Daily News Digest Featured News

Friday November 8 2017, Daily News Digest

Equity ETFs

News Comments

United States

United Kingdom

China

European Union

International

Australia

Africa

News Summary

United States

Lending Club shares hit all-time low on gloomy outlook (Financial Times), Rated: AAA

Shares in the San-Francisco based company hit a low of $3.29 and were down more than 21 per cent to $3.33 at pixel time, leaving them poised for the biggest one-day drop since May 2016. The slide came after Lending Club said it expects revenues of between $680m to $705m in 2018. The mid-range would be up roughly 20 per cent from its 2017 estimate but well shy of the $715.4m that analysts had expected, according to Thomson Reuters data.

WSFS and SoFi Strike Agreement on New Cash Management Account (GlobeNewswire), Rated: AAA

WSFS Financial Corporation, the parent company of WSFS Bank, has entered into a two-year partnership to provide payment processing and debit card sponsorship services for a new cash management account by SoFi Securities, a subsidiary of SoFi.  The new “SoFi Money” account is expected to launch in early 2018.

KBRA Assigns Preliminary Ratings to Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-NP2 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-NP2 (“CLUB 2017-NP2”). This is a $265.799 million consumer loan ABS transaction that is expected to close December 20, 2017.

Preliminary Ratings Assigned: Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-NP2

Class Preliminary Rating Expected Initial Class Principal
A A- (sf) $157,614,000
B BBB (sf) $38,704,000
C BB (sf) $69,481,000

Moody’s assigns definitive ratings to SoFi Professional Loan Program 2017-F LLC (Moody’s), Rated: A

Moody’s Investors Service has assigned definitive ratings of Aaa (sf) to Class A-1FX and A-2FX Notes issued by SoFi Professional Loan Program 2017-F LLC (SoFi 2017-F). The collateral underlying the transaction consists of SoFi’s private student loans, which are loans the government does not guarantee. Our cumulative net loss expectation for SoFi 2017-F’s loan pool is approximately 2.0%.

The complete rating actions are as follows:

Issuer: SoFi Professional Loan Program 2017-F LLC

$381,200,000 Fixed Rate Post-Graduate Loan Asset-Backed Class A-1FX Notes, Definitive Rating Assigned Aaa (sf)

$313,600,000 Fixed Rate Post-Graduate Loan Asset-Backed Class A-2FX Notes, Definitive Rating Assigned Aaa (sf)

Three Subtle ETF Distortions (INTL FCStone Email), Rated: AAA

In “Dumb Beta”, I highlighted the market distortions caused by heavy purchases of similar securities by seemingly
different “smart beta” funds. In “Modern Portfolio Theory as Opium for the Masses”, I argued that the “passive is
best” philosophy that underpins the ETF revolution could eventually endanger price discovery and capital
formation.

Today, I want to focus on subtler distortions that are often missed by the media but do matter over time. First, the
switch from active mutual funds to ETFs is not neutral. Because ETFs hold much less cash, the rotation creates
additional demand for stocks.

Equity ETFs

Bottom Line:
1 – Because of ETFs’ lower cash balances, the great rotation into ETFs results in extra buying of securities
2 – Competition from ETFs has forced mutual funds to hug their benchmarks and reduce active bets
3 – Recent regulatory changes in Europe and the U.S. have internalized the “passive is best” philosophy

Equity mutual funds and ETFs

Read the full report here.

Banks are missing the point of open banking (Tearsheet), Rated: AAA

Executives from PNC and Bank of America said Tuesday it’s not that they’re not ready for open banking — it’s that their customers aren’t.

Ward highlighted that companies’ enterprise resource planning systems are still as archaic as some of the legacy infrastructure burdening the banks, citing a customer that recently stressed paying employees in physical checks.

But a lot of banks aren’t as ready as they think they are, according to Kevin Kohut, global API strategy lead at Accenture. You may see product announcements here and there from banks’ chief innovation officers embracing open banking, but Kohut, who works with their enterprise architects to actually put the technology and infrastructure in place, said banks still struggle to recognize the platform as a necessary component and say “we’ll just put that in later.”

Reality check
Whether or not banks are ready depends on interpretation and perspective. It’s the job of regulators to determine whether or not a bank is compliant; it’s the job of the bank to determine how it will deliver open banking solutions that are compliant. But banks seem to be missing the more important point of open banking, which has come a long way from merely sharing data through application programming interfaces, according to Simon Paris, deputy CEO of Finastra.

Open banking isn’t specifically about financial institutions and startups opening up different capabilities to peers and competitors, it’s broadly about being able to power a “banking economy,” in which people don’t need the bank itself — just the expertise they can provide invisibly.

BitPay Raises $ 30M in Series B Funding (Finsmes), Rated: AAA

BitPay, an Atlanta, GA-based blockchain payments technology platform, raised $30M in a strategic Series B funding round.

The round was led by Aquiline Technology Growth (ATG), a fund managed by Aquiline Capital Partners that invests in early- and growth-stage financial technology companies.

BoeFly Tops $ 6.0 Billion of Volume on Its Online Small Business Lending Marketplace (Digital Journal), Rated: A

BoeFly has announced that effective today, more than $6.0 billion of small business financing activity has flowed through its online marketplace.

BoeFly’s unique suite of products are designed to meet the needs of borrowers, lenders, brokers and franchisors. They include:

bQual – A patented online, real-time financing education report that delivers a business owner their FICO score, SBSS (small business score required on SBA loans) and financing education, all without impacting the borrower’s credit.

bVerify – An asset verification, background check, and credit check service.

bFinance – A BoeFly service in which a small business owner receives a dedicated financing expert to support them through the financing process as well as other enhanced features such as their bQual and a business plan writing tool.

Loan Sale Marketplace – BoeFly provides lenders with a safe, secure an efficient platform to sell loans, or portions of loans, such as the government guaranteed portion of SBA loans.

A Lesson on Lending: Alternative Lenders and Community Banks (Let’s Talk Payments), Rated: A

According to a survey by the Federal Reserve and the Conference of State Bank Supervisors, small business lending at community banks fell by 2.2% in 2016, while small business lending at banks with more than $10 billion in assets grew by 5.1%. Additionally, 26% of small businesses that sought funding in 2016 turned to alternative lenders, according to the Federal Reserve’s 2016 Small Business Credit Survey. In short, today’s community banks are challenged with increased competition, from both banks and their non-bank counterparts, coupled with increasing customer demands.

Maxwell Financial Labs Raises $ 3M in Funding (Finsmes), Rated: A

Maxwell Financial Labs, Inc., a Denver, CO-based provider of B2B digital mortgage cloud software, raised $3m in funding.

The round, which brings the total capital raised to date by the company to $5m, was led by the investment arm of Anthemis Group, with participation from Route66 Ventures and Assurant Inc., and existing investors.

Payday lender’s IPO gets a ‘meh’ from Wall St. (New York Post), Rated: A

Curo Financial, which operates controversial loan firms like Speedy Cash that typically target lower-income borrowers, had a middling start to its initial public offering on Thursday, as unresolved regulatory concerns still loom in Washington.

The stock which priced at the low end of a $14-to-$16 range late Wednesday, raising $93 million. Recently the shares were at $14.20 in Thursday afternoon trades.

Company claims first AI advice launch (FT Adviser), Rated: A

A company claiming to be the first in the world offering financial advice with artificial intelligence has launched.

Pefin was founded by former Goldman Sachs executive Ramya Joseph and has no minimum investment, charging $15 (£11) a month for financial advice.

The company, based in New York, charges 0.25 per cent with the first $5,000 (£3,700) managed for free.

Pefin’s artificial intelligence is capable of making 80-year financial projections and keeping up with between two and five million data points for each user, including changing rules, markets, and lives to provide real-time advice.

Traders on a $ 1 billion cryptocurrency exchange say they can’t withdraw money and are left in the dark about why (Business Insider), Rated: A

Customers of cryptocurrency trading platform Bittrex are complaining of problems withdrawing money and say they have been left in the dark by the huge US exchange.

The majority appear to have issues verifying their identities when trying to withdraw money from the platform. The people who BI spoke to are angry that they have received little to no communication from the platform about the issues, leaving them confused and concerned.

Forbes, Faster Payments, and FinTech: Cutting-Edge Banking Topics at Deluxe Exchange 2018 (Deluxe.com), Rated: B

Hundreds of movers and shakers in the banking industry will mix, mingle, and get up to speed on the latest industry topics when Deluxe Exchange (aka DX18) takes place in Boca Raton, Florida, Feb. 5-7.

This year’s keynote speakers at Deluxe Exchange include Steve Forbes, chairman and editor-in-chief of Forbes Media; Maria Bartiromo, global markets editor at Fox Business Network; Daniel Pink, bestselling author of five books on work, business, and behavior, and Deluxe Financial Services President, John Filby.

Other highlights for 2018:

  • Ernie Martin of Receivables Savvy will show how AI tools are being leveraged to make payment processing more efficient.
  • Jonathan Marguilies of Winterberry Group reviews his predictions for how data will continue to revolutionize marketing and advertising.
  • Jan Estep of NACHA talks about the evolution of electronic payments and ways AI and same-day ACH are meeting the need for speed.

Differentiated Research Partners with P2P Compliance (NB Herard), Rated: B

Differentiated Research, a revolutionary platform that enables asset managers to anonymously set their own price for investment research, is collaborating with P2P Compliance, a leading provider of compliance management solutions to regulated and non-regulated companies in the investment, financial and marketplace lending industries.

Juan Tavares of LendingPoint predicts where fintech will head next year (LendingPoint), Rated: B

  • Critical category creation. Non-balance sheet models like P2P and marketplace lending will continue to show signs of fatigue in credit performance. While these platforms meet an important need in the market, the model itself is capital-light and credit-last. Because there is not enough premium on credit assessment (matching the right customer to the right product), there is little alignment of interest between lenders, borrowers, and investors. This will result in further restriction of access to credit for worthy borrowers who need it most.  We’re at a time of critical category creation in lending. Credit-first, balance-sheet lenders are poised to upend the space.
  • Continued collaboration in the industry.  Despite ongoing questions about FinTech’s ability to live up to its promise, FinTech companies will continue to partner with incumbent banks and big tech companies and spur innovation in the industry.
  • The intersection of payments and credit will be the next FinTech frontier.  Products that offer credit at the point of need, like PayPal Credit, Square, Affirm and LendingPoint will solve for consumer pain points; those with a credit first model will win the day.

Chargeback Gurus CEO Wins Finance Monthly’s 2018 FinTech Award for FinTech Entrepreneur of the Year USA (PR Newswire), Rated: B

Chargeback Gurus, a global leader in e-commerce chargeback and fraud prevention solutions, is proud to announce that its CEO Srii Srinivasan has received the Finance Monthly FinTech Awards 2018  for FinTech Entrepreneur of the Year – USA. The Fintech Awards acknowledge and reward the individuals, firms, start-ups and banks who are recognized as leaders and thought leaders in their area of expertise.

United Kingdom

The UK’s ‘alternative finance’ industry is now worth £4.6 billion (Business Insider), Rated: AAA

The UK’s “alternative finance” industry has grown by 43% over the last year to £4.6 billion, according to a new report from the University of Cambridge.

Here’s how the £4.6 billion “altfi” sector breaks down, according to the report:

  • Peer-to-peer business lending: £1.23 billion
  • Peer-to-peer consumer lending: £1.17 billion
  • Peer-to-peer property lending: £1.15 billion
  • Invoice trading: £452 million
  • Equity crowdfunding: £272 million
  • Property crowdfunding: £71 million
  • Reward-based crowdfunding: £48 million.

Startups & SMEs are Big Beneficiaries of UK Alternative Finance as Market Grows by 43% Year over Year (Crowdfund Insider), Rated: AAA

The Cambridge Centre for Alternative Finance (CCAF), the leading global research institute for all things Fintech, has published its fourth annual survey on UK alternative finance. According to the report, entitled Entrenching Innovation: The 4th UK Alternative Finance Industry Report, the sector of emerging financial innovation grew by 43% in 2016, jumping to £4.3 billion in the UK. In 2015, the total amount was pegged at £3.2 billion.

As part of the research, the CCAF surveyed more than 8,300 investors and online lenders, as well as 77 crowdfunding and peer-to-peer platforms in the United Kingdom.

Anil Stocker, CEO and co-founder of invoice finance firm MarketInvoice, commented on the data in the CCAF research report;

“We very much recognise this trend [alternative finance growth]. We advanced £414 million to UK businesses in 2016 during which we passed the £1b in cumulative funding milestone since we started in 2011. This year (2017) we’ve already advanced £657 million and are close to reaching £2 billion in funding (currently at £1.7 billion).”

The UK alternative finance market was dominated by the five largest platforms that hoovered up 64% of activity in 2016. While few new entrants cropped up in 2016, over 35 UK platforms either merged or simply went away during the year.

Pension funds, small businesses boost growth in UK alternative finance (Reuters), Rated: A

Last year, 4.6 billion pounds ($6.2 billion) was raised through alternative channels, up from 3.2 billion pounds in 2015, according to a survey of 8,300 investors and 77 crowdfunding or peer-to-peer platforms.

Approximately 72 percent of the year’s market volume, or 3.3 billion pounds, was driven by demand from start-ups and small businesses. That was up from 50 percent the year before.

Institutional investors including pension funds, asset managers and banks were also increasingly backing the platforms, the survey showed. Funding from these sources accounted for 34 percent of peer-to-peer property lending, 28 percent of peer-to-peer business lending and 32 percent of peer-to-peer consumer lending.

P2PFA members banned from raising funds through their own platforms (P2P Finance News), Rated: AAA

PEER-TO-PEER Finance Association (P2PFA) members are to be banned from using their own platforms to raise funds as part of new operating principles launched by the self-regulatory body.

P2PFA Boosts Standards for P2P Lending in UK as Leading Fintech Sector Continues to Grow (Crowdfund Insider), Rated: A

The new Operating Principles will come into full force next April. The new Principles are as follows:

  • Enhancements to the full and comparable disclosure of bad debt and likely returns for investors;
  • A ban on platforms borrowing or raising funds through their own platforms;
  • Robust credit risk management policy and practice;
  • A requirement that retail lenders are not discriminated against in favour of wholesale lenders;
  • Transparency for investors so that they can see where their money is being lent;
  • Improved disclosures on liquidity risk and risk to capital;
  • A requirement to match the term of a direct lending contract with the term of the loan that is agreed;
  • Platform governance requirements; and
  • A commitment to undertake and publish assessments of platform resilience in stress scenarios

How the UK’s regulatory framework protects P2P investors (City A.M.), Rated: A

In the UK, the sector has been overseen by the Financial Conduct Authority (FCA) since April 2014, when it took over the regulation of consumer credit from the former Office of Fair Trading. In November last year, LendingCrowd became the UK’s first P2P lender focused on the SME market to move from interim to full FCA authorisation.

These developments demonstrate that the UK remains at the forefront of the P2P industry – in contrast with other countries such as the US, where regulation has seemingly not adapted as quickly, perhaps leading to negative sentiment towards the sector.

Mark Barnett: I don’t buy the bull story for banks (Citywire), Rated: A

Peer-to-peer lending investment trusts have delivered a mixed performance, but Invesco Perpetual’s Mark Barnett, a big backer of the sector, is still bullish.

Real story exposed by student loan book sale (EveningStandard), Rated: A

But yesterday was the big day. Some 411,000 loans, neatly divided into four bunches — or tranches, according to their different levels of quality and the time they have left still to run — were offered to the City.

Relief all round you might think except that at the top of the first page it says the sale raised £1.7 billion and at the bottom of the second it mentions,  in a throwaway line, that the face value of what was sold was £3.54 billion.  So, they actually got less than half the face value of the loans they sold.

New CFO For Quint Group (Quint), Rated: B

Quint Group today announced the appointment of Anuj Bhatnagar as chief financial officer.

Based at the Group’s Cheshire headquarters as well as its offices in London, Bhatnagar will be responsible for delivering Quint’s financial strategy and oversight across the Group’s global operations. His appointment is effective immediately.

China

Dianrong Names Executive Chairman, Co-Chairman and CEO (PR Newswire), Rated: AAA

Dianrong today made a series of senior executive announcements:

Soul Htite, Founder and former CEO, has been named Executive Chairman of the Board.

Kevin Guo, Founder and former Co-CEO, will serve as Co-Chairman of the Board.

Long Hsiang Loh, former Chief Operating Officer, has been promoted to Chief Executive Officer (CEO).

Additional details about Dianrong executives are available at www.dianrong.com/en/.

New digital bidding service in China brings enhanced liquidity, efficiency (The Asset), Rated: A

A NEW cash management service which digitizes the bidding process is taking shape in China, bringing substantive advantages for both bidders and sellers alike.

Guangfa Bank, a Chinese commercial bank with a focus on transaction banking, has started providing a smart bidding service, where sellers are able to return deposits automatically at a time previously set by the project manager. Traditionally, finance managers needed to manually transfer the deposits back to the bidders one by one.

European Union

Mobile Banking App Revolut Adds Litecoin, Ether Trading (Coindesk), Rated: AAA

Mobile banking startup Revolut is adding litecoin and ether trading to its app-based service.

The move to add new cryptocurrency options follows the company’s integration of bitcoin support last July, having completed a $66 million Series B funding round.

Chief executive Nikolay Storonsky announced Tuesday that all customers would be able to begin trading in the new offerings on Thursday, according to TechCrunch.

The European FinTech Investment Boom – Will It Last? (NUWire Investor), Rated: A

In fact, the UK and Ireland alone accounted for more than 42 per cent of the European total of FinTech in March 2015. That’s twice as much as Silicon Valley, where more and more startups are holding back on their investments.

IRELAND’S 1ST PEER-TO-PEER FUNDED PROPERTY DEVELOPMENT (Business World), Rated: A

Ireland’s first Peer to Peer property-backed loan of €1.5m was launched by Initiative Ireland today. This positions the finance company as Ireland’s 2nd Largest Peer to Peer Lender.

The loan was made to North Strand Five Lamps limited, to finance a social housing development in Dublin 1, consisting of 10 apartments and a ground floor cafe.

International

Introducing Caviar – the Innovative Blockchain-Based, Real-Estate Backed Token (Cryptocoins News), Rated: AAA

Real Estate is a huge $217 trillion sector that has little or no share in the ever-increasing crypto market. Caviar is one of the first companies to realize this gap and has come up with a dual-purpose platform that has a token backed by real estate projects and a real estate crowdfunding platform, all rolled into one.

Caviar is launching a crowdfunding campaign starting from November 28, 2017. The funding goal is $25 million and the hard cap is set at 375 million tokens. The main ICO will start from December 12, 2017 and last until January 31, 2018.

 

Australia

Credible founder Stephen Dash comes home for biggest ASX tech IPO of 2017 (Financial Review), Rated: AAA

A 33-year-old Australian tech entrepreneur, who left Australia five years ago for Silicon Valley, will return home to ring the bell at the Australian Securities Exchange on Friday as his fintech company Credible becomes the biggest local tech float of the year.

Stephen Dash, a former investment director at Mark Carnegie’s private equity, venture capital and advisory firm M.H. Carnegie, already raised over $US20 million ($26.5 million) in external funding for the US-focused online student loan marketplace before raising $68 million through an initial public offering, which valued the company at $306.6 million.

Mr Dash owned 55 per cent of the company but following the raising, which was underwritten by Bell Potter, his stake will fall to 44.7 per cent. His shares, which are held in CDIs, will be escrowed for two years.

In addition to being the largest tech IPO of 2017, Credible is also the second largest ever tech IPO raise for a foreign company on the ASX, behind Kiwi billing software company Gentrack, which raised $90.5 million in 2014.

Australian tech IPO
Source: Financial Review

ASX selects distributed ledger technology to replace CHESS (Digital Asset), Rated: A

ASX today announces its intention to replace CHESS using distributed ledger technology (DLT) developed by
its technology partner Digital Asset (DA).

CHESS (Clearing House Electronic Subregister System) is the system used by ASX to record shareholdings and
manage the clearing and settlement of equity transactions in Australia.  ASX is now taking the opportunity to replace
CHESS with a next generation post-trade platform using contemporary technology.

Payday lenders included in bank inquiry (Sky News), Rated: B

Royal Commissioner Judge Kenneth Hayne will investigate lenders who target low-income Australians who are not in a position to repay their loans.

Africa

WorldRemit raises $ 40m to target 5 million customers in Africa (Military-Technologies), Rated: AAA

Leading digital money transfer service WorldRemit (www.WorldRemit.com) has raised $40m to drive its next phase of global growth, aiming to serve 10 million customers connected to emerging markets. Half of these customers will be in Africa.

As part of the expansion, WorldRemit will enable customers in Africa to transfer money to 148 countries as easily as sending an instant message, using the WorldRemit app.

Money transfers to Africa account for more than half of WorldRemit’s total volume of transactions. The company currently handles 74% of remittances to popular mobile money services across Africa like MTN, Ecocash, Tigo Pesa, Vodafone M-Pesa and Airtel Money, making it the global leader in mobile-to-mobile international money transfers.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

Testimonials

default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest

Daily News Summary Digest Sent Daily To Your Inbox