered across numerous cities with mega cities – Beijing, Shanghai and Shenzhen – taking the lead.
Between 2010 to 2013, investors had valued no more than one Chinese company a year. In 2014, five were classified as unicorns.
The first seven months of this year have seen an eye-popping 13 Chinese companies crowned unicorns, according to research firm CB Insights. This compared with the US’ 16 unicorns in January to July.
The report, based on a survey of more than 800 technology leaders globally, found that cities in the US and China are expected to make up six of the top 10 innovation hubs, outside of Silicon Valley/San Francisco, over the next four years, with Shanghai being on top of the list.
Fintech In China: Hitting The Moving Target (Oliver Wyman), Rated: A
We have not yet seen the full potential of fintech in China. We believe that technological advances, coupled with the unique circumstances of China’s financial system, will propel fintech companies to further drive innovation and disrupt the traditional financial services space. Premier Li Keqiang commented at the inauguration ceremony of WeBank, the new web-based bank owned by Tencent, “It’s one small step for WeBank, one giant step for the country’s financial reform.”
Download the full report here.
Review of My Linked Finance Investment After 6 Months (P2P-Banking), Rated: A
The best part of my Linked Finance experience is that so far all payments have been made on time. Certainly I expect that there will be delays and defaults, but I appreciate that there have been none so far and this confirms the very low overall default rate Linked Finance shows in its statistics
The only disadvantages of Linked Finance are:
- 1.2% fee for investors
- No secondary market
My self calculated ROI so far is 5.6% (XIRR), but some of that is due to the initial cash drag and this figure will rise.
The Destiny of European Corporate Banking (TechBullion), Rated: A
The banking world faces unforeseen challenges as it tries to hold on to customers who are being tempted to try alternative banking solutions by Fintech companies; finance start-ups and large technical corporations. These banking alternatives are attracting customer attention with lucrative proposals as they infiltrate the banking world which has up to now been the exclusive territory of conventional, traditional banking.
By going digital and fully automated financial companies can reduce expenses. They can also make AML easier through live monitoring for illegal activity. A major issue facing conventional banks today is an inability to improve their banking systems sufficiently and adjust to the increased KYC (Know Your Client) and AML (Anti Money Laundering) regulations procedures now in place. EMIs on the other hand usually operate newer and more advanced banking systems which make them appear to financial companies as insusceptible to fraudulent activity.
ID Finance sees “huge potential” for online lending in Brazil as it reports 82% revenue growth in first half of 2017 (ID Finance Email), Rated: AAA
ID Finance, the emerging markets fintech company, has reported 82 per cent revenue growth for the first half of 2017 following successful expansion into the Brazilian online lending market. The data science, credit scoring and digital finance company has now processed over 1m loans and is planning further expansion in Latam with a launch expected in Mexico later this year.
ID Finance was founded in Russia in 2012 and has rapidly expanded into Kazakhstan, Georgia, Poland, Spain and Brazil. It uses both traditional and alternative sources of data to improve access to competitive financial services and helps customers build their credit profile over time in order to gain access to more financial products. The company reached profitability in 2015 and is now issuing over 60,000 loans each month with monthly revenue of $15m.
Brazil is attracting considerable interest among fintech companies for several reasons. Firstly, the banking sector has a small number of players and competition is limited. Secondly, there are 61m people that are blacklisted from the traditional financial system. Thirdly, Brazil has the largest smartphone market by volume in Latam.
According to a recent report from Goldman Sachs, the top five banks in Brazil hold 84 per cent of total loans excluding development banks. Meanwhile in retail branch banking, the top five banks have 90 per cent of branches. By way of comparison, in the United States the top five banks hold around just 20 per cent of all branches. ID Finance partnered with Brazilian bank Socinal Financeria to overcome regulatory challenges and accelerate its launch.
According to Goldman Sachs, Brazil has an estimated revenue pool of $24 billion for fintech companies over the next 10 years, with payments, lending and personal finance the most promising segments. The Latin American Private Equity and Venture Capital Association saw fintech companies in Brazil attract $113m in venture capital in 2016, more than 10 per cent higher than the $102m pledged in 2015 despite a broader decline in venture capital investment in Brazilian startups.
Captain’s Log, Aug 16 (e27), Rated: A
As per this report, Tencent Holdings has also explored contributing funds to the round.
Modalku joins hands with TaniHub to launch fintech solution for SMEs
Indonesian P2P lending platform Modalku has partnered with agritech startup TaniHub to launch a new fintech solution for small businesses operating in the areas of agriculture and supply chain financing.
Five trends that will shape commercial real estate in future (Lanka Business Online), Rated: B
- Airports will be hassle-free
- Technology will do 90% of the work – Surveying—the term used for leasing and investment brokers, property managers and valuers—is ripe for automation. Tasks such as rent collection, the examination of financial information, property valuation, and monitoring market conditions are predicted to be completed with the help of artificial intelligence and deep learning.
- More investment in the emerging markets – In the Philippines, in Q1, six office developments were completed adding 113,000 sqm of office space in the capital Metro Manila. Impressively, the average vacancy rate is as low as 4%.
- Unbanked lending will develop further – Alternatives to bank loans will continue to gather momentum. In countries like Mexico, peer-to-peer lending targeted at the underserved/unbanked population will prosper and bring more home buyers into the market. Customers searching for lower interest rates will also be tempted by the more favorable rates on offer by non-traditional lenders.
- Agility will shape the market
Tic:Toc Wants To Bust The Big Bank Myth About Online Home Loans (Which-50), Rated: AAA
Emerging online lender and local fintech Tic:Toc, which says it offers a full home loan approval online in just 22 minutes, wants to bust the myth that consumers still need bank branches to apply for a mortgage.
When asked about the role of physical bank branches in a digital world, the big banks are adamant that consumers want to speak to a human in person when they are signing up for decades of debt.
But that’s a myth, argues Anthony Baum, Tic:Toc founder and CEO. And particularly so, if someone has already gone through the home loan approval process once, he suggests.
According to Baum, The most popular time to apply for a home loan online is 7pm on Thursday evening — well outside regular office hours.
The average age of applicants using the Tic:Toc platform is 41 for men and 39 for women, and it’s a 50/50 split between applications to refinance and to make a new purchase. The median mortgage repayment is $1,680 per month and a variable interest rate home loan is the most popular product on the platform.
Tic:Toc’s first settlement was completed last Friday, exactly one month after launch. The smallest loan “in the settlement pipeline” is $60,000 and the biggest is $1 million.
Baum says Tic:Toc is the first of its kind in the world. The closest offer in the market already is US-based Rocket, which doesn’t offer valuation and document generation, he said.
Capital Float in advance talks to raise Rs 300-crore (India Times), Rated: AAA
Bengaluru-based digital lending startup Capital Float is in advanced talks to raise Rs 300 crore, according to two sources familiar with the development. US-based fintech-focused venture capital fund Ribbit Capital is in talks to lead the fresh capital infusion, said one of the sources mentioned above.
Capital Float, which specialises in lending to small and medium enterprises, will use the fresh funds for expanding its lending portfolio to consumer financing and for financing kirana stores as well, said the people mentioned above.
Funding Societies is First P2P Lender to Join International Association of Credit Portfolio Managers (Crowdfund Insider), Rated: B
Funding Societies also reported that risk expert Terry Tse has joined the online lender’s Board of Directors. Mr. Tse is the former Chief Risk Officer of Dianrong – one of China’s leading P2P lending platforms. Before joining Dianrong, Terry Tse spent many years in consulting and banking with Oliver Wyman and Deutsche Bank respectively. He currently serves as the Senior Vice President of Lian Lian Pay and is responsible for its international business development.
The future of banking in Southeast Asia (HERO), Rated: A
Hero Token is starting their Official Bounty Program in order to reward BitcoinTalk Supporters, and it has one of the biggest Bounty Pools to be ever awarded on Bitcointalk!
The Program will run until the end of ICO
A total of 2% Hero Tokens from the Total Supply of Hero Tokens are reserved for the Bounty Campaigns. If the hard cap is reached, that amounts to 1.25M Hero Tokens ( 6250 ETH or $1.875M at a price of 300$/ETH ).
Exchange Rate: 1 ETH=200 Hero Tokens
5% of Total Bounty will be allocated to Facebook
Tier 3 : Having 500+ friends: 5
Tier 2 : Having 2000+ friends: 10 stakes
Tier 1 : Having 5000+ friends: 25 stakes
Tier 0: Having 10.000+ friends: 50 stakes
Extra Tier : 25.000+ friends/followers : 100 stakes
1: Your must have a minimum of 500 friends.
2: Your Facebook account must not be fake, inactive or a bot account. Only original Facebook accounts will be accepted.
3: You must be an active and regular Facebook user, and must be sharing and liking HERO’s official posts and updates.
4: Account must be open as a Public Profile and all Posts shared need to be public as well.
4: Multiple accounts are not allowed. Those found using such multi accounts will be disqualified and blacklisted from any and all future campaigns.
5: Terms and Conditions are subject to change if necessary.
From the HERO white paper:
Introduction Two billion people, about 40% of the global population, are still unbanked or underbanked and cannot get access to affordable credit, even if they have well-paying jobs and are connected to the Internet.
Savings and lending are foundational building blocks of modern society, serving as both fuel for funding economic growth and funds in times of financial need. Today we call the former as capital, and the latter as credit. Increased access to capital for the unbanked can have a positive impact of historical proportions. Without access to capital, Columbus’s expeditions to the Americas may not have occurred, and perhaps nor would the subsequent explorations of the “New World”. Without proper financing mechanisms, neither the Industrial Revolution nor the tech boom in Silicon Valley would have spread at such rapid speed. Both national and local economies are affected by the ease or difficulty to access capital. Access to credit is just as important. If you translate the examples earlier to a local level, then you have billions of people who don’t have access to credit to allow them to go to school, remain healthy and grow their small businesses – credit remains a roadblock to economic prosperity for billions of people, even if they have the talent, ambition and work ethics to prosper.
Download and read the white paper here.