- Today’s main news: Square expands Bitcoin service to all 50 states. Funding Circle says higher rates will help them. Zopa says UK investors likely to hate Marmite. Preview of China Rapid Finance Q2 earnings. Funding Societies hits SGD200M in SME crowdfunding.
- Today’s main analysis: How non-prime families cover college tuition.
- Today’s thought-provoking articles: How Goldman Sachs created Marcus to be dominant in consumer banking. UK companies likely to make unicorn status in 2019. Chinese victims of P2P lending crisis speak out.
- Square expands Bitcoin service to all 50 states. It was previously reported that a substantial part of Square’s revenues came from Bitcoin services. Now, the company is rolling it out to all 50 states. It’s possible that Square could do considerable business in Bitcoin in 2019. The question is, will that impact the crypto market in any measurable way?
- How non-prime families cover college tuition. The best analysis of the day, with lots of interesting charts.
- How Goldman Sachs made Marcus a dominant force in consumer banking. Marcus is going to be one of the major player in consumer banking long-term.
- Lenmo to launch for IOS. Think Venmo for lenders, an interesting service indeed.
- Interview with Kabbage CEO Rob Frohwein.
- How one startup helps cash-strapped students finish college.
- Fintech dives into subprime credit-card lending.
- Q2 Holdings to acquire Cloud Lending.
- Roostify announces Roostify Adapt functionality.
- Funding Circle says higher rates will help them.
- Zopa says UK investors are more likely to hate Marmite.
- UK companies that will achieve unicorn status in 2019.
- Wonga investors raise 10 million GBP to save the company.
- Welendus to raise 850,000 GBP on Seedrs.
- The effects of the FCA crackdown on P2P lending and crowdfunding.
- Preview of China Rapid Finance Q2 earnings.
- Victims of P2P lending crisis speak out.
- Regulatory reorganization is crucial to financial system health.
- Protest mark China’s ruptured P2P lending landscape.
- China’s multi-front economic war dulls direction.
- Europe: Mintos interest rates go lower.
- International: How banks, retailers track how you type, swipe, and tap with behavioral biometrics.
- Singapore: Funding Societies hits SGD200 Million in SME crowdfunding.
- Asia: Hexindai acquires equity stake in Musketeer.
- Middle East: Impact of fintech boom on inequality.
- Israel: Lending Express connects small businesses with lenders.
- United States
- Square Expands Cash App Bitcoin Service to All 50 US States (CoinDesk) Rated: AAA
- How Non-prime families cover college tuition (Center for the New Middle Class) Rated: AAA
- How Goldman Sachs Created Marcus To Be a Dominant Force in Consumer Banking (Lend Academy) Rated: AAA
- Lenmo, the Venmo for Lenders, Set to Launch for IOS (Bank Innovation) Rated: A
- Transforming The Small-Business Lending Customer Experience: Kabbage CEO Rob Frohwein (Forbes) Rated: A
- Startup’s mission: Help cash-strapped students finish college (American Banker) Rated: A
- Fintech Crowd Dives Into Subprime Credit-Card Lending (The Wall Street Journal) Rated: A
- Q2 Holdings To Acquire Cloud Lending For Lending And Leasing Platform (Seeking Alpha) Rated: B
- Roostify Announces Roostify Adapt Functionality to Extend Branding and Customization Options for Enterprise Lenders (Business Wire) Rated: B
- United Kingdom
- Higher rates will help us, says Funding Circle after divi cut (Citywire) Rated: AAA
- ZOPA: UK investors more likely to hate Marmite (Peer2Peer Finance) Rated: AAA
- Here Are The U.K. Companies That Will Be Unicorns In 2019 (Forbes) Rated: AAA
- Wonga investors raise £10 million to save company (Isreal National News) Rated: A
- P2P Lender Welendus Returns to Seedrs to Raise £850,000 (Crowdfund Insider) Rated: A
- Exploring the effect of the FCA crackdown on P2P and crowdfunding (AltFi News) Rated: A
- Preview: China Rapid Finance Q2 Earnings (Benzinga) Rated: AAA
- Victims of P2P Lending Crisis in China Speak Out About Misfortunes (The Epoch Times) Rated: AAA
- Regulatory Reorganization Crucial to Health of Financial System (Caixin Global) Rated: A
- Protests Mark China’s Ruptured P2P Lending Landscape (PYMNTS) Rated: A
- China’s multi-front economic war dulls direction (Asia Times) Rated: A
- European Union
- Lower Interest Rates on Mintos – How do Investors React? (P2P Banking) Rated: AAA
- Banks and Retailers Are Tracking How You Type, Swipe and Tap (The New York Times) Rated: AAA
- Funding Societies Hits SGD200 Million in SME Crowdfunding (Funding Societies) Rated: AAA
- Chinese P2P Lender Hexindai Announces Equity Stake Acquisition in Indonesian Online Lending Platform Musketeer (Crowdfund Insider) Rated: A
- The Impact Of The Middle East’s Fintech Boom On Economic Inequality In The Region (Entrepreneur) Rated: AAA
- Square And MetLife Watch Out: Two Fintech Startups Target $21T Markets (Forbes) Rated: A
Square Expands Cash App Bitcoin Service to All 50 US States (CoinDesk) Rated: AAA
The company – which was co-founded by Twitter chief executive Jack Dorsey – announced the service expansion through a Tweet on Monday, months after the firm initially rolled out the bitcoin service to investors in the country.
As reported by CoinDesk, Square officially launched the bitcoin purchasing option on its Cash App in January following a testing phase started last year. However, the service was not offered in the states of New York, Georgia, Hawaii and Wyoming due to their more restrictive regulations regarding bitcoin transactions.
How Non-prime families cover college tuition (Center for the New Middle Class) Rated: AAA
Students from non-prime households are more likely to attend public, community, or junior colleges compared to students from prime households.
- Consequently, they are more likely to live at home.
- The majority of these students come from single-parent or homes with a stepparent.
- Compared to prime parents, non-prime parents are significantly more likely to say that financial aid affected their choice of schools.
- Non-prime parents are slightly more sensitive to schools welcoming students from diverse economic backgrounds.
- Students from non-prime families are extremely reliant on financial aid as nine out of ten will use some form of financial assistance to cover college expenses in the Fall 2018, compared to three-quarters of prime students.
- Access to financial aid is critical for these students because most of them come from single-income households with fluctuating incomes where their parent’s financial situation is precarious and burdened with high levels of debt.
Almost twice as many nonprime students, 42%, attend public/community/jr colleges compared to prime students, 23%.
Read the full report here.
How Goldman Sachs Created Marcus To Be a Dominant Force in Consumer Banking (Lend Academy) Rated: AAA
First, there was the launch of GS Bank in April 2016. Six months later Goldman Sachs introducedthe world to their Marcus brand. They began as an online lending platform offering unsecured consumer loans up to $30,000 with interest rates ranging from 5.99% to 22.99% (they now offer loans up to $40,000 and rates range from 6.99% to 24.99% as of August 2018). Their big differentiator was offering no fees. There was no origination fee for the borrower, no prepayment fees and no late fees.
They gained traction very quickly. They crossed $1 billion in total originations within eight month of launch. At the end of their first year they were at $1.7 billion. At that time they brought their deposit business under the Marcus brand, it was formerly branded under GS Bank. Now when you go to the Marcus website you are presented with two options: personal loans and savings accounts (which includes certificates of deposits).
We learned in Goldman Sachs Q2 earnings call in July that Marcus had originated more than $4 billon in total loans since launch and they had 1.5 million customers. Their deposit base is now $23 billion.
Lenmo, the Venmo for Lenders, Set to Launch for IOS (Bank Innovation) Rated: A
Whether it’s a consumer lender like Goldman Sachs’s Marcus or a point-of-sale lender like Affirm or even SMB lenders like BlueVine, there is a lot of perceived opportunity in the lending market. Add a P2P dimension to that, and you have Lenmo.
The new app is launching in the next few weeks in Apple’s app store, Bank Innovation has learned. Lenmo, founded less than a year ago, is a peer-to-peer app in which the lender can select a borrower as well as set their own interest rate, “which will be higher than most alternative options,” Margaret Cipparone, a Lenmo spokesperson, told Bank Innovation. These individual lenders will facilitate small, unsecured loans ranging from as low as $50 to as high as $5,000, she said.
For borrowers, they can choose the various lenders available on the app and select the one they find most suitable. The goal behind this type of P2P lending service is to cater to the vast underserved market.
Transforming The Small-Business Lending Customer Experience: Kabbage CEO Rob Frohwein (Forbes) Rated: A
In the intervening years since Frohwein and his friends, Marc Gorlin and Kathryn Petralia, started Kabbage “with an idea and a misspelling of cabbage” (a slang term for money), it’s gone on to fund more than 150,000 small businesses, representing a wide variety of industries, with over $5 billion of working capital. And in that time, the goal has evolved, says Frohwein, to “never allowing you to go below zero.” What he means by this is “to keep entrepreneurs away from that pit-of-the-stomach feeling, which I know as a former small business owner myself: Deciding whether to pay vendors first, or make payroll, or invest in marketing, and knowing you need to do all three but it’s going to kill you because your cash flow just isn’t working out. It’s here that Kabbage can step up and help.”
Micah Solomon, Forbes: I’m interested in how you went about pushing back against the traditional customer experience norms in lending.
Rob Frohwein, Co-Founder and CEO, Kabbage, Inc.: Everyone knows that banks have been underserving small business customers, but our transformational moment came from asking “why?”. It turns out that a large part of the reason is the costly, manual processes that make underwriting small business loans time-intensive and unprofitable. Kabbage’s technology quickly analyzes the live business data of a small business and fully automates the underwriting process, so businesses get an answer and access to capital in minutes, not weeks or months.
And for Kabbage? What’s next for you.
Another internal saying here is “Let the bakers bake.” A baker didn’t start their business to deal with back-office financing all day long. They want to serve their customers and perfect their craft. We’re in the business of giving small businesses back more time in their day and to remove unneeded friction.
Startup’s mission: Help cash-strapped students finish college (American Banker) Rated: A
Harvard MBAs who want to refinance their student debt have numerous options, including the online lenders SoFi and CommonBond. Ivy Leaguers who need a loan to get through college also have choices, including Discover and Wells Fargo.
But low- or moderate-income students who do not have relatives with sound credit who can co-sign have few options for obtaining the financial help they need to complete college. Many of them are women, who hold nearly two-thirds of outstanding student debt in the U.S. — almost $900 billion as of mid-2018.
Fintech Crowd Dives Into Subprime Credit-Card Lending (The Wall Street Journal) Rated: A
Facing rising loan losses, especially among the riskiest borrowers, banks are reining in their growth in this sector. Subprime credit-card balances at seven large U.S. banks rose 3% in the first half of the year from a year prior, down from a 13% increase in the year-earlier period, according to Autonomous Research. Capital One Financial Corp.’ssubprime balances accounted for 32% of its domestic credit-card balances in the first half of 2018 compared with 36% in the same period a year earlier
Capital One has around $32 billion in subprime credit-card balances on its books.
The new entrants say their use of machine learning and artificial intelligence for underwriting helps them manage the risk. They also mostly extend small credit lines, often ranging between $500 and $2,000, limiting the scale of potential losses.
Around 60 million U.S. adults have credit scores lower than 650, according to Fair IsaacCorp. , roughly the threshold where banks focused on prime borrowers stop lending. Some 53 million U.S. adults don’t have credit scores at all because they have little or no borrowing history.
Q2 Holdings To Acquire Cloud Lending For Lending And Leasing Platform (Seeking Alpha) Rated: B
Cloud Lending has developed cloud-based software for the financial lending and leasing industry.
QTWO is acquiring Cloud Lending for its next generation web-based system and complementary capabilities and geographic customer base.
The San Mateo, California-based Cloud Lending was founded in 2012 to develop and operate a cloud-based peer to peer lending and leasing platform.
Roostify Announces Roostify Adapt Functionality to Extend Branding and Customization Options for Enterprise Lenders (Business Wire) Rated: B
Roostify today announced the release of Roostify Adapt. An easily configurable feature for lenders with complex workflows, Roostify Adapt allows for real-world process management while maintaining the power of primary and secondary (“parent/child”) accounts within the Roostify digital lending environment.
Higher rates will help us, says Funding Circle after divi cut (Citywire) Rated: AAA
Peer-to-peer lending lending investment trust Funding Circle(FCIF) is expecting rising interest rates to help boost its yield after hedging costs forced a dividend cut.
After launching in 2015, the peer-to-peer fund had offered a 6.5p annual payout but in June it was forced to cut its target dividend range to between 5p and 6p for the next 12 months.
That equates to a forward yield of between 4.9% and 5.8% based on the current 102.8p share price.
ZOPA: UK investors more likely to hate Marmite (Peer2Peer Finance) Rated: AAA
INVESTORS in the UK are more likely to hate Marmite than average, according to new research.
A survey commissioned by peer-to-peer consumer lender Zopa showed that 50 per cent of UK investors dislike Marmite, compared to the national average of 33 per cent.
The research, which polled 2,000 people with an investment of at least £2,000, found a number of other quirky traits.
This included a preference for blue cars, which are owned by 20 per cent of investors, and a love of listening to Radio 2.
Here Are The U.K. Companies That Will Be Unicorns In 2019 (Forbes) Rated: AAA
There are 258 unicorns at the moment, but the club is getting less and less exclusive. The majority reside in the US and China with just over 145 a piece but after this few countries other than the U.K. and India make double digits. Who is next to join this group?
- WorldRemit, a London-based challenger to Transferwise, operates an online platform through which users can make international money transfers, usually for immigrants or expats sending remittances back to their families at home. Raising $40m in December 2017 and a current valuation of $670m. Turnover was $51.02m in 2016, so it looks on track to make it into the club.
Wonga investors raise £10 million to save company (Isreal National News) Rated: A
Payday loan giant Wonga.com has received a £10 million cash injection from its investors to avoid going into administration. The controversial company was once hailed as the fastest growing company in Europe and had plans for a £1 billion flotation. However, the firm has faced difficulties after a surge in compensation claims and a regulatory clamp-down on the high-cost loans industry.
The company had a variety of backers including Israeli investors – but emergency fundraising in the last few weeks caused their original investors of Accel Partners and Balderton Capital to offer a bailout solution.
P2P Lender Welendus Returns to Seedrs to Raise £850,000 (Crowdfund Insider) Rated: A
Short-term peer-to-peer lending platform Welendus has returned to equity crowdfunding platform Seedrs to raise £850,000 in funding. The lender’s latest initiative comes less than one year after it secured £208,898 through the funding portal.
Welendus also reported that for investors its enables them to invest in short-term loans, offering higher returns with the short-term investment flexibility and the benefit of a Provision Fund.
Exploring the effect of the FCA crackdown on P2P and crowdfunding (AltFi News) Rated: A
The growth of P2P lending and its positive effect on the UK economy cannot be disputed. Initially starting out as a curiosity during the depths of the financial crisis in 2008, P2P lending has grown from £300 million in funds being lent in 2011 to a huge £4.6 billion in 2016.
Preview: China Rapid Finance Q2 Earnings (Benzinga) Rated: AAA
On Wednesday, China Rapid Finance XRF 4.86% will release its latest earnings report. Decipher the announcement with Benzinga’s help.
Earnings and Revenue
Wall Street analysts see China Rapid Finance reporting a loss of 13 cents per share on revenue of $30.88 million.
China Rapid Finance EPS in the same period a year ago came in at a loss of 29 cents. Revenue was $15.16 million. Revenue would be up 103.67 percent on a year-over-year basis.
Victims of P2P Lending Crisis in China Speak Out About Misfortunes (The Epoch Times) Rated: AAA
Yindou had a loan balance of 4.4 billion yuan (about $640 million) as of the end of June, according to Yicai, a major Chinese business newspaper. After Yindo suspended its operations in July, the company’s investors were left without the ability to withdraw their investments.
Since the platform closed, Yindou investors have turned to the bank in hopes of collecting their investments back.
Recently, victims of another financial product apparently gone wrong have taken to the streets. This year, a total of 170 private funds, 70 percent of which are private-equity or venture-capital funds, have failed or closed without explanation. This has led to many protests, most notably in Beijing on Aug. 7, where local police turned away protestors before they could make their case to China’s bank regulator, the Banking Regulatory Commission (CBRC).
Meanwhile, China’s M2 money supply, or the total savings of companies and residents, increased more than a hundredfold from 1990 to 2017, according to He, at a rate faster than the growth of GDP. While a steady money supply, or credit, can fuel an economy’s growth, such excessive credit, in relation to the GDP, can fuel bubbles and cause inflation.
Regulatory Reorganization Crucial to Health of Financial System (Caixin Global) Rated: A
The merging of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission into the China Banking and Insurance Regulatory Commission (CBIRC) naturally has attracted a lot of attention outside of China as it involves major changes across two important areas of finance.
Yet perhaps the most important thing is how this will change the relationship between regulators and the central bank, the People’s Bank of China.
Fifteen years ago, responsibility for supervising and regulating banking institutions was taken from the central bank and given to the then-newly formed CBRC. This development had far-reaching consequences, and led to the rebuilding of the previously inefficient financial regulatory model into a comprehensive and professional banking system that is in line with international standards. State-owned banks were also commercialized around this time.
Protests Mark China’s Ruptured P2P Lending Landscape (PYMNTS) Rated: A
China’s peer-to-peer (P2P) lending crisis has caused widespread anger from citizens who are demanding that the government bail out hundreds of collapsed P2P companies. Last week, it was reported that China ordered a lockdown of Beijing’s financial district to prevent individuals from protesting a crisis in the P2P lending marketplace.
The size of China’s P2P industry is bigger than in the rest of the world combined, with outstanding loans of 1.49 trillion yuan ($217.96 billion USD). The industry was nearly unregulated and at its peak in 2015, when there were about 3,500 P2P businesses in the country. However, a combination of regulatory failures, fraud and the declining debt is being blamed for the shuttering of 243 online lending platforms since June.
China’s multi-front economic war dulls direction (Asia Times) Rated: A
Chinese stocks were at the bottom of the Emerging Asia pack into August, down 20% in local-index terms, as the so-called “trade war” with Washington added another 25% mutual tariff blow on tens of billions of dollars’ worth of goods.
The International Monetary Fund urged a negotiated settlement as it predicted only “limited direct impact” on the Chinese economy, shaving growth by half a percentage point under a medium-case scenario, while holding to this year’s 6.6% forecast. However, the IMF also warned that credit expansion was unsustainable and that tighter global financing conditions posed “downside risk,” as the renminbi continued its 10% slide since April.
However, the US-China exchange-rate and trade regimes now closely overlap as an overhang on “A” share consideration, despite China’s 30% slice on the benchmark MSCI Index, with a clean resolution of cross-cutting issues unlikely to offer recovery prospects in the coming months.
Lower Interest Rates on Mintos – How do Investors React? (P2P Banking) Rated: AAA
Compared to the beginning of July the interest rates for newly issued EUR loans on Mintos are much lower now. While investor enjoyed interest rates of up to 13-14% for loans issued in the first half of the year, typical rates are 8-11% now, with a 12-13% for more exotic loans mixed in.
To find out how investors reacted to the situation P2P-Kredite.com conducted a survey among German speaking Mintos investors. Here are the preliminary results (48 respondents):
- 35% say they withdraw univested cash and invest it on other p2p lending platforms
- 21% say they continue to invest on Mintos primary market
- 17% say they just wait, the interest rates will rise again
- 15% say they withdraw unimvested cash and invest it in other asset classes (e.g stock)
- 12% say they buy on the Mintos secondary market now, instead of using the primary market
Banks and Retailers Are Tracking How You Type, Swipe and Tap (The New York Times) Rated: AAA
The way you press, scroll and type on a phone screen or keyboard can be as unique as your fingerprints or facial features. To fight fraud, a growing number of banks and merchants are tracking visitors’ physical movements as they use websites and apps.
Some use the technology only to weed out automated attacks and suspicious transactions, but others are going significantly further, amassing tens of millions of profiles that can identify customers by how they touch, hold and tap their devices.
The data collection is invisible to those being watched. Using sensors in your phone or code on websites, companies can gather thousands of data points, known as “behavioral biometrics,” to help prove whether a digital user is actually the person she claims to be.
When clients log in to their Royal Bank of Scotland accounts, software begins recording more than 2,000 different interactive gestures. On phones, it measures the angle at which people hold their devices, the fingers they use to swipe and tap, the pressure they apply and how quickly they scroll. On a computer, the software records the rhythm of their keystrokes and the way they wiggle their mouse.
Funding Societies Hits SGD200 Million in SME Crowdfunding (Funding Societies) Rated: AAA
Funding Societies surpassed the SGD 200 million mark in total crowdfunded SME loans. This achievement came just 6 months after crossing SGD 100 million in January this year. In the same period, its investor base has also increased from about 40,000 to 75,000, indicating strong demand from investors to support local SMEs while diversifying their investment portfolio.
Chinese P2P Lender Hexindai Announces Equity Stake Acquisition in Indonesian Online Lending Platform Musketeer (Crowdfund Insider) Rated: A
Chinese peer-to-peer lending platform Hexindai (NASDAQ:HX) announced on Tuesday it has entered into definitive agreements to acquire a 20% equity stake in Musketeer Group Inc., an Indonesian online lending platform that offers consumption installment loans, for approximately $1.6 million, and simultaneously completed the acquisition.
The Impact Of The Middle East’s Fintech Boom On Economic Inequality In The Region (Entrepreneur) Rated: AAA
The past decade has shown that fintech can be a powerful force for equality. Blockchain, data analytics, and mobile phone technology are evolving at breakneck speed and have shown potential to bridge the gap between the rich and the poor. Safaricom’s mobile-money platform, M-Pesa, reaches an estimated 96% of households in Kenya, and is credited with lifting at least 200,000 Kenyan households out of poverty. The Indian mobile wallet, PayTM, has nearly 200 million users, including women and rural families that can now participate in the digital economy. Will the Middle East produce companies of the same caliber and social impact? There is certainly an opportunity, thanks to three factors.
The first factor is necessity. The Middle East is in dire need of ideas to bridge the massive gulf between the rich and the poor. The region leads the world in economic inequality, where the top 10% of the population enjoy about 60-66% of the region’s income. 86% of the adult population is underbanked, which means they don’t have access to services at formal financial institutions. This provides a tremendous market opportunity.
Square And MetLife Watch Out: Two Fintech Startups Target T Markets (Forbes) Rated: A
Lending Express, a Tel Aviv-based platform founded in 2016 that connects small businesses with lenders, is hoping to expand the market for small business loans. As CEO Eden Amirav explained in an August 13 interview, Lending Express — which has raised $2.7 million in seed capital — has grown from under 10 people in October 2016 to 25 — mostly in Tel Aviv with a business development office in San Francisco.
Lending Express did not disclose its revenues but it seems to be growing. As Amirav said, “We currently work with more than 30 leading lenders and FinTech partners, and have facilitated $65 million in SMB loans funded through our platform. Since we began operations in the US in the last quarter of 2017, and thereafter almost every quarter, we have doubled the number of loans we facilitated the previous quarter and 46% of all loans we’ve helped close happened in the second quarter of 2018.”
Lending Express sees tremendous potential for SMB lending outside of traditional banks. Amirav estimates that a mere 1% of the $1 trillion in total SMB loans — or $10 billion — is offered by alternative lenders like Lending Club and On Deck.