Daily News Digest Featured

Monday August 6 2018, Daily News Digest

China alternative assets
Source: Financial Times

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News Summary

United States

Will Europe’s fintech banks conquer North America? (AltFi), Rated: AAA

Revolut and N26 will be launching in the US soon, but what sort of market will they be entering? How are local banks adapting their offerings to suit younger users? And what will be the impact of the newly-announced bank charters for fintechs?

PeerIQ’s MPL Securitization Tracker for 2Q2018 (PeerIQ), Rated: AAA

  • Twelve marketplace lending securitizations priced this quarter totaling $5.0 Bn, the highest level of quarterly issuance, representing 36% growth YoY.  To date, cumulative issuance equals $38.4 Bn across 126 deals.
  • We observed spreads widening and yields rising on new issuance. Weighted average all-in yields on consumer deals increased from 2.9% to 4.2% QoQ, and on student deals from 3.0% to 4.5% QoQ.
  • All deals issued this quarter except SoFi’s student loan passthrough securitizations were rated.   
  • Tranches continue to get upgraded. So far, ratings’ agencies have upgraded 51 consumer MPL tranches and 67 student MPL tranches that are outstanding.
  • Citigroup, Deutsche Bank, and Credit Suisse continue to top the issuance league tables with 54% of MPL ABS transaction volume.
  • Freedom Financial issued its inaugural deal and OnDeck returned to the market. SoFi issued over $2 Bn in student loan passthrough securitizations.
PeerIQ marketplace loans
Source: PeerIQ

Debut of the OCC’s FinTech Charter + Supervisory Standards (PeerIQ), Rated: AAA

The US economy added 157k jobs in July and the unemployment rate dropped to 3.9%. Wage growth came in strong at 2.7%, potentially fueling inflation down the road and keeping the Fed on its stated rate hike path.

OCC Asserts its Authority and is Open to Accepting SPNB Charters

Immediately following the report, Joseph Otting, Comptroller of the Currency, announced that the OCC would start accepting applications from “fintech companies that are engaged in the business of banking but do not take deposits.”

An SPNB can engage in a limited range of banking or fiduciary activities like credit card operations, taking deposits, paying checks, lending money, community development, or cash management activities. The policy is a significant development as companies with the Fintech charter would be able to perform banking activities like lending and payment processing nationally.

Who are the Likely Winners and Losers?

The long-term winner of the charter is the US consumer who will benefit from greater competition, innovation, and access to credit. Payments companies that seek to compete with Visa/Mastercard also stand to benefit. Lenders that qualify for the charter may also have a competitive advantage. Payments arms of firms like Google, Apple, Amazon and PayPal would fit the profile, as well as large non-bank lenders that can demonstrate sustainable profitability de-risked their business models. Fintechs that have liquidity, funding, or going-concern risks will struggle to obtain charters.

Less is more for OCC’s fintech financial inclusion plans (American Banker), Rated: A

The Office of the Comptroller of the Currency is threading a tricky needle.

It has affirmed that it plans to evaluate fintech charter applicants based on their fair lending efforts, but it’s pulled back on specifics for how that process might work. That has made some consumer groups nervous.

The OCC published an updated version of its licensing manual supplement for fintechs on July 31, in connection with an announcement that it’s begun accepting applications for fintech charters.

Fintech charter: Be wary of innovating into another crisis (The Hill), Rated: A

But before we allow fintech firms to bound over the regulatory mound, it’s important to take a hard look at why we regulate the financial services sector so thoroughly to begin with.

Many also claim that fintech will bank the unbanked and lead to financial inclusion. The only thing standing in the way of all of this change and disruption, many claim, is overbearing government regulation.

With OCC’s door officially open, will fintechs enter? (American Banker), Rated: A

Fintech companies now have the federal option they have long sought after the Office of the Comptroller of the Currency green-lighted firms to apply for a special-purpose bank charter. But winning OCC approval on charter bids will not be a walk in the park.

One day after the OCC announcement, some fintech firms signaled clear interest in the charter. But the agency’s decision also prompted a slew of additional questions, including whether firms would be able to meet the regulator’s tough criteria, and whether state regulators would continue to fight

Does a Bank Charter for Square Still Make Sense? CEO Jack Dorsey Thinks So (Bank Innovation), Rated: A

POS payments provider Square is still interested in pursuing a bank charter, but how? It may be more challenging given that the company will be paying more attention to its customer-facing prepaid products like Square Cash and its Cash Card, according to CEO Jack Dorsey in the company’s earnings call yesterday.

This map shows the states where payday loans charge nearly 700 percent interest (CNBC), Rated: AAA

Some short-term loans cost over 20 times more in interest than the average credit card. And yet one in 10 Americans have used them.

In the U.S. today, these loans are a $9 billion business. In the past two years, 11 percent of U.S. adults say they’ve taken out a payday loan, according to a recent survey of approximately 3,700 Americans that CNBC Make Itperformed in conjunction with Morning Consult.

payday lending
Source: CNBC

This Rebrand Is Not Barking Up The Wrong Tree (Forbes), Rated: AAA

For LendingTree, a leading online loan marketplace, it had been nearly ten years since they last made any changes to their logo. However, they recently underwent a brand refresh that offered some best practices for other brands potentially considering the same move.

The focus is now on letting consumers know that LendingTree is there to support them and provide assistance with what they term life’s ‘meaningful moments.’ This might entail a personal loan to consolidate high-interest credit card debt. Or, it could be a student loan to cover the cost of higher education. Besides providing for these moments, LendingTree also ensures that it provides the choice, education, and support that is often missing from what banks and financial institutions offer.

$ 203.49 Million in Sales Expected for Elevate Credit Inc (ELVT) This Quarter (Fairfield Current), Rated: A

Equities analysts expect Elevate Credit Inc (NYSE:ELVT) to announce sales of $203.49 million for the current fiscal quarter, according to Zacks. Two analysts have made estimates for Elevate Credit’s earnings, with the lowest sales estimate coming in at $201.00 million and the highest estimate coming in at $205.97 million. Elevate Credit reported sales of $172.85 million in the same quarter last year, which indicates a positive year-over-year growth rate of 17.7%. The business is scheduled to announce its next earnings report on Monday, October 29th.

NCUA’s Proposed Payday Alternative Loans Unattractive to CUs: Trades (CU Times), Rated: A

A new payday alternative program proposed by the NCUA is unlikely to convince many more credit unions to offer short-term loans because the loan terms are too prescriptive, credit union trade groups said.

Why Real Estate Deals, Not Startups are the Big Success Story of Equity Crowdfunding (Crowdfund Insider), Rated: A

In the year after Title III went into effect, startups received only $38 million in equity crowdfunding, according to Bloomberg—an amount that amounted to “a rounding error” in the larger system.

Before the JOBS Act, there were three formidable barriers to widespread individual investment in commercial real estate.

  1. Limited access to deal flow
  2. Inconvenience
  3. High minimums

Online crowdfunding has eliminated all three barriers

To begin with, the process is far more transparent and accessible, with minimum investments dropping to as low as $10,000.

ICBA calls for a new FDIC moratorium on industrial loan charter applications (American Banker), Rated: A

Renewing longstanding opposition to industrial loan charters, the Independent Community Bankers of America urged the Federal Deposit Insurance Corp. to impose a two-year moratorium on such applications.

The trade group also pressed the FDIC to reject an application from the student loan servicer Nelnet for an industrial loan charter.

Lenders One Names Michael Kuentz as Chief Executive Officer (Altisource), Rated: A

Lenders One Cooperative, a national alliance of independent  mortgage bankers, announced that Michael Kuentz has been promoted to the role of Chief Executive Officer of Lenders One by its Board of Directors. Mr. Kuentz previously held the title of President. In his new role, he will assume responsibility for Lenders One’s day-to-day operations and strategic execution as well as continue to lead and manage the cooperative’s sales effort.

United Kingdom

Barclays takes stake in SME lender MarketInvoice (Banking Tech), Rated: AAA

Barclays has taken a “significant” minority stake in UK-based SME lending platform MarketInvoice.

Details were not disclosed, because we live in the age of secrecy, but the bank says the deal is a key part of its plans to invest in new business models for growth, and MarketInvoice’s ambition to broaden its reach across the UK.

P2P lender Zopa raises £44m to fund new bank (Financial Times), Rated: AAA

Zopa has raised £44m in a new funding round to aid its expansion into traditional banking as its traditional peer to peer business comes under pressure from regulators.

Wonga investors inject £10M so cash-strapped payday lender can fund claims (TechCrunch), Rated: A

Yesterday Sky News reported that those same two, Accel Partners and Balderton Capital, are among a group of Wonga investors that have agreed to inject a further £10M (~$13M) into the business to help fund compensation claims related to its past censured practices.

Can this new breed of robo-advisers help you take control of your money? (The Telegraph), Rated: A

Savers have historically been forced to choose between picking and managing their own investments, paying for financial advice, or, recently, handing their money over to a “robo adviser” to do it for them.

China

China private equity funds suffer wave of closures (Financial Times), Rated: AAA

Chinese alternative asset managers have become the latest casualty of the country’s crackdown on debt and financial risk, with a record number of private equity and hedge funds dissolving in recent months as new regulations limit their fundraising.

In the first six months of this year, the Asset Management Association of China (Amac) — a government-controlled industry body — “lost contact” with 163 private fund institutions, more than 70 per cent of the total for which contact was lost for 2017.

China alternative assets
Source: Financial Times

Chinese P2P chief Yao Kunjie makes the Forbes high achievers list while under investigation (SCMP), Rated: A

Yao Kunjie, 28, is the CEO of peer-to-peer lending platform Beimi Wallet and was named on the financial sector list on Thursday.

Forbes magazine puts out regional lists of high achievers born after January 1, 1988, in 20 sectors every year.

The announcement came just a week after Shanghai police said Yao had been detained on July 13 on suspicion of “illegally absorbing public funds”, without elaborating, in a statement last Saturday.

Qudian Tries to Distance Itself from Other P2P Lenders (Capital Watch), Rated: A

Qudian Inc. (NYSE: QD) defended its business model Friday, saying that it is not undergoing the same “[volatility] and uncertainty” suffered by China’s broader peer-to-peer industry.

The announcement sent the company’s stock up nearly 5 percent mid-afternoon to $7.59 per American depositary share.

Qudian
Source: Capital Watch

China lends trillions to SMEs, farmers as part of inclusive finance push (Global Times), Rated: A

For example, banks’ balance of loans to farmers stood at 30.95 trillion yuan ($4.53 trillion) as of the end of 2017, up 48.2 percent from 2013. The balance of lending to small and micro-sized businesses stood at 34.74 trillion yuan in 2017, up 73.1 percent from 2013, according to Feng.

European Union

€10m loans mark record quarter for Linked Finance (Independent), Rated: AAA

Linked Finance, an Irish peer-to-peer (P2P) lending platform, recorded its strongest quarter to date in the three months to the end of June, facilitating over €10.1m to Irish SMEs.

This followed on from a strong start to 2018, with total lending for the year now more than €18.7m, up 65pc on the same period in the previous year.

The increase in lending is down to both the volume and size of loans. The number of loans that went live on the platform rose by 39pc in the period to 335, with average loan size up 19pc to almost €56,000.

BANCO BNI EUROPA LAUNCHES EQUITY RELEASE IN SPAIN WITH ÓPTIMA MAYORES (Fintech.Finance), Rated: A

Banco BNI Europa launches equity release in Spain in partnership with Óptima Mayores, the Spain’s leading financial advisor specialized in this segment.

Altisource Names Justin Vedder as Chief Operating Officer of Origination Solutions (Altisource), Rated: B

Altisource Portfolio Solutions S.A. (“Altisource” or the “Company”) (NASDAQ: ASPS), a leading provider of services and technologies to the mortgage and real estate industries, today announced the appointment of Justin Vedder as Chief Operating Officer, Origination Solutions.

International

How Fintex Capital Enabled the $ 30M Banco BNI Europa Investment in Upgrade Loans (Lend Academy), Rated: AAA

Last month we learned about the new $30 million investment received by Upgrade from the Portuguese digital bank Banco BNI Europa.

In reality BNI Europa did not actually purchase Upgrade loans, they invested in a privately placed bond that was backed by Upgrade loans. This bond was issued by Fintex Capital.

India

Regulations Shrink India’s Peer-To-Peer Lending Industry (Bloomberg Quint), Rated: AAA

When the Reserve Bank of India first brought out a discussion paper on peer-to-peer lending in April 2016, it said that there were 30 such start-ups in the country. It then proceeded to fashion a set of rules for the nascent but fast growing sector and came out with regulations in October 2017. Key among them was a requirement that peer-to-peer lenders register with the RBI.

Nine months since, only five of these lenders are registered in the ‘NBFC-P2P’ category, according to RBI data available until June 30, 2018.

This includes:

  • Fairassets Technologies India Pvt. Ltd.
  • Fincquare Fintech Pvt. Ltd.
  • Bridge Fintech Solutions Pvt. Ltd.
  • Bigwin Infotech Pvt. Ltd.
  • OHMY Technologies Pvt. Ltd.

Cashkumar foresees huge potential in online lending for short-term credit (The Hindu Business Line), Rated: A

Peer-to-peer (P2P) lending company Cashkumar, which offers short-term credit to borrowers, foresees huge potential to lend in the online space.

At present, the company services around 200 loans a month . It is targeting to service about 80 loans a day in the next six months, besides expanding operations to 20 cities by next year.

Asia

Japan’s Samurai Asset Finance Offers Loans Collateralized by Digital Assets (Bitcoin Exchange Guide), Rated: A

A Japanese firm listed on the Tokyo Stock Exchange recently unveiled loans that can be collateralized by three digital assets, namely BitcoinBitcoin Cash and Ethereum. As of now, the maximum amount borrowable is capped at 300 million yen (approximately $2.7 million).

Currently, the loan limits range from a minimum of 20 million yen ($180,000) to a maximum of 300 million yen ($2.7 million). The default repayment period is twelve months, although there are provision for extensions. The interest rates for these loans start from 7% to 155 annually, inclusive of commissions and extensions charges. If a lender fails to repay the loan in time, they will liable to a delinquency charge of 20% per year.

Crypto for real estate (Business Times), Rated: A

WE believe, in time, all real estate assets will reside on the blockchain – this is the grand vision of real estate entrepreneurs Julian Kwan and Alice Chen. The married couple – who co-founded Singapore-based real estate crowdfunding platform InvestaCrowd – has created a new product: RealFuel,

IMDEX ICO (IMDX Token): Decentralized Exchange & Crypto Banking Platform? (Bitcoin Exchange Guide), Rated: B

It’s difficult to ascertain much information about the people behind IMDEX. The company appears to have some connection to a Korean company called Techton Soft that was established in 2016. The Techton Soft website indicates that the company specializes in investment trading solutions, peer-to-peer lending, artificial intelligence, and cryptocurrency exchange. The Techton site states that the company has 10 employees, making it a rather small operation, and lists a man named SangHyun Kim as the CEO.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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