- Today’s main news: OnDeck files first ABS in two years. Funding Circle opens second Denver office. LendingClub settles with Massachusetts regulator. OFF3R founder to launch personal investment assistant. China Rapid Finance reports unaudited Q4, full year results.
- Today’s main analysis: Strengthen your fraud prevention strategy. (A MUST-READ REPORT FROM LexisNexis)
- Today’s thought-provoking articles: True lender litigation is on the rise. Why it’s no surprise GreenSky would weigh IPO options. Chinese P2P lender transaction volume.
- OnDeck rolling out new ABS. AT: This doesn’t signal that OnDeck is out of the water yet, but it is a good sign that they are well on their way to the beach.
- Funding Circle opens second office in Denver. AT: Funding Circle made big news in 2013 when it entered the U.S. market. Its growth in the market has been competitive, so this launch of a new office in Denver is confirmation of its presence as a positive sign for the U.S. lending market.
- LendingClub settles with Massachusetts regulator for $2M. AT: That’s a small settlement, and easily shakeable.
- True lender litigation is on the rise. AT: This is an excellent read. JD Supra looks at several recent true lender lawsuits and explains how they impact the future of alt lender and bank relationships.
- Why it’s not surprising GreenSky is looking at an IPO. AT: A good breakdown of the advantages to GreenSky, from Forbes.
- More on GreenSky.
- Strengthen your fraud prevention strategy. AT: A strong focus on e-commerce, but there is a lot of relevance here for the online lending segment, and this must-read report addresses concerns there, as well.
- Oscar raises $165M.
- 5 ways banks are being disrupted.
- Streamlining the customer experience in lending.
- What borrowers do when payday loans go away.
- Is it too early to write off robo startups?
- Why banks have trouble selling real-time payments.
- MetaBank partners with Health Credit Services.
- JPMorgan blockchain exec leaves to start her own firm.
- China Rapid Finance reports unaudited Q4 and FY results.
- P2P lenders get a confidence boost.
- Tech innovation and anti-fraud technology.
- United States
- OnDeck makes ABS return (Global Capital), Rated: AAA
- Funding Circle Expands U.S. Operations with New Office in Denver (PR NEwswire), Rated: AAA
- LendingClub settles with Mass. banking regulator for $ 2M (American Banker), Rated: AAA
- “True Lender” Litigation on the Rise: Recent Litigation and Enforcement Actions (JDSupra), Rated: AAA
- Why It’s No Surprise That Online Lender GreenSky Would Weigh An IPO (Forbes), Rated: AAA
- Strengthen Your Fraud Prevention Strategy (LexisNexis), Rated: AAA
- U.S. Insurtech Oscar Secures $ 165 Million Through Latest Investment Round Led By Brian Singerman & Founders Fund (Crowdfund Insider), Rated: A
- 5 Major Ways Banks Are Getting Disrupted (The Motley Fool), Rated: A
- The Lending Game: Streamlining Customer Experience (Lendit), Rated: A
- New Fintech IPO on the Horizon with GreenSky (Lend Academy), Rated: A
- What Borrowers Do When Payday Loans Go Away (Lend EDU), Rated: A
- It may be too early to write off robo start-ups (Investment News), Rated: A
- Why banks have trouble selling real-time payments (Tearsheet), Rated: A
- MetaBank Announces Partnership with Health Credit Services to Originate Personal Healthcare Loans (Markets Insider), Rated: B
- Amber Baldet Leaving JPMorgan Blockchain Team to Start New Venture (CoinDesk), Rated: B
- United Kingdom
- The robo-adviser of robo-advisers (Fn London), Rated: AAA
- New Innovative Finance Isa pays 7.28% a year (MoneyWise), Rated: A
- China Rapid Finance Reports Unaudited Fourth Quarter and Full Year 2017 Results (Benzinga), Rated: AAA
- Chinese P2P lenders get confidence boost with protection plan (Enterprise Innovation), Rated: AAA
- Technological Innovation and Anti-Fraud Technology in a Maturing Fintech Sector (Lendit), Rated: A
- HSBC partners with FinTech and asset managers for cloud-based data platform (Global Custodian), Rated: A
- SME lender gives insight on changing landscape (Broker News), Rated: AAA
- Cryptocurrency-backed Lending Startup BlockFi Eyeing Indian Market, CEO Reveals in Interview (Crypto-News), Rated: AAA
- SME loans marketplace Namaste Credit raises $ 3.8 million (Fortune), Rated: AAA
- Namaste Credit raises $ 3.8 million from Nexus Venture Partners (LiveMint), Rated: A
- 3 Fintech Companies Answers Jokowi`s Challenge on Student Loans (Tempo.Co), Rated: A
OnDeck makes ABS return (Global Capital), Rated: AAA
The lender filed documents with the Securities and Exchange Commission for the upcoming deal on Tuesday. Deutsche Bank, Credit Suisse and SunTrust are leading the deal, according to the deal documents.
OnDeck spent the last two years holding a greater percentage of its loans.
Funding Circle Expands U.S. Operations with New Office in Denver (PR NEwswire), Rated: AAA
Funding Circle today announced it is expanding its U.S. operations with a second office in Denver, Colorado. With the move Funding Circle will look to hire around 290 new employees in the Denver area over the next two years to support the company’s growth.
LendingClub settles with Mass. banking regulator for $ 2M (American Banker), Rated: AAA
LendingClub has settled with the Massachusetts banking regulator to the tune of $2 million over claims that the company made unlicensed loans in the state.
The state division of banks said that the San Francisco-based LendingClub made over 46,000 loans to Massachusetts consumers without a license since 2011, when it surrendered its small loan company license as a condition of a consent order. The division also said that it found additional unlicensed lending activity at Springstone Financial, a wholly owned subsidiary of LendingClub that has its main office in Westborough, Mass.
“True Lender” Litigation on the Rise: Recent Litigation and Enforcement Actions (JDSupra), Rated: AAA
Over the last two years the financial industry has seen an uptick in litigation and enforcement actions aimed at banks and their non-bank lending partners. These actions have primarily challenged the validity of the bank partnership model that is used by many non-bank lenders to generate consumer and small dollar business loans.
Bank and Non-Bank Lender Partnerships
Although the structure of a bank and their non-bank lending partners can take many forms, the typical relationship involves the non-bank lender identifying loan opportunities for the bank, which then originates the loan and either immediately assigns the loan to their non-bank partner or another third-party. By partnering with banks, non-bank lenders avoid certain regulatory and licensing requirements in states where their bank partners operate. In return, banks are able to utilize their relationships with their non-bank lending partners to generate leads for additional loans.
Colorado’s Uniform Consumer Credit Code Administrator Takes Action
In January 2017, the Colorado’s Uniform Consumer Credit Code (“UCCC”) Administrator, Julie Meade, filed two substantially similar complaints in Colorado state court against Marlette Funding, LLC, and Avant of Colorado, LLC. The complaints alleged violations of the UCCC based on the theory that Marlette and Avant were the “true lender,” not their bank partners, in a series of loans made to Colorado consumers, which loans contained interest rates that exceeded Colorado’s usury laws.
Broad Reaching Implications
The CashCall, Madden, and other related actions threaten the traditional bank partnership model that the financial industry relies on to originate, buy, sell, and transfer loans.
Legislative Fix Coming?
There is currently at least one bill pending in the House and Senate that, if passed, would address both the “true lender” issue and the consequences of the Madden decision.
Why It’s No Surprise That Online Lender GreenSky Would Weigh An IPO (Forbes), Rated: AAA
Now, the company is challenging a near-sacred belief in Silicon Valley these days that staying private for longer is better. GreenSky has filed confidentially for an IPO, according to The Wall Street Journal, and could raise $1 billion at a reported $5 billion valuation.
GreenSky also has 17,000 contractors doing much of the heavy lifting. They pitch home improvement loans of up to $65,000 to homeowners. They also pay GreenSky, on average, 6% of the loan amount for the opportunity.
It also profits from the relationship: Banks pay GreenSky an estimated 1% of the balance each year to generate and service the loans.
The company has been profitable for the last five years and recorded revenue that Forbes estimates at $250 million in 2017. In a recent report, Moody’s projected annual revenue would be over $400 million in 2018.
Strengthen Your Fraud Prevention Strategy (LexisNexis), Rated: AAA
- The cost of fraud is sizeable for retail, eCommerce, financial services and lending organizations. Every $1 of fraud costs organizations in these industries between $2.48 and $2.82 – that means that fraud costs them more than roughly 2 ½ times the actual loss itself. Fraud cost as a percent of revenues ranges between 1.58% and 2.39%.
- The eCommerce, financial services and credit (rather than mortgage) lending sectors are getting hit somewhat harder.
- The digital space, either as a transaction channel or type of good being sold, is a high risk for even more negative fraud impact. Regardless of industry segment, the percent of average monthly fraud attempts is higher for these types of organizations. For those using the online channel, this is the result of more fraudster focus on the anonymous purchasing environment, particularly leveraging the nocard-present opportunities compared to EMV chip barriers at physical points of sale.
- Yet, digital channel / digital goods selling organizations are not fully leveraging the value of risk mitigation solutions. Identity verification remains a challenge and common type of fraud; there is only moderate use of advanced identity verification solutions among these organizations.
- These issues will only increase as more firms adopt the mobile channel. Larger merchants / firms tend to be the pioneers of the mobile channel.
- Findings show that retailers, eCommerce merchants and financial services and lending firms which layer solutions by identity and fraud transaction solutions
Read the full report here.
U.S. Insurtech Oscar Secures $ 165 Million Through Latest Investment Round Led By Brian Singerman & Founders Fund (Crowdfund Insider), Rated: A
Oscar Health, a U.S.-based insurtech, announced last week it has raised $165 million through its latest investment round led by Brian Singerman and Founders Fund. Founded in 2013, the company stated it is focused on utilizing technology, design, and data to humanize healthcare.
5 Major Ways Banks Are Getting Disrupted (The Motley Fool), Rated: A
The peer to peer lending term is kind of a loose term nowadays. Like Michael said, a lot of the bigger banks have started to copy this business model, so it’s not exactly peers loaning to peers anymore. But, at its heart, Prosper was actually the first mover on this. A lot of people think it was Lending Club but Prosper actually got there a little bit earlier. But, Lending Club was definitely the big one that got the banking industry on its toes in terms of peer to peer lending.
Marcus by Goldman Sachs is one of the newest ones. Goldman is getting into consumer banking a little bit. On the business side, you have companies like Funding Circle, which is a really interesting concept, because business lending is a big pain in the neck, especially in certain industries.
The Lending Game: Streamlining Customer Experience (Lendit), Rated: A
Lending, much like dating, has been brought online in the past decade with the aim of streamlining the process and dramatically reducing the time spent for both parties. But as the backend systems involved become more complicated to include more data and decisioning points, how do lenders continue to create a simplified customer experience that will bring good customers back for that “second date”?
New Fintech IPO on the Horizon with GreenSky (Lend Academy), Rated: A
So who is GreenSky exactly and what do they do? We wrote about the company earlier this year when we learned of their $200 million funding round from PIMCO which made them the most valuable company in the online lending space. The company has a unique model where they partner with merchants and contractors to offer financing at the point of sale. They view themselves as more of a tech company since they do not actually lend any money. This capital light business model has likely led to much of the success they have seen. Instead of lending their own money GreenSky has relationships with about 15 banks. On the tech side, the process is paperless and all done through a mobile device.
What Borrowers Do When Payday Loans Go Away (Lend EDU), Rated: A
For South Dakota consumers, payday loans used to be available at storefronts, but since late 2016, this access and annual interest rates have been cut.
Although South Dakota limited payday lending, it didn’t outlaw it. And some borrowers are hitting online lending agencies found through Google searches under “payday loans”—a familiar option for South Dakota consumers, according to KELO. This alternative carries risks such as a lack of oversight and inconsistent regulation; however, this is a national issue with these lenders.
It may be too early to write off robo start-ups (Investment News), Rated: A
News that robo-adviser Wealthfront’s valuation dropped was read by many in the financial advice industry as the writing on the wall for direct-to-consumer digital advice startups.
Scott Smith, the director of advice relationships at research firm Cerulli Associates, said the stories surrounding Wealthfront are proof that the market is favoring a hybrid advice approach. While the number of people who want a purely digital advice platform could grow over time, the majority of assets are still held by people over the age of 40 who want human assistance with their financial decisions.
As for Betterment, the company says it isn’t experiencing any headwinds at all.
Why banks have trouble selling real-time payments (Tearsheet), Rated: A
Real-time payments have landed in the U.S., but banks are still figuring out how to sell them to corporate clients. BNY Mellon, U.S. Bank, Citi, JPMorgan, PNC and SunTrust are the only banks using the Clearing House’s new real-time payments system.
One challenge is simply the legacy infrastructure on which most financial services companies today are built. Companies that provide ERP systems like SAP or Oracle have built their systems in a batch processing world and need to also become real-time.
In the age of PayPal, Venmo and Square Cash, it’s easy to forget that most transactions that take place day-to-day aren’t happening in real time. They feel like they are, but they really just move money from one PayPal user’s balance to another. Moving that balance from PayPal’s banking partner to the customer’s own bank account is still a multiday process.
U.S. banks are not that far away from ubiquitous real-time payments, according to Ward, who said he thinks 90 percent of banks will have implemented real-time payments by the middle of 2019. PNC hasn’t met too many challenges itself trying to sell RTP, Ward said, but clients are still figuring out the best way to take advantage of it and whether they prioritize the needs of customers or suppliers.
MetaBank Announces Partnership with Health Credit Services to Originate Personal Healthcare Loans (Markets Insider), Rated: B
MetaBank; a wholly-owned subsidiary of Meta Financial Group, Inc. (NASDAQ: CASH) (“Meta”) today announced a new, three-year agreement with Health Credit Services (“HCS”), a technology driven, patient financing company. MetaBank will approve and originate loans for elective procedures for HCS provider offices throughout the country. HCS will work with its provider partners to market the loans, as well as provide servicing for them. Over the course of this relationship, MetaBank expects to originate at least several hundred million dollars in personal loans.
Amber Baldet Leaving JPMorgan Blockchain Team to Start New Venture (CoinDesk), Rated: B
Amber Baldet, who oversaw development of JPMorgan’s permissioned blockchain platform, Quorum, is leaving the financial institution, according to an internal memo sent Monday by the bank’s head of blockchain initiatives, Umar Farooq.
The robo-adviser of robo-advisers (Fn London), Rated: AAA
The story of robo-advisers is an old one, or so thinks Lex Deak, serial entrepreneur and creator of a new breed of online wealth management tool. Deak, who was the brains behind the launch of peer-to-peer lending aggregator Off3r, is rolling out a new online service that he claims will bring web-based investment to the masses and “battle the bias and bullshit that has dogged the investment sector for decades”. The new service, called Personal Investment Assistant — or Your Pia — uses artificial intelligence to help investors sift through a range of robo-advisers, wealth management platforms and IFA networks.
Big names on the board
Todd Ruppert, the former president and chief executive of T Rowe Price — who is no stranger to backing fintech start-ups — is taking a seat on the Pia board. He will be joined by Daniel Sauva, head of creative and buzz at money transfer service TransferWise, and Nigel Webber, who was global chief investment officer at HSBC Private Banking. Gayle Schumacher, a Coutts executive, is taking a seat, too.
New Innovative Finance Isa pays 7.28% a year (MoneyWise), Rated: A
A new Innovative Finance Isa (IF Isa) has launched offering a whopping 7.28% annual interest rate. The easyMoney ‘Balanced’ IF Isa allows you to invest in peer-to-peer lending – where your money is lent to individuals or small businesses – within an Isa wrapper, so your returns are tax-free.
The target rate of 7.28% is a guide to what return you can expect from investing in multiple property-backed loans, all of which have a maximum 75% loan to value.
The firm offers two different IF Isas: its ‘Conservative’ IF Isa, has a 4.05% targeted annual return with a minimum investment of £1,000. It is “aimed at investors who are looking for something more than the paltry rates offered by cash ISAs”, says Mr Candole.
China Rapid Finance Reports Unaudited Fourth Quarter and Full Year 2017 Results (Benzinga), Rated: AAA
China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE:XRF), operator of one of China’s largest consumer lending marketplaces, today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2017.
Fourth Quarter 2017 Highlights:
- Positive operating cash flow of $15.8 million
- Total gross billings up 186% year-over-year
- Facilitated 6.2 million loans with total loan volume of $1.03 billion
- Added 627 thousand new borrowers, up 17% from the end of Q3 2017
- Added approximately 10 thousand new investors to reach over 23 thousand investors
- GAAP net loss of $3.9 million
- Non-GAAP adjusted profit before income tax expense of $1.1 million
Full Year 2017 Highlights:
- Year-end cash balance of $94.9 million, up from $74 million immediately after the IPO
- Total gross billings up 102%
- Added 2.9 million new borrowers, up 202% from the end of 2016
- Facilitated over 23 million loans with total loan volume of $3.3 billion
Chinese P2P lenders get confidence boost with protection plan (Enterprise Innovation), Rated: AAA
China’s marketplace lending is bracing for regulation around “record filing” systems that kicks into effect this month (April 2018). However, said new regulations may not be addressing altogether the problem of runaway credit that is growing on the back of cash loans and microlending market.
The current most prominent methods of financial fraud are organized fraud, regional fraud, and targeted-occupation fraud. Various criminal and fraudulent organizations, including organizations developing illegal software, hacking databases for sale, and batch registration, have been working together to increase profits. However, their golden times are over now.
An insider once commented, “Certain P2P platforms only have a user retention rate of 20% following promotional events due to malicious users while the remaining 80% became inactive. Platforms spend a lot of money on marketing which has directly led to continually rising costs in customer acquisition.”
- Hexindai’s risk control technology has laid a solid foundation for anti-fraud progress
- Introducing new technologies to enhance anti-fraud capabilities
HSBC partners with FinTech and asset managers for cloud-based data platform (Global Custodian), Rated: A
HSBC Securities Services has partnered with FinTech firm FINBOURNE, asset manager Fidelity International and hedge fund Altana Wealth to design a new cloud-based investment management platform.
The four organisations will collaborate to design a shared, cloud-based data utility that aims to reduce operating cost and improve the quality of information for in-house and client use.
The platform, named LUSID, is aimed at replacing existing in-house software and hardware, and achieve advanced standards of data handling for institutional clients.
SME lender gives insight on changing landscape (Broker News), Rated: AAA
Small business lender OnDeck Group is hosting an event centred on SMEs and the changing lending landscape in Australia.
Taking place on 17 April, CEO Noah Breslow, will host a select group of brokers, aggregators and finance partners, with special guest Stephen Koukoulas, Managing Director of Market Economics, and Economic Advisor to illion (formerly Dun & Bradstreet).
OnDeck has now loaned over $8 billion to 80,000 small businesses across the United States, Canada and Australia, making it one of the largest online SME lenders globally.
Cryptocurrency-backed Lending Startup BlockFi Eyeing Indian Market, CEO Reveals in Interview (Crypto-News), Rated: AAA
Borrowing against cryptocurrencies is becoming a big new trend in the industry. A number of startups have sprung in crypto-backed lending space, which include SALT, CoinLoan, Ethlend, Unchained Capital and most recently Nuo Bank. Now a new startup with similar offering is eyeing the Indian market from New York. The startup, called BlockFi, offers cryptocurrency backed loans to individuals and companies both in 35 states of USA as of now. However, it’s planning to expand internationally very soon, and in that expansion it sees India as a major opportunity. This was revealed by none other than company’s CEO Zac Prince in a recent interview to Bitcoin Magazine.
SME loans marketplace Namaste Credit raises $ 3.8 million (Fortune), Rated: AAA
Namaste Credit, a digital marketplace and technology platform for SME loans, has raised $3.8 million in a Series A investment round from Nexus Venture Partners.
The company intends to use the corpus raised to grow its geographic footprint, enhance its technology and data analytics platform, and further scale its business. The company also plans to significantly increase its channel partner program across India and further expand its technology licensing partnerships with lenders globally.
Namaste Credit raises $ 3.8 million from Nexus Venture Partners (LiveMint), Rated: A
Owned by Delhi-based Opendoors Fintech Pvt Ltd, Namaste Credit is a digital platform which serves as a marketplace for borrowers and lenders. It focuses exclusively on small and medium enterprise (SME) customers.
“SME credit is seriously constrained due to lack of reach and relevant data to assess credit-worthiness of borrowers. Namaste Credit’s technology, combined with its channel partners and lender network, is already making a significant impact on facilitating credit to SMEs in a win-win manner for all,” said Anup Gupta, managing director at Nexus Venture Partners, in a statement.
3 Fintech Companies Answers Jokowi`s Challenge on Student Loans (Tempo.Co), Rated: A
Last month, state-owned banks was not up for President Joko Widodo’s (Jokowi) challenge to provide students with the option of student loans. However, companies of Fintech (technology-based financial services providers) responded positively to the president’s challenge.
Danacita and Koinworks are Fintech peer-to-peer lending companies that focus on funding the education sector. Meanwhile, Danadidik is an academic funds provider that is on crowdfunding as its main financial backing.
The three platforms also provide a long-term loan for university students with a tenor from four to six years. Each of these companies applies varying methods of repayments from 9 percent- 20 percent low installments up to profit sharing a student’s wage once they have found jobs.