- Today’s main news: GreenSky raises $4.5B in equity, becomes most valuable online lender. Funding Circle has eye on IPO at 2B GBP valuation. P2P lenders in India blame lending limit on rising costs. GN Compass wants to disrupt lending liquidity in Canada.
- Today’s main analysis: Can Mifid II spur growth in European ETF market?
- Today’s thought-provoking articles: What 2018 means for marketplace lenders. Lend Academy predicts 2018. Why one former Netflix executive is betting on LendingClub. Outlook for fintech in 2018.
- Who’s the most valuable online lender? AT: “This is proof that alternative lending still has surprises. That forces me to ask, What other surprises are store for the industry in 2018?”
- What does 2018 mean for marketplace lenders? AT: “The focus here is on Prosper, OnDeck, and LendingClub. While it’s an interesting read, Lend Academy’s analysis of 2017 and 2018 is a better one.”
- Predictions for 2018. AT: “From Lend Academy. Peter Renton doesn’t just predict the coming year. He also looks back at 2017 to see how many predictions he got right. Four out of seven at least partially right, which isn’t bad. Regarding his 2018 predictions, #1 is a no-brainer, #3 is somewhat bold but conceivable, #4 is likely and a fear of mine as well, Square is a tech giant? #6 is entirely likely, and probable.”
- The top 10 most important MPL stories of 2017. AT: “From Lend Academy, again.”
- An ex-Netflix exec bets on LendingClub. AT: “An interesting comparison, but LendingClub has to push through the veil.”
- Ousted SoFi CEO is back. AT: “Interesting comment on why it matters.”
- Affirm’s business is marketing. AT: “Of course.”
- Where does alternative lending go from here?
- RIAs are betting more on alternative investments.
- 2 alternative lending charts that surprised us in 2017.
- Silicon Valley doesn’t understand banking and fintech.
- Will future core banking systems be open source?
- Will banks buy into credit union fintech?
- Another 2018 fintech prediction.
- Bankers nervous about credit union regulator for head of Consumer Financial Protection Bureau.
- Funding Circle plans IPO. AT: “I’m glad to see somebody thinking about an IPO rather than an ICO.”
- Urban Jungle raises 1M GBP. AT: “Congratulations.”
- Moneywise reveals top financial resolutions.
- IFAs fight back against digital investment management.
- Proplend looks back at 2017 successes, announces 2018 plans.
- 5 alternative investments.
- Is 2018 the year for tech IPOs?
- Fintech outlook for 2018. AT: “The Finanser is a banking blog with interesting insights from time to time on fintech and technology for banking.”
- Top 10 blockchain companies.
- United States
- Who’s the Most Valuable Online Lender? After This Deal, It’s GreenSky (WSJ), Rated: AAA
- What 2018 Will Mean For Marketplace Lenders (PYMNTS), Rated: AAA
- Marketplace Lending Predictions for 2018 (Lend Academy), Rated: AAA
- The Top 10 Most Important Marketplace Lending Stories of 2017 (Lend Academy), Rated: A
- Ex-Netflix Exec Thinks This Fintech Company Has Netflix-Like Potential (The Motley Fool), Rated: AAA
- Ousted SoFi CEO is back with a new startup (Axios), Rated: A
- Affirm’s big business for 2018 is marketing (Tearsheet), Rated: A
- Where Does Alternative Lending Go in 2018? (Hackernoon), Rated: A
- Alt investments on the rise among RIAs (InvestmentNews), Rated: A
- 5 fintech charts that surprised us this year (Tearsheet), Rated: A
- What Silicon Valley Misunderstands About Banking & Fintech (The Financial Brand), Rated: A
- Will tomorrow’s core banking systems run on open-source software? (American Banker), Rated: A
- For fintech owned by a CUSO, will banks buy? (Banking Exchange), Rated: A
- Fintech Predictions For 2018 (Financial Advisor), Rated: B
- Bankers anxious as Trump mulls credit union regulator for CFPB (American Banker), Rated: B
- United Kingdom
- UK’s Largest P2P Lender Funding Circle Said to be Planning IPO at £2 Billion Valuation (Crowdfund Insider), Rated: AAA
- Urban Jungle Raises £1M in Seed Funding (FinSMEs), Rated: A
- Moneywise reveals top 2018 financial resolutions for UK adults (London School of Business & Finance), Rated: A
- When IFAs fight back against digital investment management (WhatInvestment.co.uk), Rated: A
- Proplend Looks Back on 2017 P2P Successes & Announces 2018 Plans (Crowdfund Insider), Rated: A
- 5 alternative investments to the stock market (BM Magazine), Rated: B
- Could 2018 be a bumper year for tech IPOs? (Computer Business Review), Rated: B
- European Union
- ETF providers hope Mifid II will spur European growth (Financial Times), Rated: AAA
- The FinTech outlook for 2018 (The Finanser), Rated: AAA
- Top 10 Companies of the Blockchain Industry in 2017 (Coin Telegraph), Rated: A
- P2P players blame lending limit for rising costs (Business Standard), Rated: AAA
- P2P lender AnyTimeLoan, prop-tech startup Foyr, tech firm Imanis raise funds (Deal Street Asia), Rated: A
- Crowdo Recaps 2017 Milestones: 3,500+ Projects Funded (Crowdfund Insider), Rated: A
- Meet GN Compass: The ICO Attempting to Disrupt Liquidity In The Lending Market (Equities.com), Rated: AAA
- Older Canadians still leery of fintech despite flood of services, RateHub finds (IT Business), Rated: A
- Internet firm Opera bets on Kenyan to steer Africa Fintech (Business Daily), Rated: A
Who’s the Most Valuable Online Lender? After This Deal, It’s GreenSky (WSJ), Rated: AAA
Financial-technology firm GreenSky LLC raised new equity from Pacific Investment Management Co. in a deal that valued the digital lender at nearly $4.5 billion, said a person familiar with the matter.
It vaults GreenSky over Social Finance Inc. to become the most highly-valued online lender in the U.S. It also makes the Atlanta company the second most valuable privately held U.S. fintech company behind Stripe Inc., which processes payments for Internet businesses.
Pimco, the Newport Beach, Calif., money manager, invested at a valuation roughly 25% above the $3.6 billion GreenSky fetched in 2016.
What 2018 Will Mean For Marketplace Lenders (PYMNTS), Rated: AAA
2017 was a tough year for some of the biggest names in alternative financial services in the U.S. – Prosper, OnDeck and LendingClub, in particular.
Breslow is hyping OnDeck’s future of partnerships with mainstream baking players – in particular, calling out a renewed partnership with JPMorgan Chase in August to expand the banks’ SMB lending reach.
Prosper, perhaps unsurprisingly, is focused on remaining prosperous, as measured by profitability and further developing its new securitization platform.
LendingClub finally got investors to show them some love – and after its record low following its analyst day earnings accounting, stock jumped 15 percent in mid-December and has managed to hold relatively stable.
Marketplace Lending Predictions for 2018 (Lend Academy), Rated: AAA
First, let’s review my predictions I made exactly one year ago.
- 2017 will be the year of the bank partnership
I would say I was partially right on this one.
- The OCC Fintech Charter will receive a positive reception
So, while many of the fintech platforms supported the charter there was no real positive movement this year.
- Lending platforms will offer banking products
While we had a couple of platforms offering credit cards for the most part this prediction failed to materialize.
- One large platform will be acquired
Student lender Earnest was acquired by Navient in a deal announced in early October.
- There will be no new IPOs this year
I was almost right on this one but one US lending platform did have an IPO in 2017.
- China will become an important source of capital outside the USA
I got this one right.
- Artificial intelligence will take center stage
I think I read more articles about AI this year than in the previous five years combined.
My 2018 Marketplace Lending Predictions
- Five top 25 banks will launch their own online lending platforms
Banks have realized that if you want to provide successful loan products today you need to have an online presence.
- Two new pieces of legislation will be passed that will benefit the industry
- One of the top five (non-bank) online lending platforms will be acquired
- A major lending platform will get hit with a cyber attack
Here is the one prediction where I really hope I am wrong.
- The tech giants consolidate their positions in online lending
Amazon, PayPal and Square have all started to roll out various online lending offerings to their huge customer bases.
- 2018 is the year of product line expansion
- Messaging apps start to get integrated into online lending
The Top 10 Most Important Marketplace Lending Stories of 2017 (Lend Academy), Rated: A
- Mike Cagney is Gone as CEO of SoFi Effective Immediately
- The Cleveland Fed Retracts Their Report on “P2P Lending”
- Prosper Finally Closes Their Big $5 Billion Deal
- Renaud Laplanche is Back with a New Consumer Lending Platform Called Upgrade
- The New Breed of Small Business Lenders: Amazon, Paypal and Square
- The Fastest Consumer Lenders to $1 Billion in Originations
- CFPB Announces No-Action Letter to Upstart
- The OCC Publishes Details on the Fintech Charter
- Bills Being Introduced to “Fix” Decision in Madden v. Midland
- Takeaways From LendingClub’s First Ever Investor Day
Ex-Netflix Exec Thinks This Fintech Company Has Netflix-Like Potential (The Motley Fool), Rated: AAA
Netflix has completely disrupted the entertainment industry, sending large incumbents scrambling to compete with its vast global scale.
How did Netflix pull this off? Several reasons, but one is certainly Netflix’s unique culture, outlined in its now-famous Culture Deck.
That deck was constructed by Patty McCord, who spent 14 years as Netflix’s chief talent officer.
The company McCord joined is Lending Club (NYSE:LC).
In the press release, McCord stated:
I see a lot of parallels between where Netflix was as a company 10 years ago, where LendingClub is today, and where it can go in the next 10 years. I’m attracted to LendingClub for the stellar people and the way it exemplifies the concepts of freedom and responsibility. Culture can help drive innovation in companies that are paving new ground and transforming legacy industries, like Netflix did and like LendingClub is doing today. … In our innovative world, I see marketplaces like LendingClub as the future.
Ousted SoFi CEO is back with a new startup (Axios), Rated: A
Why it matters: If 2017 was the year in which VCs began to fire controversial execs, 2018 may be the year in which they’re forced to decide on quick-turn second acts.
Affirm’s big business for 2018 is marketing (Tearsheet), Rated: A
Affirm isn’t just a payment method or a personal loan anymore — it’s a marketing lever for merchants
Affirm sees every transaction at the point of sale — who is buying, what they’re buying and where; it’s a departure from the way credit is underwritten today, where lenders have no idea why borrowers need the money or how they’ll use it
Where Does Alternative Lending Go in 2018? (Hackernoon), Rated: A
When most people think of alternative lending, they immediately think of payday loans and other abusive loan products. In the tech world, the first thing that comes to mind are online lenders: those who take loans traditionally originated in person and move them online. That was the first wave of alternative lenders — think LendingClub, Prosper, OnDeck, to name a few.
Alt investments on the rise among RIAs (InvestmentNews), Rated: A
Based on the success of the RIA industry, the trend of breakaway advisers interested in exploring the independent channel continues to gain momentum.
Propagated by wirehouse branch management to keep their top producers in their seats, this false campaign is now being revealed as its exact opposite; there are more customizable solutions for RIAs to access and deploy alternative investments for their high net worth clients than ever before.
For example, to access alternatives on their own, RIAs in the past typically would be looking at $25 million AUM minimums just to reach cost-effective scale, and many alternative managers have $10 million individual minimums themselves.
5 fintech charts that surprised us this year (Tearsheet), Rated: A
Loyalty and rewards incentives may not be enough to make consumers like mobile payments, and it could be on retailers to find what would keep people coming back to their mobile wallets. Mobile payment adoption among Apple, Android and Samsung Pay today is low. Paying with cash or card works just fine for them, customers say.
Transparency is the big sticking point when it comes to why small businesses still prefer banks to online lenders.
What Silicon Valley Misunderstands About Banking & Fintech (The Financial Brand), Rated: A
There are some relevant lessons learned about behavioral finance and digital adoption discussed in the book “FinTech Innovation.” One of the most important lessons is the distinction between digital banking winners and laggards over time.
- Disruptive innovation is ultimately less important than sustaining innovation.
- Digital is a ‘pull’ technology, while much of financial serves are ‘push’ market places.
- Platforms win on digital: bundling is more important than unbundling.
The Distinction Between ‘Push’ and ‘Pull’ Marketplaces
Digital brings many benefits to streamline the processes in financial services, but front office disintermediation could easily create financial exclusion in the Western world because many households operate in a ‘push’ modality. Only the few self-directed consumers are comfortable enough to ‘pull’ financial products.
This is the reason why the growth of first mover Robo-Advisor solutions were initially very promising but then faltered, while firms like Vanguard and Charles Schwab can still grow fast on digital.
Being a ‘pull’ marketplace means using digital with a purpose, like looking for a specific product on Amazon. However, very few households would google for the next investment fund or business loan. Instead, the majority would ask a friend, a banking organization or an advisor about their recommendations.
Will tomorrow’s core banking systems run on open-source software? (American Banker), Rated: A
Banks, long committed to keeping customer data private and their own code proprietary, are now opening up to fintechs and third-party developers in new ways.
Open-source projects are underway at Deutsche Bank, which made code from its Autobahn commercial banking software publicly available this fall, and at JPMorgan Chase, whose Quorum blockchain software is available in the open-source software repository GitHub.
For fintech owned by a CUSO, will banks buy? (Banking Exchange), Rated: A
Morales, CEO of QCash Financial, a credit union service organization (CUSO) owned by WSECU (formerly Washington State Employee Credit Union), says that constraint may be lessening based on the final ruling on payday lending issued by the Consumer Financial Protection Bureau in October.
Credit unions, however, are interested in the QCash small-dollar lending platform. Morales says that nine credit unions have signed up for the product and five are currently live with it.
Fintech Predictions For 2018 (Financial Advisor), Rated: B
Identity verification will be a priority in 2018, with 60 percent of online marketplaces and other websites adopting technologies and techniques for verifying new users’ identities, the company predicts.
Bankers anxious as Trump mulls credit union regulator for CFPB (American Banker), Rated: B
The Trump administration’s consideration of J. Mark McWatters to lead the Consumer Financial Protection Bureau is stoking fears among bankers that he will show favor to credit unions once in office.
UK’s Largest P2P Lender Funding Circle Said to be Planning IPO at £2 Billion Valuation (Crowdfund Insider), Rated: AAA
Funding Circle, a UK based peer to peer lender, is reportedly planning an initial public offering (IPO) for 2018. The news of the new listing is courtesy of SkyNews that reports Funding Circle will begin meeting with investment banks during Q1 of 2018 as they sign up underwriters for the deal. Shares are expected to list at some point in late 2018. If Funding Circle trades on an exchange it will become the first UK P2P lender to do so thus representing a seminal event in the online lending industry.
Urban Jungle Raises £1M in Seed Funding (FinSMEs), Rated: A
Urban Jungle, a London, UK-based insurtech startup, completed a £1m seed funding round.
Moneywise reveals top 2018 financial resolutions for UK adults (London School of Business & Finance), Rated: A
Research from financial advice website Moneywise has revealed the top financial goals of its users for 2018.
Moneywise found that cutting down on unnecessary spending was the top financial resolution for 2018, with 18 per cent citing this as their main priority.
Starting or boosting cash savings was voted the second most popular financial resolution for 2018, with this goal being set by 11 per cent of Moneywise users, whilst 10 per cent plan to start investing for the first time or boosting investments in a Stocks and Shares Isa.
When IFAs fight back against digital investment management (WhatInvestment.co.uk), Rated: A
More robo-advice platforms are on the market than ever before, and the number will grow rapidly during 2018. A joint report from the FCA and the Treasury, published last June, found that 100 robo firms are either on the market already or in active development.
IFAs may well find this frustrating – even with professional credentials and years of experience, they are subject to more distrust and scrutiny than a number of untested algorithms. Worse, these algorithms may come to represent their primary competition: they offer lower prices, they open up access to financial advice, and there is a range of options available for customers minded to use them, with more to come.
Proplend Looks Back on 2017 P2P Successes & Announces 2018 Plans (Crowdfund Insider), Rated: A
On Tuesday, online platform Proplend gave its 2017 peer-to-peer lending year in review.
- The majority of platforms gained full Financial Conduct Authority (FCA) authorization
- Many platforms sought ISA Manager Status to launch Innovative Finance ISA (IFISA) – with Proplend being among the early adopters.
- LendInvest withdrew FCA approval application and stepped down from the Peer to Peer Finance Association as it moved from all P2P activity
- RateSetter’s wholesale lending practices notably proved costly. The lender eventually withdrew from the P2PFA after breathing the association’s operating principles
The lender went on to note its plans for 2018:
- The redesign of Lender Dashboards, Proplend.com website and the launch of our Auto-Invest product
- Initially Proplend Auto-Invest will be a low-risk (Tranche A), three-year, Innovative Finance ISA product targeting returns of c.5% each year
- The lender has built a “healthy” loan pipeline which will be available on the platform from early 2018, subject to due diligence, valuations, and legals.
5 alternative investments to the stock market (BM Magazine), Rated: B
- Real Estate
- Gold and other Precious Metals
- Backing and Staking in Poker
- Peer-to-Peer Lending
- Equity Crowdfunding
Could 2018 be a bumper year for tech IPOs? (Computer Business Review), Rated: B
After a couple of quiet years on the IPO front, the market could be ready to bounce back with Funding Circle said to be the first targeting flotation.
In January 2017 the P2P site surpassed a £1bn valuation thanks to an £82m funding round, led by the likes of Accel.
With distribution deals with the likes of the Royal Bank of Scotland and Santander, Funding Circle lent more than £1.7bn in 2017.
The London Stock Exchange revealed that 106 companies floated on its markets in 2017, raising £15bn, up 63% by number and 164% by value on 2016. These numbers mean that the LSE surpassed all European exchanges in the year by both IPO number and by money raised.
ETF providers hope Mifid II will spur European growth (Financial Times), Rated: AAA
ETF trading has since spread to 25 exchanges across Europe, but no accurate record of activity has been required by regulators. About 70 per cent of ETF trading in Europe goes unreported because it occurs via private bilateral over-the-counter transactions.
This should begin to end from Wednesday with the introduction of sweeping European rules designed to strengthen protection for investors and improve transparency across the continent’s financial markets. The package of regulations, known as Mifid II, requires comprehensive, detailed reporting of ETF trades.
The passive investment industry, which is dominated by BlackRock, State Street and Vanguard, are betting Mifid II will set their European businesses on a growth path akin to the US, where usage has spread far more widely and deeply. Assets held in US-listed ETFs stood at $3.5tn at the end of November, compared with just $790bn across all European-listed ETFs, according to ETFGI.
The FinTech outlook for 2018 (The Finanser), Rated: AAA
There are four big things for 2018 from a FinTech viewpoint that are obvious to me however, which are:
- Getting down to business with Artificial Intelligence (AI)
- Rationalising and cleansing core data structures
- Continuing the digital drive
- Distributed Ledger Technology (DLT) continues to rise
Therefore, rather than me making predictions, I thought it interesting to review the views of other commentators.
Jim also wrote another piece that nicely summarises Forrester’s predictions for 2018 which include:
- Banks not embracing Open Banking, but increasing partnerships with start-ups;
- Faster moves to embrace Digital Banking whilst losing focus on face-to-face communications; and
- Focus on back office transformation.
Saxo Bank’s Payments business sent me a press release with their top three predictions, which are:
- The demise of traditional, slow, expensive cross border payments
- Payment Service Providers (PSPs) will help merchants to expand internationally
- Tech giants move into banking
Top 10 Companies of the Blockchain Industry in 2017 (Coin Telegraph), Rated: A
The total market capitalization of all the cryptocurrencies hit the $600 bln mark in December.
Coinbase is one of the top digital currency wallet and platform for exchange. Market capitalization: $2 bln (GDAX)
Ripple is a real-time gross settlement and currency exchange. Its main goal is to make an entire system devoted to money transferring. Market capitalization: $30 bln
P2P players blame lending limit for rising costs (Business Standard), Rated: AAA
Peer-to-peer lending (P2P) platforms have seen a rise in traffic as well as investor interest after registering themselves with the RBI. But they argue the Rs 1-million limit placed on lenders across all platforms is restrictive.
“With time, these limits are going to be relaxed by the RBI. These have been imposed in order to avoid rapid growth that could lead to systemic risk,” said Ekmeet Singh, CEO, Lendbox.
Industry players want the RBI to raise the limit for individual borrowers and remove the limit for institutional lenders.
P2P lender AnyTimeLoan, prop-tech startup Foyr, tech firm Imanis raise funds (Deal Street Asia), Rated: A
While Spice Digital is investing up to $3.9 million in AnyTimeLoan, prop-tech startup Foyr has raised $3.8 million from JLL and others. Also, Wipro has put in an additional $2 million in US-based tech firm Imanis.
Crowdo Recaps 2017 Milestones: 3,500+ Projects Funded (Crowdfund Insider), Rated: A
Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding, posted an infographic citing its 2017 milestones.
Meet GN Compass: The ICO Attempting to Disrupt Liquidity In The Lending Market (Equities.com), Rated: AAA
Collins: I left the railway, cashed out my pension and started my own lending company; Great North Capital Inc. We have successfully funded approximately 100 loans; primarily focusing on high risk clients. Based on my accumulative knowledge and experience in both banking and running Great North Capital, I started to develop the idea for a peer-to-peer lending solution where there is very limited risk to the investors (lenders) while making loans liquid. Also by having our own credit system for borrowers, they have the opportunity to improve their credit rating on the platform by making timely payments and having no delinquencies. At the same time, I was learning more about cryptocurrencies and blockchain technology. I quickly realized the huge potential of the blockchain and how it can solve the liquidity problem as well as securing an investor’s principal capital; which are the main issues of current peer-to-peer lending platforms. I got in touch with Jean Pierre Rukebesha who immediately liked the idea and decided to come on board as co-founder and CFO. Hence GN Compass (Great North Compass) was born.
Older Canadians still leery of fintech despite flood of services, RateHub finds (IT Business), Rated: A
Between last year’s official release of Android Pay, the increasing ubiquity of artificial intelligence (AI)-powered support platforms such as Sun Life’s Ella, and the ongoing digital transformation of Canada’s banks, Canadians have more opportunities than ever to integrate fintech into their lives – but according to financial comparison platform developer Ratehub.ca, the eldest among us aren’t taking advantage.
According to the company’s 2017 Digital Money Trends Report, released last month, fewer than half of baby boomers reported trusting robo-advisors, mobile payments, marketplace and peer-to-peer lenders, and rate comparison website, while in many cases millennials and generation X-ers were nearly twice as likely to do so.
Other findings from the report include:
- Nearly twice as many millennials (44 per cent) and generation X-ers (42 per cent) reported trusting robo-advisors compared to boomers (23 per cent).
- Nearly twice as many millennials (71 per cent) said they trust mobile payments compared to boomers (38 per cent). (62 per cent of generation X-ers said they trust mobile payments.)
- Twice as many millennials (47 per cent) and generation X-ers (48 per cent) trust marketplace lenders compared to boomers (23 per cent).
- 58 per cent of millennials and 53 per cent of generation X-ers trust peer-to-peer lenders, versus only 32 per cent of boomers.
- 63 per cent of millennials and 60 per cent of generation X-ers trust rate comparison websites, versus 42 per cent of boomers.
Internet firm Opera bets on Kenyan to steer Africa Fintech (Business Daily), Rated: A
Internet browser company Opera has picked Eddie Ndichu to drive its Fintech strategy in Africa even as it prepares to set up an office in Nairobi.
Opera has said that it is investing Sh10.3 billion ($100 million) in Africa’s digital economy over the next two years and OPay is part of those investments.
In a statement Tuesday, Opera said that it had appointed Mr Ndichu as the managing director and vice president for Fintech in Africa.