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Thursday January 18 2018, Daily News Digest

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United States

Goldman Sachs’ Online Lending Platform Marcus Has Originated Over $ 2 Billion in Loans, Deposits Rise to Over $ 5 Billion (Crowdfund Insider), Rated: AAA

Meeting a prediction from this past June set by Goldman Sachs CEO Lloyd Blankfein, online lending platform Marcus topped $2 billion in loan originations. Additionally, Marcus reported online deposits of over $5 billion. Deposits and consumer lending have now been combined under a single brand, thus, in reality, creating a challenger bank for the future.

Overall, Goldman Sachs (NYSE:GS) reported net revenues of $32.07 billion and net earnings of $4.29 billion for the year ended December 31, 2017.

Diluted earnings per common share were $9.01 compared with $16.29 for the year ended December 31, 2016. Goldman reported a Q4 loss of $5.51 per share. The results were impacted by a tax related expense of $4.4 billion. Without this expense, Goldman said earnings per share would have been $5.68.

Varo Money Closes $ 45M Series B Financing Round (KUAM News), Rated: AAA

Varo Money, Inc., a mobile banking startup, announced today that it has closed a $45M Series B funding round led by existing investor Warburg Pincus, a global private equity firm focused on growth investing, and The Rise Fund, a global impact fund led by private equity firm TPG. The Rise Fund is committed to achieving social impact alongside competitive financial returns and was founded by TPG Growth Founder and Managing Partner Bill McGlashan, U2 lead singer Bono (a well-known activist and a special partner with TPG Growth), and Jeff Skoll, a global entrepreneur, film producer and impact investor. 30 additional participants — including angels, existing investors and management — were included in the funding round, which will be used to further the explosive growth of Varo’s banking app, which improves the financial lives of its customers. With the closing of this round, Varo will have raised more than $78M in less than two years.

Mobile banking is more important than ever (Business Insider), Rated: AAA

As we’ve seen for the past few quarters, mobile banking is continuing to rise, but the rate of growth is decelerating as offerings mature.

  • JPMorgan Chase has 30.1 million active mobile customers, up 13% from the 26.5 million that the bank counted in Q4 2016, and representing a gain of just 800,000 sequentially.
  • Wells Fargo counts 28.1 million total active digital users, 21.2 million of which use mobile banking.

A BI Intelligence study found that 83% of respondents use mobile banking, indicating that the plateau isn’t because of declining interest, but rather near ubiquity, where growth is coming more from customers new to banks rather than those new to mobile offerings.

mobile banking user growth

How a 23-year-old Max Levchin got Peter Thiel to invest in PayPal in under 24 hours (Business Insider), Rated: A

Levchin told Shontell, “I saw [Thiel’s] name on the pinboard, wandered into a class that was taught by him, which turned out to be more like seminar with six people in the room. So it was a very small group of people. One: I couldn’t sleep because it would be obvious, but two, he was actually pretty interesting. So I stayed awake and chatted him up afterwards.”

That turned out to be a good move. Here’s Levchin:

“In the inimitable Peter Thiel fashion, we basically spend about 20 minutes talking after his lecture, and he said, ‘Well, what are you doing in Silicon Valley?’ I said, ‘I just got here two weeks ago. Probably gonna start a company.’ He said, ‘Oh, great. We should meet for breakfast.’

“We met the next day. He said, ‘All right, so what companies are you thinking of starting?’ I had two ideas that I was concurrently thinking about. I described No. 1., No. 2. He said, ‘No. 1 is better; you should do that.’ ‘OK.’ ‘I’d like to invest.’ It was less than 24 hours later. Peter was a committed investor in my new project.”

Credit score changes would saddle banks with risk to help nonbanks (American Banker), Rated: AAA

Recently, the Federal Housing Finance Agency has been evaluating whether to allow originators that sell loans to Fannie Mae and Freddie Mac to use something other than the currently mandated FICO model. Specifically, the FHFA is evaluating whether originators can also use the VantageScore model offered by a company owned by the three credit bureaus — Equifax, Experian and TransUnion.

VantageScore contends that its model will provide credit scores on more than 30 million additional consumers and make 7.6 million of these scores eligible for a loan sold to Fannie or Freddie because of the model’s supposed ability to more accurately assess blemished and dormant credit histories and accommodate thin credit files that most often effect younger consumers. VantageScore also argues that, since the model consolidates data from all three credit bureaus, it eliminates scoring differences caused by data discrepancies. The result, the company maintains, will be expanded home ownership, a more vibrant housing market, more consistent underwriting and faster economic growth.

The major proponents of the alternative credit scoring model are large nonbank originators and credit reporting firms — companies that make their living from the quantity of loans they originate, not the quality. Their business models shield them from ongoing credit risk and require ever-increasing volumes to achieve scale economies. In short, nonbank originators generally don’t eat their own cooking — either in the form of loans or in the form of securities backed by the loans they originate. Therefore, they have everything to gain from this FHFA change, and very little to lose.

PeerStreet Announces New Investment Product “30-Day Notes” (Crowdfund Insider), Rated: AAA

On Wednesday, PeerStreet announced the launch of its new investment product, 30-Day Note, to provide increased liquidity for accredited investors at 30-day terms. According to the online lender, the 30-Day Notes product was launched quietly in October as a pilot program, is now offered monthly.

PeerStreet
Source: PeerStreet

Axial Members Surpass $ 25 Billion in Closed Middle Market Deals (BusinessWire), Rated: A

Axial, the deal network for the middle market, today announced its members have closed more than $25 billion in deals on 2,000-plus M&A and growth capital transactions since Axial’s launch in 2010. To facilitate these closed transactions, Axial arranged more than 2.1 million private member-to-member deal connections. Nearly one-third (650) of the total transactions closed in 2017.

In 2017, the revenues of businesses that privately transacted using the Axial deal network ranged from $2.9 million to $610 million, with EBITDA ranging from negative $19 million to $223 million. Top sectors of deal flow activity include Business Services, SaaS, Healthcare IT, Distribution & Logistics, and Manufacturing. Notably, 24% of all growth capital transactions attempted in 2017 were in the Technology sector, more than doubling year-over-year from 10% in 2016.

Worthy Peer Capital Receives SEC Qualification for 5% Money Market Alternative (BusinessWire), Rated: A

Worthy Financial, Inc., a modern personal finance company that delivers alternative investment products and digital savings solutions to a wide-range of retail investors, is pleased to announce that its subsidiary Worthy Peer Capital, Inc. has been qualified by the U.S. Securities and Exchange Commission (SEC), under Regulation A+, to bring a new liquid peer-debt product to the entire investing ecosystem.

The new Worthy Bond offers all investors – including non-accredited investors – a 5% fixed return. Although the bonds have a 36 month term, they can be cashed in at any time for those with imminent liquidity needs, thereby serving more as an alternative to traditional money market products. Bonds may be purchased at https://worthybonds.com.

Democrats Add Momentum to G.O.P. Push to Loosen Banking Rules (The New York Times), Rated: A

But unlike the $1.5 trillion tax overhaul, which passed along party lines, the effort to loosen the post-crisis rules is somewhat bipartisan. A group of Senate Democrats has joined Republicans to support legislation that would mark the first major revision of the 2010 Dodd-Frank Act, a signature accomplishment of President Barack Obama that has been deemed “a disaster” by President Trump.

The bill would allow hundreds of smaller banks to avoid certain elements of federal oversight, including stress tests, which measure a bank’s ability to withstand a severe economic downturn. Under current law, banks with assets of $50 billion or more are considered “systemically important financial institutions” and therefore governed by stricter rules. The bill would raise that threshold to institutions with assets of $250 billion or more, leaving fewer than 10 big banks in the United States subject to the stricter oversight.

Banks with assets of $50 billion to $100 billion would be immediately freed from those requirements. Financial institutions with $100 billion to $250 billion in assets, such as BB&T and American Express, would no longer be subject to tougher rules after 18 months, although the Federal Reserve would retain the authority to periodically conduct stress tests on those firms.

The One Big Reason It’s So Hard to Refinance Your Student Loans (Money), Rated: A

More than half of borrowers who applied for refinancing in 2017 were turned down, according on a report released Wednesday by LendEDU, a student loan marketplace that tracked 32,000 applications to eight refinance companies.

Using data from users of the LendEDU marketplace, the report found that 58% of 2017 refinance applicants were ultimately rejected. And those who passed muster had very high FICO credit scores—the average approved applicant had a score of 764. Nationally, the average credit scoreis 700 out of 850; anything above 720 qualifies as excellent.

Refinancing companies are currently advertising fixed interest rates that start at about 3.5%. Yet the average on refinanced loans in 2017 was 5.56%, LendEDU found.

college education
Source: Money

Bill Gates made these 15 predictions in 1999 — and it’s scary how accurate he was (Business Insider), Rated: A

Gates’ prediction: “People will carry around small devices that allow them to constantly stay in touch and do electronic business from wherever they are. They will be able to check the news, see flights they have booked, get information from financial markets, and do just about anything else on these devices.”

No. 3: Instant payments and financing online 

Gates’ prediction: “Automated price comparison services will be developed, allowing people to see prices across multiple websites, making it effortless to find the cheapest product for all industries.”

The Top Ten Fintech Predictions for 2018 (Crowdfund Insider), Rated: A

10. Resurgence of Peer to Peer Lending and the Emergence of A New Asset Class

We’ve seen coin-backed lending such as Salt Lending. There will be many more platforms that will attempt to solve solvency and liquidity issues with lending in fiat currency backed by coins.

9. Alternative Internet

The cost of a simple PayPal transaction might go up dramatically because it was routed through Comcast’s fiber. You may have to pay an additional $3.99 a month for an “Online Banking” package if you want to do online banking…

8. Banks will rule again

Most of the online platforms (payments or lending) plus secondary markets are at the mercy of banks. Without a bank charter, you are simply limited on growth.

6. Baby Boomer Financial, Inc.

The youngest baby boomers are approaching retirement age. The baby boomer generation is about 75 million people (on par with Millennials) in the US and represents a vast amount of wealth in this country. They want to transact, invest, bank and most importantly transfer their wealth in a responsible way. I predict that there will be Fintech startups specifically addressing the needs of this generation of folks.

4. Mass Adoption of Zero Latency Payment Clearance/Credit.

Over the past few decades, we went from a cash society and in-person / in-branch interviews to “same-day” ACH (direct deposit) and next day loan funding. I predict that in 2018, we will see instant credit approval and funding.

3.  Social Networks Venture Into Credit.

I am making another prediction that Facebook or Snapchat will venture into extending credit.

2. Vertical Integration.

WeWork will get into the Working Capital lending business. And dare I say Indeed, Monster, and LinkedIn, will start lending money based on your resume and activities within your professional connections?!

BlackRock makes impact a necessity for companies (ImpactAlpha), Rated: A

Larry Fink flips social impact from a luxury to a necessity for every company. The chief executive of BlackRock, the world’s largest asset manager with $6 trillion under management, served notice on corporate CEOs their companies “must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Fink made his point as clearly as possible: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

Would a bank payday loan be any safer? (Daily Journal of Commerce), Rated: A

Thanks to a recent regulatory change, it now may be possible for banks to offer small, short-term loans that could be a lot less dangerous for borrowers. Whether banks will actually do so remains to be seen.

Standard Chartered creates fintech investment unit (Fintech Futures), Rated: B

Standard Chartered has established a new business unit, SC Ventures, to invest in fintechs and other start-ups.

Christopher Blake Joins Cross River Bank Loan Team (Long Island Press), Rated: B

Veteran loan officer Christopher Blake joined Cross River Bank, where he’ll serve clients in Long Island, Queens and Brooklyn in the lender’s Commercial and Multi-Family Real Estate division, the company announced Tuesday.

Freefly has teamed up with three fantastic financing partners (Freefly), Rated: B

AFFIRM FINANCING

Ideal for individuals looking to finance their Freefly purchases.

SCL EQUIPMENT FINANCE

A flexible lender designed for U.S. business, sole proprietors, and independent contractors.

GLOBAL FINANCE

A creative lender with options for businesses in the U.S. and many countries across the globe.

United Kingdom

Funding Circle’s fund unveils Citibank deal (P2P Finance News), Rated: AAA

FUNDING Circle’s listed fund has inked a deal with Citibank, whereby the financial institution indirectly channels £50m to small businesses through the peer-to-peer lending platform.

The transaction was announced by the Funding Circle SME Income Fund (FCIF) on Wednesday.

Under a rather complicated structured finance deal, Citibank’s London branch will advance a senior, floating rate loan of £50m through two Irish special purpose vehicles. The facility matures in December 2026.

Funding Circle SME Income Fund Limited (London South East), Rated: A

The Board is pleased to announce that the Company has entered into a formal agreement with Citibank, N.A. London Branch (“Citibank London”) to establish a funding transaction to make loans to ?UK small businesses through the Funding Circle platform?. The transaction will serve to support the Company’s target dividend yield of 6-7% per annum.

Under the terms of the agreement Citibank London will provide �50 million of funding into the transaction, by entering into a senior, floating rate loan. The Company will contribute a portfolio of existing UK small business loans at par, and in return shall receive ?approximately �50 million of cash to be deployed in accordance with its investment policy, and junior notes.

Fintech firms struggling to get a foothold with established lenders (The Irish Times), Rated: A

Banks and other financial institutions remain extremely wary of working with fintech firms, particularly in Ireland where few are willing to give start-ups the endorsement they need to help secure business elsewhere.

Andrew Patrick White, founder and chief executive of FundApps, a regtech firm that provides compliance and regulation monitoring services to asset managers and hedge funds, said many financial institutions were afraid of fintech solutions because of a fear that they would be used to replace staff.

“Your grandmother probably has more sophisticated apps on her iPad than many banks have inhouse,” Mr White added.

Your morning briefing (PaymentsSource), Rated: A

‘All-in-one’ cards get another shotCurve has debuted a card in the U.K. that allows consumers to switch a card used to fund a payment after they have left the store. Through the card’s “back in time” feature, card preferences can be changed for up to two weeks, a system the company is selling as a financial management tool. Curve, which is being offered for free with a $60 premium option with more rewards, works like a regular card and is usable anyplace that accepts Mastercard. While all-in-one cards have struggled to gain traction over the years, more than 100,000 people signed up during the card’s testing phase and spent more than $120 million, according to a release.

OnePlus’ fraud hit: Electronic equipment company OnePlus became the latest to get hit with card fraud, with consumers reporting unauthorized transactions and the company disabling credit card payments but still allowing PayPal transactions. The company is doing a complete audit of its systems and is looking for alternative payment options.

When we asked, which, if any, Isas have you used over the 2017/18 tax year, nearly a third (32%) said they’d only used a Stocks and Shares Isa.

This was followed by nearly a quarter (24%) who’ve only used a Cash Isa, and 17% who use a mixture of different Isas.

This decline in Cash Isa savings is likely to be attributed to poor cash savings rates and the introduction of the personal savings allowance in April 2017.

Interestingly, Innovative Finance Isas – used for peer-to-peer lending – don’t appear to have taken off, with just 3% of those who voted in our poll only using this savings vehicle.

Isas
Source: Moneywise

Name Change for Funding Knight as GLI Finance Updates to Sancus Funding (Crowdfund Insider), Rated: B

As part of an ongoing strategic update, GLI Finance has renamed peer to peer lending platform FundingKnight to Sancus Funding Limited with immediate effect. GLI Finance, an AIM listed company, has also transferred ownership to Sancus BMS Group Limited.

China

Qudian is Moving into Budget Auto Financing (CapitalWatch), Rated: AAA

The newly listed peer-to-peer lending company in China, Qudian (NYSE: QD), has moved into auto-purchase financing, a new business initiative called “Dabai Auto,” according to the company.

Launched in late November 2017, Dabai Auto is currently targeting Qudian’s existing high quality users, who have been approved with credit lines, but have not actively transacted in small cash installments. The company also announced that it plans to spend around RMB 100 million ($15.5 million) to promote Dabai Auto through online and offline channels. The offline channels would include Qudian user engagement and delivery centers that are located in the shopping districts of over 100 cities across China.

HNA-owned P2P lending platform doing business normally, executive says (Global Times), Rated: A

Payments of investment products on jbh.com, an online peer-to-peer (P2P) platform owned by HNA Group, remain normal and there have not been any capital losses since the platform was set up three years ago, an executive of the company said on Wednesday.

Payments for all maturing investment products on jbh.com are being made as normal, sina.com.cn reported Wednesday, citing Xia Aobi, president of jbh.com.

International

Funding Circle and Lufax: Two High Profile IPOs for 2018 (Lend Academy), Rated: AAA

Neither IPO is a surprise as both companies have indicated their intentions before. But we now have a clearer indication on the timing. First off the rank will likely be Lufax. The South China Morning Post reported that Lufax is planning to do their IPO in Hong Kong in April at a possible valuation of US$60 billion. This would be more than three times the valuation of their previous funding round in 2016.

The Funding Circle news actually broke just before the New Year with this article from Sky News. They reported that the company was preparing to hire advisors in the first steps towards an IPO. They are supposedly going to interview investment bankers this quarter with a possible listing in London in late fall which would put us in the latter part of the third quarter.

A successful Funding Circle IPO, one where the valuation rises after it goes public will be very good for the marketplace lending industry in both the UK and the US. We have had little good news here in the last couple of years when it comes to the public markets and I would very much like to see a success story here.

Investing on the Mintos Secondary Market – Hint One (P2P-Banking), Rated: AAA

On the Mintos p2p lending marketplace the majority of investors invest on the primary market into loans, either manually or via autoinvest. But for the 29% of investors that do invest on the secondary market picking loans presents them with a huge choice of about 125,000 offers (no typo, really 125K loan parts on offer!).

Mintos
Source: P2P-Banking

For the shown loans there is a very high probability that they will miss the payment and therefore run an additional 60 days until they are repaid under the buyback guarantee. If that happens the remaining actual loan duration would be 62 or 63 days and the impact of the 0.1% discount on the YTM would be much smaller. The resulting YTM would be somewhere around 11 to 13%. So they would not be a good buy and there are much better offers on the secondary market.

Mintos pawnbroking loan
Source: P2P-Banking

With two weeks remaining the effective YTM for a buyer is not 36% but rather around 12%. Again there are offers with better YTMs on the secondary market.

Chinese tech groups undermine banks’ dominance of finance (Financial Times), Rated: AAA

The recent refusal by US regulators to sign off on Ant Financial’s $1.2bn acquisition of Dallas-based money transfer firm MoneyGram International does not signal the end of the Alibaba-affiliated payments group’s US financial ambitions.

On one level, the scuppered deal suggests that Chinese companies, whether state-owned or otherwise, will have an ever harder time winning approval for US acquisitions. The move also confirms that the Americans now believe that the definition of national security — their basis for scrutinising overseas deals — embraces anything related to information and data.

But Ant Financial’s attempted US play also shows how much technology is undermining the dominance of traditional global titans, especially in the financial sphere. It is especially noteworthy that many of the upstart challengers to banks and other legacy companies increasingly either have a Chinese face or Chinese capital behind them. That, in turn, underscores how some Chinese players have leapfrogged into prominence across the world.

Blockchain is revolutionizing the loan industry – a look at Valorem… (Global Crypto Press), Rated: A

Smart contracts are providing the solution to the trust issues that are usually the main concerns in the micro loan industry.  Whether it be student loans, cars, or any other kind of micro lending – blockchain technology provides what’s needed to move away from the banks, and towards a peer to peer lending model.

Volerem Foundation is building the infrastructure to facilitate exactly this.

India

Govt should think of new ways to boost sectors like P2P lending: LenDenClub (India Info Online), Rated: A

Additionally, we also expect the government should think of new ways to boost sectors like P2P lending. Eg.- Enable tax exemption for the lenders on P2P lending platforms, under section 80C. This will result in raising the trust bar and credibility, leading to more and more people investing in such platforms. It will also bring in a good enough capital infusion in the P2P lending space.

Introducing Syndicates for India (Angel.co), Rated: A

Today, we are announcing Syndicates for India, a new way for investors in India to invest alongside experienced angels and VC funds that invest in India’s vibrant tech ecosystem.

To date, over 1,800 startups have raised more than $700M through Syndicates on the AngelList platform, receiving more than $6B in follow-on funding.

APAC

Gov’t urged to increase ceiling for individual investment in P2P lenders (Yonhap News Agency), Rated: AAA

A business lobby of peer to peer (P2P) finance firms said Thursday it has asked financial regulators to raise the annual ceiling on individual investment in P2P lenders.

The Korea P2P Finance Association has asked the Financial Services Commission (FSC) to increase the limit to 100 million won (US$93,632) per year from the current 10 million won, an association official said.

ZorroSign Among Top 25 FinTech Companies (PR Newswire), Rated: B

ZorroSign, Inc., today announced the company has been recognized among the top 25 FinTech companies in Asia-Pacific (APAC) by CIO Outlook. The honor spotlights organizations that are fundamentally disrupting the way companies in the global finance sector do business. ZorroSign offers unique secure eSignature, end-to-end Digital Transaction Management, and post-execution fraud protection solution. With security being on top of mind for financial services providers, ZorroSign Document 4n6 (Forensics) Token technology offers a major advantage to its customers.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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Allen Taylor

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