- Today’s main news: Upgrade to issues ABS–but when? FCA warns Funding Circle clone. Funding Circle Netherlands approved for Guarantee SME Credit Scheme Participant.
- Today’s main analysis: The metro areas with the most fraud alerts.
- Today’s thought-provoking articles: The regulation of marketplace lending (A MUST-READ REPORT). LendIt, PitchIt award winners. Is China Rapid Finance close to profit? GDPR consent for data processing. The 2018 VC market is off to a strong start.
- Upgrade may issue an ABS soon. At this point, until I see an official announcement, I’m not ready to say it’s going to happen. But it wouldn’t surprise me to see it happen.
- The metro areas with the highest, lowest fraud alerts. Houston and Las Vegas top the list of the highest. Rochester and Buffalo, New York are top of the list of the lowest.
- The regulation of marketplace lending. A must-read.
- PitchIt, LendIt award winners. Congratulations to all the winners.
- Modernizing consumer lending.
- CashCall appeal could jeopardize Consumer Financial Protection Bureau.
- Optimizing mortgage loan lifecycles.
- Big banks are using non-bank middlemen to lend to subprime borrowers.
- Second chances – Mike Cagney and Renaud Laplanche.
- Blockchain gives P2P lenders a taste of their own medicine. There will always be innovation, and that’s good.
- FCA warns Funding Circle clone.
- Prestige Funds partners with Goji.
- Loan approval and payments speed.
- Higher salaries give fintechs a leg up.
- The VC market is off to a strong start.
- How global fintech trends impact banking.
- What’s going on with blockchain P2P lending startups.
- United States
- Ex-LendingClub chief’s new venture set to issue ABS (GlobalCapital), Rated: AAA
- LendingTree Ranks Metros with the Most Fraud Alerts (PR Newswire) Rated: AAA
- The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler) Rated: AAA
- LendIt Fintech Names PitchIt Competition Winners And Second Annual LendIt Industry Award Winners (PR Newswire) Rated: AAA
- To modernize consumer lending, it had to strip systems to the core (American Banker) Rated: A
- Appeal could jeopardize CFPB win in landmark tribal sovereignty case (Reuters) Rated: A
- Optimizing Mortgage Loan Lifecycles With Fintech (the M Report) Rated: A
- Big Banks Using Non-Bank Middlemen to Lend to Subprime Borrowers (Low Cards) Rated: A
- Two’s company (Breakingviews) Rated: A
- Blockchain makes online lenders taste own medicine (Nasdaq) Rated: A
- United Kingdom
- FCA issues warning about Funding Circle clone (Peer2Peer Finance News) Rated: AAA
- Prestige Funds partners for Innovative Finance ISA bond (The Armchair Trader) Rated: A
- The need for speed for loan approvals and payments (Credit Strategy) Rated: A
- Higher salaries giving fintech sector edge over traditional banking (Finextra) Rated: B
- China Rapid Finance: Is It Close To Making A Profit? (Seeking Alpha) Rated: AAA
- European Union
- Ministry of Economic Affairs and Climate Approves Funding Circle Netherlands As Guarantee SME Credit Scheme Participant (Crowdfund Insider) Rated: AAA
- GDPR and financial advice: Consent for data processing (Professional Adviser) Rated: AAA
- Strong start to 2018 for VC market (Digital News Asia) Rated: AAA
- How global fintech trends will impact your banking (Bank Rate) Rated: A
- What’s Happening with P2P Lending Blockchain Startups in 2018 (Equities) Rated: A
- The future of financial advice is tech and touch (Moneyweb) Rated: A
- Dipping Into Digital (Global Finance) Rated: AAA
- New Realities, New Technologies (Global Finance) Rated: B
Ex-LendingClub chief’s new venture set to issue ABS (GlobalCapital), Rated: AAA
Upgrade is said to have a private warehouse facility in place and is looking to debut a securitization in the coming months, according to two people familiar with the matter.
According to an April 2017 press release, Jefferies is advising the company on its capital markets strategy and is….
LendingTree Ranks Metros with the Most Fraud Alerts (PR Newswire) Rated: AAA
With millions of Americans affected by data breaches every year, such as recent revelations at Uber and Equifax, LendingTree decided to look at anonymized data from a sample of the over 7 million My LendingTree users to see where people are most likely to have asked a credit bureau to place a fraud alert on their credit report.
Key findings of the study:
- The average rate of fraud alert requests among all cities reviewed is 6.4 percent.
- Las Vegas and Houston tie for the highest rate of fraud alerts, at 13.6 percent.
- Miami and New York are close behind, tied at 12.9 percent.
- Rochester, N.Y. has the lowest rate of people requesting fraud alerts at 2 percent. Nearby Buffalo, N.Y. has 2.6 percent.
The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler) Rated: AAA
So-called “true lender” litigation remains one of the most significant risks facing the marketplace lending industry. These are cases involving a claim by a borrower or regulator that the “true lender” of a loan funded by a Funding Bank for a marketplace lender is the marketplace lender rather than the
Funding Bank. Often such litigation involves asking the court to look past the form of the loan transactions to their substance in order to ascertain which party, the Funding Bank or the marketplace lender, holds the predominant economic interest in the loans. The aim of true lender claims is to subject
the marketplace lender to federal and state regulation as a non-bank lender, enabling the claimant to pursue actions based on failure to comply with state lender licensing or usury laws.
Read the full report here.
LendIt Fintech Names PitchIt Competition Winners And Second Annual LendIt Industry Award Winners (PR Newswire) Rated: AAA
Out of eight PitchIt finalists, the judge’s winner was CreditStacks, a company that offers U.S. based premium credit cards to prime, new-to-credit customers. The audience winner was Narmi, a fintech company the helps credit unions and banks deliver a unified experience with modern and secure online banking, mobile banking and websites.
Below are the second annual LendIt Industry Award winners, per category:
Fintech Innovator of the Year
Executive of the Year
Anthony Hsieh, Founder & CEO, loanDepot
Fintech Woman of the Year
Kathryn Petralia, Co-founder & COO, Kabbage
Blockchain Innovator of the Year
Most Innovative Token Economy
Top Consumer Lending Platform
Top Small Business Lending Platform
Top Real Estate Lending Platform
Emerging Lending Platform
Excellence in Financial Inclusion
Most Promising Partnership
LendingClub + Opportunity Fund
Most Successful Cross-Border Partnership
Kasisto + DBS Bank
Most Innovative Bank
International Innovator of the Year
Top Enterprise Technology Company
Top Emerging Technology Company
Top Professional Services Company
Most Innovative Mobile Technology
Top Fintech Equity Investor
Best Journalist Coverage
Tony Zerucha, Managing Editor, Bankless Times
Top Investment Bank in Fintech
To modernize consumer lending, it had to strip systems to the core (American Banker) Rated: A
Replacing core systems can be an expensive and risky proposition for banks, but KeyCorp has decided the time is now to replace an antiquated legacy system.
The $138 billion-asset bank announced at the Oracle Industry Connect conference in New York this week that it plans to ditch its existing lending platform in an effort to digitize and modernize the lending process.
Appeal could jeopardize CFPB win in landmark tribal sovereignty case (Reuters) Rated: A
Online lender CashCall filed a notice of appeal Tuesday in a Consumer Financial Protection Bureau enforcement action that set precedent on whether consumer lenders can evade state interest rate caps by affiliating with Native American tribes and invoking tribal sovereignty. In 2016, U.S. District Judge John Walter of Los Angeles granted partial summary judgment to the CFPB, holding that CashCall was the true lender, rather than a company owned by a member of the Cheyenne River Sioux Tribe, so state laws govern CashCall loans. The company’s notice to the 9th U.S. Circuit Court of Appeals, filed by its lawyers at Latham & Watkins and Skadden Arps Slate Meagher & Flom, indicated that CashCall will challenge the landmark summary judgment decision on tribal sovereignty, as well as other rulings by Judge Walter.
Judge Walter, however, concluded that the bureau hadn’t shown it was entitled to any restitution and that CashCall had not knowingly flouted consumer protection laws. He awarded the bureau only $10.3 million in penalties.
Optimizing Mortgage Loan Lifecycles With Fintech (the M Report) Rated: A
Integrated properly into both the trading and operational side of the mortgage lifecycle, fintech can not only increase margins but also allow for lenders to originate more loans in less time and in a more efficient and secure manner. Additionally, by using fintech throughout the mortgage lifecycle, each phase of management is enhanced and therefore produces optimized outcomes leading to better investment returns, while still providing the borrower with a great customer experience.
A “High Level” Tech-Enabled Residential Mortgage Lifecycle*
*This chart is provided as a “high level” example of what types of fintech can optimize the lifecycle. It is not to be considered a complete integration or feature roadmap.
Big Banks Using Non-Bank Middlemen to Lend to Subprime Borrowers (Low Cards) Rated: A
If a borrower has a low credit score and needs a loan for a $12,000 vehicle, this would not be of interest to a large bank such as Wells Fargo. But it would be an option for a non-bank lender like Exeter Finance. Exeter would screen the applicant and approve the loan at their discretion. Then, Wells Fargo would extend a loan to Exeter. The bank is still profiting from a sub-prime loan, but they are giving the money to another lender.
This does not eliminate risk on Wells Fargo’s end. However, it does push the burden onto the non-bank lender, according to The Wall Street Journal.
Two’s company (Breakingviews) Rated: A
Silicon Valley is giving two of its most noted fintech outcasts a second chance. Former Social Finance boss Mike Cagney and erstwhile LendingClub Chief Executive Renaud Laplanche are each back with new loan ventures after losing their jobs to scandals.
Between them, both men created what are now the two largest fintech lenders, having originated or facilitated some $63 billion between them in the past few years.
Blockchain makes online lenders taste own medicine (Nasdaq) Rated: A
Blockchain is giving online lenders a taste of their own medicine. The likes of Prosper, Social Finance and On Deck Capital found cryptocurrency technology trying to steal the limelight at their annual get-together in San Francisco this week. It’s a case of the disruptors being disrupted.
FCA issues warning about Funding Circle clone (Peer2Peer Finance News) Rated: AAA
THE CITY watchdog has issued a warning to consumers about a clone of peer-to-peer lender Funding Circle.
The clone, Funding Circle Loans, had set up a website purporting to be the P2P platform.
Its website, http://fundingcircle.bravesites.com, has since been suspended.
Prestige Funds partners for Innovative Finance ISA bond (The Armchair Trader) Rated: A
Prestige Funds, a specialist direct lending manager, is partnering with UK-based Goji to launch a Renewables Lending Bond which is eligible for inclusion in an Innovative Finance ISA (IFISA). IFISAs are a new, tax-free way for investors to access investment opportunities that are not available on stock exchanges.
The Goji Renewables Lending Bond will include a yield target of between 5.5% and 6.5% over three and five year terms. Interest payments on the bond will be supported by UK government subsidies, such as Feed-in-Tariffs.
The need for speed for loan approvals and payments (Credit Strategy) Rated: A
Arguably, consumer lending has come full circle.
But today’s consumer lenders are having to contend with raised customer expectations. “Empowered borrowers,” says consultancy firm PwC, expect not only a simple, but also a fast loan process.
Consumer lending research published by PwC found that other than economic factors (interest rates and closing costs) or “having an existing relationship,” the speed of the process was the most important factor for borrowers in choosing a lender.
Higher salaries giving fintech sector edge over traditional banking (Finextra) Rated: B
The threat from Brexit has also called into question how Britain has – and will – deal with the country’s departure from the European Union in terms of its strong worldwide financial standing. With this in mind, Joblift has analysed and compared the UK’s Fintech and traditional banking sectors over the last 12 months. The analysis shows that traditional banking has felt the effect of the competition from Fintech and the upcoming Brexit with vacancies decreasing by 3% monthly, while Fintech seems to be flourishing, with a huge growth of 9% monthly, in the face of these challenges.
China Rapid Finance: Is It Close To Making A Profit? (Seeking Alpha) Rated: AAA
China Rapid Finance (XRF) went public on NYSE on April 28, 2017, as the beginning of the IPO wave for China P2P companies in 2017. The company focuses their business on meeting the credit demand for EMMAs (Emerging Middle-class Mobile Active consumer) in China.
- China Rapid Finance (XRF) has experienced a business shift from lifestyle loans (larger in size) to consumption loans (smaller size), which will lead to bigger impact from regulatory hammer;
- Q4 earnings results didn’t satisfy investors and stock price dropped 15% in two days after the ER release;
- Despite of the short term concerns, operating efficiency has significantly improved in 2017, which makes the profitability outlook of the firm very positive.
Ministry of Economic Affairs and Climate Approves Funding Circle Netherlands As Guarantee SME Credit Scheme Participant (Crowdfund Insider) Rated: AAA
The Ministry of Economic Affairs and Climate (EZ) has reportedly approved Funding Circle Netherlands as a Guarantee SME Credit (BKMB) scheme participant.
According to AltFi, for participating firms, which are typically major banks, the BKMB provides guarantee of up to 75% of the loan amounts that fit within its criteria.
GDPR and financial advice: Consent for data processing (Professional Adviser) Rated: AAA
A firm could be in trouble with the Information Commissioner’s Office (ICO) if an individual makes a complaint about being marketed to by a firm and there is no consent in place, since this constitutes a breach of the GDPR.
Article 6 – lawfulness of processing
Processing shall be lawful only if and to the extent that at least one of the following applies:
a. the data subject has given consent to the processing of his or her personal data for one or more specific purposes;
b. processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract;
d. processing is necessary in order to protect the vital interests of the data subject or of another natural person;
f. processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child.
Strong start to 2018 for VC market (Digital News Asia) Rated: AAA
Mega-deals continue to shape Asian market
After rounding off 2017 at a remarkable high bolstered by megadeals, Asia continued to see large deals in Q1 2018.
Global Q1 2018 key highlights
- Global VC investment rose from US$46 billion in Q4’17 to US$49.3 billion in Q1 2018, a solid increase buoyed by five US$1 billion+ megadeals.
- The number of global VC deals declined for the fourth straight quarter, falling from 3,286 in Q4 2017 to 2,661 in Q1 2018. The number of VC deals has dropped by half since reaching a peak of 5,480 deals in Q1’15.
- The Americas set a new record for VC investment in Q1 2018, with US$29.4 billion raised across 1,782 deals. Asia raised US$14.6 billion across 317 deals, and Europe raised US$5.2 billion across 548 deals.
- Corporate participation in global VC deals set a new record for the second straight quarter, rising from 18.5% in Q4 2017 to 21% in Q1 2018.
- New and old unicorns – companies valued at over US$1 billion – attracted a significant amount of funding with US$14 billion across 32 deals. Two unicorns went public late in Q1 2018: cloud-based security provider Zscaler and cloudstorage provider Dropbox, with both companies seeing positive results to date. With Spotify set for a direct listing in April and UK-based online loan provider Funding Circle planning to go public later this year, the IPO market may be opening up.
How global fintech trends will impact your banking (Bank Rate) Rated: A
In the last few years, the U.S. has seen the launch of a whole crop of neobanks, consumer-friendly startups that are trying to change the way we manage our money. A bunch of neobanks have appeared in Europe, too (they are called challenger banks across the pond), and it seems like they are all eyeing the U.S. market.
Last year, French firm Revolut, which includes a crypto wallet and free international transfers among its features, announced its plans to expand into the U.S. Germany’s N26 recently raised $160 million from venture capital investors to fuel a U.S. expansion. Meanwhile, British startup Cleo, which is more of an AI-powered budgeting tool than a challenger bank, recently began offering its product in the U.S.
What’s Happening with P2P Lending Blockchain Startups in 2018 (Equities) Rated: A
That is why startups like Alchemy, SALT, Eth-Lend and Celsius can be game-changers not only in peer-to-peer (P2P) lending, but for the future of the American economy as well. Based on blockchain technology, these startups are committed to creating a safe, global, and accessible source of P2P lending.
The debt is then pooled into Collateralized Debt Obligations (CDO’s) which are then organized by risk and made available to purchase on the platform. This not only provides an easy and secure source of P2P funding, but creates a sustainable ecosystem and investment opportunity for anyone on the network.
The future of financial advice is tech and touch (Moneyweb) Rated: A
There is a lot of conversation around investing digitally, right now. Supporters of the idea suggest that investors should cut out their brokers or financial advisors and take their money online by investing through digital platforms. The argument goes that while an advisor might give your investments a bit of an edge in terms of growth, the fees they charge tend to negate the value that they add.
Since both financial advisors and technology have such an important role to play in supporting individuals in making the right financial decisions, and in the convenience of access to information about their spread of financial products, I recommend a “touch-and-tech” model of engagement.
Dipping Into Digital (Global Finance) Rated: AAA
The MENA fintech sector is booming, with more than $100 million raised by start-ups in the last decade. Dubai-based digital research network Wamda’s State of Fintech report released last March predicted the total for just that year would reach $50 million, an increase of 270% over 2016.
Although online payments, remittances, crowdfunding and peer-to-peer lending attracted the largest tickets, fast-growing fintech subsectors include cryptocurrencies, artificial intelligence and digital wallets.
In 2017 some of the major deals included a $20 million capital injection in Saudi Arabia’s online payment solution PayTabs; a $10 million round by three investors, including UK firm Gocompare, for Emirati price-comparison platform Souqalmal; $13 million for Emirati Cloud HR and insurance platform Bayzat; $5 million for Emirati peer-to-peer lending company Beehive; and $3.5 million for Emirati comparison website Yallacompare.
Lebanon was one of the first MENA countries to invest massively in the digital economy. Back in 2013, the central bank, Banque du Liban, issued a circular guaranteeing up to $400 million worth of investments in innovative technologies, later raising that amount to $600 million. Today, the country is home to 15 funding institutions, as well as a myriad of accelerators and start-up support programs.
New Realities, New Technologies (Global Finance) Rated: B
Surprisingly, the UAE accounts for 70% of the investments in areas such as digital banking services, cryptocurrencies, ecommerce and fintech start-up deals. For a nascent market, the growth rate is explosive, with dozens of new start-ups launching every year. So far, online payments, remittances, crowdfunding and peer-to-peer lending have attracted the largest investments. Late last year, Bahrain introduced the world’s first shariah-compliant fintech consortium.