- Today’s main news: SoFi is shopping for $1B credit line. KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2018.2. Monzo headed to unicorn status. China Rapid Finance debuts up to $20M share repurchase program.
- Today’s main analysis: Forcasting cash flows using machine learning.
- Today’s thought-provoking articles: Report sheds light on early success of real estate crowdfunding. Key facts about SBA loans. 7 out of 10 people in the UK bank online. Why blockchain is the future of global lending.
- SoFi is shopping for $1 billion credit line. The interesting thing about this is, they’re looking at banks.
- KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2018-2.
- Forecasting cashflows using machine learning. This is a very interesting read from PeerIQ.
- PeerIQ CEO on OCC fintech charter.
- On the early success of real estate crowdfunding. There are some very interesting findings in this report. Anyone interested in real estate crowdfunding would do well to read this.
- Fintech names on the Inc. 5000 list of fastest growing companies.
- Treasury’s plan to legitimize online lenders is good for small businesses.
- Fintechs are cautious about OCC fintech charter.
- CRA-like standards for fintech could reduce credit access.
- Companies offer employees payday loan alternative.
- Zelle wants to let consumers pay businesses.
- TransUnion unveils solution to extend real-time credit offers.
- Credit Karma acquires Approved.
- RealtyShares exits industrial property investment.
- Monzo could join the ranks of European unicorns. This would do a lot to legitimize digital banking in Europe. The question is whether the rise of digital banking, and challenger banks, in the UK and Europe will ever migrate to the U.S.
- 7 out of 10 people bank online.
- How P2P lending plugged the funding gap for small businesses.
- Curo, QuickQuid, and LendingStream could face big legal action.
- Income investing, inflation, and P2P lending.
- Lndr adds PayPal integration.
- China Rapid Finance debuts up to $20 million share repurchase program.
- China regulator orders bailout of P2P lenders by managers of distressed assets.
- Regulations help resolve P2P plight in China.
- China orders bad-loan managers to help failing P2P lenders.
- United States
- SoFi Eyes $ 1B Credit Line, Post Q2 Loss (PYMNTS), Rated: AAA
- KBRA Assigns Preliminary Ratings to Prosper Marketplace Issuance Trust, Series 2018-2 (Business Wire) Rated: AAA
- Forecasting Cashflows using Machine Learning, Strong Retail Sales Report (PeerIQ), Rated: AAA
- PeerIQ CEO Ram Ahluwalia on OCC Fintech Charter: Consumers Win if it is Implemented Correctly (Crowdfund Insider) Rated: A
- New Research Sheds Light on Early Successes of Real Estate Crowdfunding (EquityMultiple Email), Rated: AAA
- Key Facts About the SBA (Email from SmartBiz Loans ) Rated: AAA
- Many Fintech Names on the Inc. 5000 List of Fastest Growing Companies (Lend Academy) Rated: A
- Treasury’s plan to legitimize online lenders is good for small businesses (The Guardian) Rated: A
- RPT-‘Fintechs’ sound cautious note on offer of U.S. bank charter (Rueters) Rated: A
- CRA-like standards for fintechs could reduce access to credit (American Banker) Rated: A
- Walmart And Others Offer Workers Payday Loan Alternative (NPR) Rated: A
- Venmo competitor Zelle wants to let you pay businesses, too (Payment Source) Rated: A
- TransUnion Unveils Solution to Extend Real-Time Credit Offers (DSNews) Rated: A
- Credit Karma acquires US lendtech Approved (Fintech Futures) Rated: A
- RealtyShares and Novaya Real Estate Ventures Exit Industrial Property Investment (Herald Courier), Rated: B
- United Kingdom
- Monzo poised to join ranks of Europe’s fintech ‘unicorns’ (Financial Times) Rated: AAA
- Seven out of 10 people in UK now bank online (Financial Times) Rated: AAA
- How P2P plugged the funding gap for small businesses (P2P Finance News), Rated: A
- US-based payday loan giants Curo, QuickQuid and Lending Stream could face legal action in ‘bigger scandal than PPI’ (Daily Mail Online) Rated: A
- Income investing, inflation and P2P lending (Investors Chronicle), Rated: A
- Crypto Lending App Lndr, Adds PayPal Integration to Increase Adoption Rates (Bitcoin Exchange Guide), Rated: B
- China Rapid Finance Debuts Up to $ 20 Million Share Repurchase Program (Crowdfund Insider), Rated: AAA
- China regulator orders bailout of peer-to-peer lenders by managers of distressed assets (SCMP), Rated: A
- Regulations help resolve P2P plight in China (Global Times) Rated: A
- China orders bad-loan managers to help failing P2P lenders (Financial Times), Rated: A
- European Union
- European IPOs may shake off sluggish start with a fall bonanza (Gulf Times) Rated: AAA
- Disruption or evolution? Why blockchain is the future of global lending (IT Pro Portal), Rated: AAA
- Aussies borrow money not knowing how personal loans are assessed, study finds (Daily Telegraph) Rated: AAA
- P2P has great potential, but too early to compare with equities (India Times), Rated: A
- Cambodia Establishes New Fintech Association (Crowdfund Insider) Rated: AAA
SoFi Eyes $ 1B Credit Line, Post Q2 Loss (PYMNTS), Rated: AAA
Student loan refinancing company Social Finance (SoFi) is looking for a loan of its own: The company is in talks with banks to secure a revolving credit line of as much as $1 billion after posting a second-quarter loss.
KBRA Assigns Preliminary Ratings to Prosper Marketplace Issuance Trust, Series 2018-2 (Business Wire) Rated: AAA
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Prosper Marketplace Lending Issuance Trust 2018-2 (“PMIT 2018-2”). This is a $500.5 million consumer loan ABS transaction.
Preliminary Ratings: Prosper Marketplace Issuance Trust, Series 2018-2
|Class||Preliminary Rating||Initial Class Principal|
Forecasting Cashflows using Machine Learning, Strong Retail Sales Report (PeerIQ), Rated: AAA
The price of a loan is the present value of the loan’s cashflows (after accounting for losses and prepayments), discounted by an appropriate discount rate:
Cashflow Modeling with Credit Models
The inputs of a credit model are loan attributes and borrower factors such as:
- Originator of the Loan
- Term of the Loan
- Interest Rate on the Loan
- Original Principal of the Loan
- Age of the Loan (Months on Book)
- Loan Grade
- Prior Loan Status
- Borrower’s Credit Score at Origination
The sparse transition model assumes 7 possible loan statuses which describe the performance of the loan:
- Current (or Status C)
- 1 Month Delinquent (or Status 1)
- 2 Month Delinquent (or Status 2)
- 3 Month Delinquent (or Status 3)
- 4 Month Delinquent (or Status 4)
- Default (or Status D)
- Paid Off (or Status P)
Once a loan arrives at a terminal absorbing state (“Defaulted” or “Paid Off”) there is no future possible transition as there are no further cashflows. Therefore, the probability of a loan remaining defaulted is 100%.
PeerIQ CEO Ram Ahluwalia on OCC Fintech Charter: Consumers Win if it is Implemented Correctly (Crowdfund Insider) Rated: A
We asked Ahluwalia who will benefit from the OCC Fintech Charter and whether it was big tech, Fintechs or other.
“The long-term winner of the charter is the US consumer who will benefit from greater competition, innovation, and access to the financial system. New technology and entrants will also promote the dynamism and resilience of the US financial system,” stated Ahluwalia. “Payments companies that seek to compete with Visa / Mastercard also stand to benefit. 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. Fintech lenders are a major winner as well as they’ll be able to compete on a more level playing field. Big technology firms have an opportunity to expand their role in financial services as well.”
New Research Sheds Light on Early Successes of Real Estate Crowdfunding (EquityMultiple Email), Rated: AAA
, an independent forum for real estate crowdfunding, and , the online direct real estate investing platform, recently released the results of a survey studying the preferences, experiences and planned future activity of a large cohort of investors in real estate crowdfunding offerings.
Some of the survey’s key findings include:
- A full 65 percent of respondents plan to allocate at least 10 percent of their portfolios to real estate crowdfunding sites, with nearly 40 percent expecting to allocate at least 20 percent
- More than 60 percent of respondents report typical annual returns of at least 8 percent
- Respondents considered “transparency and details with respect to investment opportunities” the most critical factor in a crowdfunding platform, exceeding all other choices, including “attentive customer service” and “diversity of investment opportunities”
- With respect to individual investments, “geographic focus” (i.e. where a property is located) matters less to investors than “sponsor/lender experience”, the property’s upside potential or several other factors
Read the full report here.
Key Facts About the SBA (Email from SmartBiz Loans ) Rated: AAA
Many Fintech Names on the Inc. 5000 List of Fastest Growing Companies (Lend Academy) Rated: A
Of the 5,000 companies on this year’s list exactly 233 are in the financial services category. Below is a screenshot of the top 10 companies in this category. Leading the list is Fundrise, the real estate platform for individual investors, a name that would be familiar to Lend Academy readers (I interviewed CEO Ben Miller on the podcast last year). Another well known name is Fundera, the small business lending marketplace, who were the third fastest growing company in our category. I encourage you to explore the complete list here where you can search for specific companies or filter by industry, state and many other criteria.
Treasury’s plan to legitimize online lenders is good for small businesses (The Guardian) Rated: A
Companies in this industry such as Kabbage, Lending Club and BlueVine have grown significantly over the past few years by offering financing to many small businesses that otherwise would not be able to get loans. Their deals are quick to approve, rarely require collateral and are usually tied in to a customer’s financial systems for close monitoring.
Last month, the Office of the Comptroller of the Currency announced that it was moving ahead with its plan to allow online lenders to apply for banking charters. When recognized as a bank, those types of financiers would no longer have to comply with state laws and would instead be subject to federal banking regulations. “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank,” Joseph Otting, the comptroller of the currency, one of the country’s top financial regulators, told the Los Angeles Times.
RPT-‘Fintechs’ sound cautious note on offer of U.S. bank charter (Rueters) Rated: A
Financial technology companies that lend online are sounding a cautious note on a U.S. banking regulator’s plan to offer them special federal charters because of concerns over legal challenges and requirements that are more onerous than expected.
The Office of the Comptroller of the Currency said last month it would accept applications for banking licenses from the likes of LendingClub and OnDeck Capital Inc, online lenders that do business outside the traditional banking system. They then could operate nationwide under one banking license rather than a patchwork of state-specific regulations.
Fintech executives lobbied for the license and applauded the OCC’s decision, but they are not immediately rushing in, they told Reuters.
CRA-like standards for fintechs could reduce access to credit (American Banker) Rated: A
As reported in American Banker, consumer advocacy groups are concerned that financial inclusion expectations for fintechs chartered as special-purpose national banks may not perfectly mirror the requirements of the Community Reinvestment Act.
This possibility exists because the final version of the Office of the Comptroller of the Currency’s licensing manual supplement for fintechs lacks the same level of specificity as the draft manual that was published for comment last March. Consumer advocates have been steadfast in their insistence that the substance of the CRA, which by its terms applies only to depository institutions, be applied to nondepository fintech national banks. Yet imposing CRA-like requirements on these institutions would likely result in reduced credit opportunities for low-income communities.
Walmart And Others Offer Workers Payday Loan Alternative (NPR) Rated: A
So when Loving heard about a company called PayActiv, a tech startup that helps companies get their workers emergency cash for very small fees, “I thought to myself, now that’s a good idea,” he says. And he signed up.
“Our data analysis showed that it was close to $150 a month being paid by the working poor — per employee or per hourly worker in this country,” says Shah. “That’s a substantial sum of money because it’s about $1,800 or $2,000 a year.”
Venmo competitor Zelle wants to let you pay businesses, too (Payment Source) Rated: A
Zelle, a Venmo-style app that lets consumers send money to friends, roommates and babysitters, is working on ways to ensure that customers can safely pay small businesses as well, according to people familiar with the situation.
Zelle, backed by Bank of America Corp., JPMorgan Chase & Co. and other banks, is beefing up its risk-assessment tools as part of the effort, according to one of the people, who asked not to be identified because the feature hasn’t been announced. The idea is to help protect users when they’re paying businesses like gardeners and hairdressers.
TransUnion Unveils Solution to Extend Real-Time Credit Offers (DSNews) Rated: A
Credit Karma acquires US lendtech Approved (Fintech Futures) Rated: A
Credit Karma, based in San Francisco, has 80 million members across North America, almost half of which are millennials and 80% of which access the service via their mobile devices.
Andy Taylor, founder and CEO of Approved, says it started the firm with a “vision that borrowers could visit an open house not having even talked with a lender, find the home of their dreams, and get fully pre-qualified on their mobile device before a listing agent offered them a business card”.
With this joint mobile mentality, both firms will be looking to cash in from the crowded US mortgage market. Approved says it has done nearly $5 billion in loan originations.
RealtyShares and Novaya Real Estate Ventures Exit Industrial Property Investment (Herald Courier), Rated: B
RealtyShares, an online platform for commercial real estate investing, has announced that one of its investment syndicates recently exited an industrial investment property—1 Distribution Center Circle in Littleton, Massachusetts—in partnership with Novaya Real Estate Ventures, an established Boston-based operator of commercial real estate throughout New England.
Monzo poised to join ranks of Europe’s fintech ‘unicorns’ (Financial Times) Rated: AAA
Monzo, the British digital bank popular with millennials, is set to become the latest European fintech “unicorn” with a fresh round of fundraising expected to put a valuation on the company of up to $1.5bn.
The east London-based online bank, known for its distinctive pink cards, is signing up 18,000 customers a week and aims to reach as many as 4m customers in the next couple of years, according to Tom Blomfield, its chief executive.
Seven out of 10 people in UK now bank online (Financial Times) Rated: AAA
While email is still the most common reason people use the internet, online banking is the fastest-growing use. According to a survey by the Office for National Statistics — looking at the UK population, not just internet users — 69 per cent said they banked online, almost double the proportion recorded 10 years ago (35 per cent).
The ONS began running its survey in 1998. In the case of internet usage, people were asked about their use in the January, February and April before the survey.
How P2P plugged the funding gap for small businesses (P2P Finance News), Rated: A
BEFORE the global financial crisis, banks were the lender of choice for Britain’s small businesses, and perhaps the only option they would consider.
Since then, banks have become more risk averse and are pulling back from lending in some parts of the market, especially since the EU referendum. Peer-to-peer, or rather peer-to-business (P2B), lending has stepped in to fill the gap.
The Peer-to-Peer Finance Association (P2PFA) says the industry provided £660m of new lending to businesses in the first quarter of 2018 and, since the third quarter of 2017, there has been a 35 per cent increase in net lending.
US-based payday loan giants Curo, QuickQuid and Lending Stream could face legal action in ‘bigger scandal than PPI’ (Daily Mail Online) Rated: A
Giant American payday lenders could face legal action in the UK today after they were accused of mis-selling loans to up to a million Britons.
Paydayrefunds.co.uk are preparing legal action against Quickquid, Curo and Lending Stream after the US-payday lending giants have so far refused to disclose information on customers who could be due tens of millions of pounds back in compensation.
The company issued a letter of action six months ago, which is due to run out next Friday. Paydayrefunds.co.uk revealed they have already appointed a barrister in preparation for issuing an injunction at the High Court against the lenders.
Income investing, inflation and P2P lending (Investors Chronicle), Rated: A
Emma Aygemang gives us a report on the Financial Conduct Authority’s study on peer-to-peer (P2P) investing, and there’s a discussion on the implications of restricting the sector to private investors, and where P2P providers need to up their game.
Crypto Lending App Lndr, Adds PayPal Integration to Increase Adoption Rates (Bitcoin Exchange Guide), Rated: B
A new cryptocurrency lending app called Lndr is planning integration with one of the most popular financial services in the world: PayPal. This integration will open the ownership to digital assets to 100 million people around the world, which can cause an unseen widespread of cryptocurrency usage even for people who never before considered using cryptocurrencies.
China Rapid Finance Debuts Up to $ 20 Million Share Repurchase Program (Crowdfund Insider), Rated: AAA
China Rapid Finance Limited (NYSE: XRF), one of China’s largest consumer lending marketplaces, announced earlier this week the launch of its new share repurchase program, which allows the lender to authorized the repurchase of its ordinary shares in the form of American depositary shares with an aggregate value of up to $20 million.
China regulator orders bailout of peer-to-peer lenders by managers of distressed assets (SCMP), Rated: A
During a Wednesday meeting in Beijing, the China Banking and Insurance Regulatory Commission asked four managers of distressed assets – Huarong, Cinda, Great Wall and Orient – to extend their mandate to non-performing loans owed by peer-to-peer (P2P) lending platforms, according to a source familiar with the matter. The meeting was first reported by Reuters on Thursday.
Regulations help resolve P2P plight in China (Global Times) Rated: A
In July, a total of 165 platforms reported problems, among which 65 percent had difficulties in investments withdrawal, while executives of 8.72 percent of those firms stole money and ran away, according to a report released by domestic industry website wdzj.com on August 1.
Accumulated transactions in the domestic P2P industry had reached 7.48 trillion yuan by the end of July, the report said.
On Wednesday, the China Banking and Insurance Regulatory Commission asked the country’s four State-owned asset management companies to help address rising risks in the P2P sector, according to media reports.
China orders bad-loan managers to help failing P2P lenders (Financial Times), Rated: A
China’s banking regulator has instructed the country’s four state-owned bad loan managers to deal with failing peer-to-peer lending platforms, a sign of Beijing’s concern about possible financial and social instability from the shadow banking sector.
Hundreds of P2P platforms have collapsed in recent months due to borrower defaults and fraud by platform operators. The defaults have sparked panic among investors, some of whom have sought early redemption of their investments.
European IPOs may shake off sluggish start with a fall bonanza (Gulf Times) Rated: AAA
European markets are set to see a slew of big initial public offerings this fall. Potential mega listings – from companies such as Aston Martin, Volvo Cars and Spanish oil firm Cepsa Trading – could help Europe overcome a relatively slow first half. IPOs there have raised about $31bn in 2018 so far, compared with almost $38bn in the same period last year, data compiled by Bloomberg show.
Still, volatile markets threaten to spook investors and owners away from new share sales. Concerns that turmoil in Turkey could hurt the region’s lenders has added to pressure on European stocks from the US-China trade spat. Commodities have tumbled along with US equities, fuelling fears that the sell- off may be the start of a broader market correction.
Disruption or evolution? Why blockchain is the future of global lending (IT Pro Portal), Rated: AAA
Global spending on blockchain solutions is estimated to reach $2.1 billion this year, but for there to be a blockchain revolution, many barriers – technological, political, organisational and societal – need to be overcome first.
Currently, citizens in Europe have the lowest levels of ‘complete trust’ in traditional banks. This is worrying, given money is simply a means of exchange, built on the trust bestowed upon it.
However, some bankers will tell you the traditional financial system is ‘global’ and ‘efficient’ as it is, despite being fully aware of its flaws. In our industry, lending, if you’re currently a non-bank lender who would like to diversify your global lending potential, you will find that it is punitively expensive, time-consuming and exclusive to large funds and traders. This ultimately reduces the potential reward for non-bank lenders through fees.
Given the astonishing fact 39 percent of the world’s population are unbanked, blockchain technologies and associated crypto currencies could open the door for anyone, anywhere to lend, borrow and invest. All you need is internet access.
Aussies borrow money not knowing how personal loans are assessed, study finds (Daily Telegraph) Rated: AAA
AUSTRALIANS have borrowed $46.6 billion in personal loans over the past 12 months, research has found, but experts claim many are unaware of how loan applications are assessed and how they may affect their own credit scores.
RateCity analysed Australian Bureau of Statistics data from the past 12 months and found personal loan numbers were up 6.4 per cent year on year, with more than half a million Australians using them to buy cars in that period. The total borrowing for new cars was $8.33 billion at an average loan size of $36,341; while a further $5.88 billion was borrowed for used cars.
On top of this, we borrowed $6.05 billion for debt consolidation and $2.54 billion for household goods, but despite the huge outlay, many borrowers are confused about how personal loans work and why they may not be offered the low interest rates they see on advertisements.
P2P has great potential, but too early to compare with equities (India Times), Rated: A
People with zero or poor credit score find it hard to get a loan from NBFCs and banks. P2P aims to serve such unbanked and underbanked population. Tell us how do you do it?
NBFCs and banks also lend to people ‘new to credit’. These people typically have a financial transaction whether in form of a bank account or income data, whether salaried or self-employed, and can be validated on the risk ratios, basis the information.
Cambodia Establishes New Fintech Association (Crowdfund Insider) Rated: AAA
Cambodia Fintech Association also reported it undertakes four major streams of work on behalf of its members, which are the following:
- Champion: Advise government and regulators on policy change that supports Fintech innovation and growth
- Assist: Provide research, legal/regulatory help, service provider discounts and other benefits that help our members build and scale their Startups
- Match: Get customers to buy, investors to invest, and talent to get involved in Fintech solutions
- Bridging: Connect ventures (capital), talents (education) and other stakeholders within the Cambodia Fintech ecosystem and provide connections to overseas hubs through our network Events and Partners
According to the Phnom Penh Post, CFA Vice President, Eddie Lee, stated that Cambodia is currently progressing in its fintech, but startups are slowly starting to surface in the country. Lee also explained that CFA has also signed a Memorandum of Understanding with the Taiwan Fintech Association, Thailand Fintech Association and Singapore Fintech Association to establish bridges with similar groups in the region. He added that the next step is to register the CFA with the Asian Fintech Network.