- Today’s main news: Zuckerberg, Bezos, Gates back Wagestream. Funding Circle plans 300M GBP IPO. P2P lenders take in 300M GBP in second year of IFISA. Hong Kong receives 29 bids for virtual bank licenses.
- Today’s main analysis: Does fintech has a vicious funding circle?
- Today’s thought-provoking articles: Samir Desai discusses Funding Circle’s IPO as plan to conquer America. Q3 lending earnings insights. Sub-prime lenders shrug off Wonga’s political cloud. China’s fintech giants have the clout to dominate.
- Zuckerberg, Gates, Bezos back UK-based Wagestream. This makes sense, but I wonder if they may be thinking that their own employees will be the ones to take advantage of what Wagestream has to offer.
- Samir Desai on Funding Circle’s IPO as a path to conquer America. This is an excellent article with a lot of detail and critical perspective. It discusses more than Funding Circle and UK lending. There is also much to say about international competition, including China, U.S., Asia, and the rest of Europe. A great read.
- Does fintech have a vicious funding circle? This is a great quetion, and an excellent exploration into its answer.
- Q3 2018 Lending Earnings Insights. From PeerIQ.
- Scratch intros loan servicing platform that align interests of lenders and borrowers.
- Funding Circle to raise 300 milliong GBP in London IPO. This is an important IPO. Not just for Funding Circle, but for the online lending industry as a whole. Could it take Funding Circle beyond Europe?
- Funding Circle’s IPO will be open to existing investors.
- Don’t be blinded by Funding Circle’s wizardry.
- Funding Circle to host cryptocurrency event to promote women in fintech.
- Sub-prime lenders shrug off Wonga’s political cloud. After Wonga’s collapse, will there be another online lender to step up and take over the market?
- Kreos Capital is first in line for Wonga payout.
- P2P lenders record taking in 300 million GBP in IFISA’s second year.
- Cash ISA accounts are at an 18-year low.
- County Down Developments gets 250,000 GBP credit facility from Blend Network.
- Casper offered Klarna credit without permission.
- Fintech giants have the clout to dominate. And with the continued crackdown on smaller firms, they are the likely beneficiaries of the clamp down.
- Hong Kong Monetary Authority gets 29 bids for virtual bank licenses.
- Airwallex to seek virtual bank license.
- Banks expect stable earnings growth.
- State banks to boost lending.
- Australia: Wong’a collapse is a warning to Aussie fintechs.
- India: FinUp backs SlicePay.
- Indonesia: Kredivo hits speed bumps on Series B funding.
- International: Robo-advice is not dead.
- Sweden: Instantor opens up bank API.
- Australia: Micro lender makes a big difference.
- Israel: Tel Aviv on top 10 list for entrepreneurial undergrad programs.
- United States
- As Wonga Collapses, Zuckerberg, Bezos & Gates Back A Fairer Alternative To Payday Loans (Forbes), Rated: AAA
- Samir Desai On Funding Circle’s $ 2 Billion IPO And His Plan To Conquer America (Forbes) Rated: AAA
- The Risk of a Vicious Funding Circle in Fintech (Bloomberg) Rated: AAA
- Lending Earnings Insights (2018 Q3) (PeerIQ) Rated: AAA
- Scratch Introduces First Loan Servicing Platform To Align Financial Interests of Lenders and Borrowers (Scratch Email) Rated: A
- United Kingdom
- Funding Circle plans to raise £300m in London IPO (Financial Times), Rated: AA
- Funding Circle IPO will be open to platform’s existing investors (Peer2Peer Finance) Rated: A
- Don’t be blinded by the wizardry of tech darling Funding Circle (London Evening Standard) Rated: A
- Funding Circle to host cryptocurrency event to promote women in fintech (Peer2Peer Finance) Rated: B
- UK sub-prime lenders shrug off political cloud (Nasdaq), Rated: AAA
- Hedge fund Kreos Capital is first in line for Wonga payout deal after lending the collapsed payday loan company around £34m (This is Money) Rated: A
- P2P lenders record £300m intake in second year of the IFISA (P2P Finance News), Rated: AAA
- The end of the Cash Isa? Number of new accounts hits 18-year low (Moneywise), Rated: A
- P2P marketing clampdown ‘may restrict IFISA takeup’ (P2P Finance News), Rated: A
- Northern Irish housebuilder secures £250,000 from P2P platform (Development Finance Today), Rated: A
- Mattress start-up Casper offered credit in UK without permission (Financial Times), Rated: B
- China/Hong Kong
- China’s Fintech Giants Have The Money And Means To Dominate Despite The Wider Slowdown (Forbes), Rated: AAA
- HKMA Receives 29 Bids for First Round of Virtual Bank Licences (Regulation Asia) Rated: AAA
- Tencent-backed Airwallex to join push for Hong Kong virtual bank license (SCMP) Rated: A
- Stable earnings growth expected by mainland banks, but bad-loan worries linger (SCMP), Rated: A
- China’s state banks to boost lending as Beijing fans economy (Nikkei), Rated: A
- European Union
- INSTANTOR OPENS UP BANK API – PROVIDING UNIQUE ACCESS TO HALF A BILLION PEOPLE (Fintech Finance), Rated: B
- Robo-advice not dead: GlobalData (Financial Standard) Rated: A
- Collapse of UK payday lender Wonga sounds warning for Aussie fintech vigilance (Australian Financial Review) Rated:AAA
- Micro lender makes big difference (Latrobe Valley Express) Rated: A
- China’s FinUp, existing investors back digital lending startup SlicePay (VC Circle) Rated: AAA
- Southeast Asia’s startups suffer from Series B funding crunch, says Kredivo’s Gar (Deal Street Asia), Rated: AAA
- Tel Aviv Climbs on List of Top 10 Undergraduate Programs for Entrepreneurs (CTech) Rated: B
As Wonga Collapses, Zuckerberg, Bezos & Gates Back A Fairer Alternative To Payday Loans (Forbes), Rated: AAA
Village Global, a venture capital fund backed by prominent entrepreneurs such as Facebook CEO Mark Zuckerberg, Amazon Founder Jeff Bezos and Microsoft Founder Bill Gates, announced its financing round in London-based Wagestream earlier this summer.
Wagestream provides a platform which allows low-wage workers such as waiters to withdraw their salaries and tips as they earn them, thereby avoiding having to wait for a fixed monthly payday.
Samir Desai On Funding Circle’s $ 2 Billion IPO And His Plan To Conquer America (Forbes) Rated: AAA
Funding Circle has already facilitated over £5 billion ($6.37 billion) in loans since launching in 2010, mostly from its home U.K. market.
Funding Circle facilitated over £1 billion in loans to small businesses during the first six months of 2018 alone.
It’s now on track to become London’s biggest fintech IPO since global payments giant WorldPay’s bumper £4.8 billion ($6.1 billion) listing in 2015.
In the U.K. just 5% of businesses say Funding Circle when asked where they would go for finance, according to the company’s data, and 95% continue to chose their banks.
The Risk of a Vicious Funding Circle in Fintech (Bloomberg) Rated: AAA
There are fintechs, and then there are fintechs. Cheerleaders point to payments startups like Jack Dorsey’s Square Inc., whose stock has soared 242 percent in a year, as evidence of a Silicon-Valley-style revolution in the making. But there are sob stories, too: loan platforms LendingClub Corp. and On Deck Capital Inc. are still trading well below their IPO prices. Promises of break-neck expansion often crash into the reality of regulated finance.
Lending Earnings Insights (2018 Q3) (PeerIQ) Rated: AAA
We remain in the late stages of the credit cycle. The US consumer has benefitted from record low unemployment, rising incomes and home prices, and a lower tax rate. The supply of credit and competition to offer loans is increasing. Lenders are optimistic about consumer spending and debt levels, and are reserving for potentially higher losses in the future.
We see divergent credit performance across FinTech asset classes. Enova (Subprime) and OnDeck (Small Biz) are seeing near cycle-low charge-offs, while LendingClub (Prime) is seeing higher delinquencies on newer vintages. LendingClub also increased its charge-off estimates across loan grades by ~40 bps QoQ.
Card issuers are increasing loan loss reserves at a higher rate than loan growth, indicating expectations of higher losses going forward. Loan loss provisions are increasing at roughly twice the rate of loan growth across card issuers, but overall reserve levels are still low.
Scratch Introduces First Loan Servicing Platform To Align Financial Interests of Lenders and Borrowers (Scratch Email) Rated: A
Scratch, a new financial technology company started in 2015 to transform the antiquated business of getting America’s $13 trillion household debt repaid, introduced the first loan servicing platform to align the financial interests of lenders and borrowers.
The Scratch loan servicing platform empowers borrowers with a simple web application for understanding, managing and paying back their loans while providing lenders accurate, real-time portfolio insights. And, by automating the back-office complexities of loan management, Scratch can devote more resources to giving borrowers the attention and guidance they deserve.
Loan Servicing Crisis Persists
U.S. household debt composed of mortgages, student loans, auto loans, credit cards, home equity lines of credit, and other consumer loans, is at an all-time high and growing daily.
Today, household debt is at a high of $13 trillion and 8 out of 10 Americans carry some type of debt, including mortgages, credit cards, student loans, and auto loans. And everyone who has a loan has a loan servicer.
Funding Circle plans to raise £300m in London IPO (Financial Times), Rated: AA
Funding Circle has announced plans to become the first of Britain’s new generation of financial technology companies to go public, in a deal expected to raise £300m and value the peer-to-peer lender at more than £1.5bn.
The initial public offering of Britain’s biggest peer-to-peer lender will provide a significant test of investor appetite for the breed of fintechs that have sprung up in the past decade to challenge high-street banks. Funding Circle has arranged £5bn of loans to small companies in the UK, the US, Germany and the Netherlands since its launch in 2010 by connecting businesses looking to borrow money with retail and institutional investors willing to lend them money.
However, the company’s prospective value of more than £1.5bn is above the current value of US-listed peers OnDeck and Lending Club, which have both suffered tumbling share prices since their lPOs.
Funding Circle IPO will be open to platform’s existing investors (Peer2Peer Finance) Rated: A
FUNDING Circle has said it expects its existing investors will be able to become shareholders in the company after it goes public.
Funding Circle said that its initial public offering (IPO), if it goes ahead, would aim to raise around £300m, with at least 25 per cent of the company’s issued share capital to be placed on a free float.
In a blog post on its website, also on Monday, the P2P lender said that its customers would have the opportunity to apply to participate in the IPO and become a shareholder in Funding Circle via an intermediaries offer.
Don’t be blinded by the wizardry of tech darling Funding Circle (London Evening Standard) Rated: A
Given that Funding Circle’s flotation comes just days after the collapse of that other trailblazing fintech, Wonga, it’s hard not to compare the two.
Both were launched to fill the gaps in the lending market where traditional banks feared to tread. Both used tech wizardry to check they were lending to the right people at the right price. Both brilliantly deployed digital technology to make their services simple and fast to use.
Hopefully, for future investors, the similarities end there.
Funding Circle to host cryptocurrency event to promote women in fintech (Peer2Peer Finance) Rated: B
FUNDING Circle is to host a panel event focusing on cryptocurrency, described by the organisers as “one of the most interesting but least understood areas of fintech.”
The event is being held in connection with FinTechWomen, a London-based meet-up group, and is sponsored by Funding Circle.
UK sub-prime lenders shrug off political cloud (Nasdaq), Rated: AAA
UK sub-prime investors are shrugging off Wonga’s cloud. Customer complaints and a regulatory clampdown forced the payday lender to stop making loans. The likes of Amigo Holdings and Non-Standard Finance have different models, and regulators’ blessing. Yet, with Wonga out of the picture, they too risk becoming the focus of public ire.
Investors love it. Amigo’s return on equity will be around 40 percent this year, using Thomson Reuters I/B/E/S, while it and Non-Standard Finance should grow revenue on average by more than 20 percent each year up to 2021, analysts reckon. NSF, which has a more diversified business including unguaranteed loans, is valued at over 17 times forward earnings. Amigo’s shares were priced at 12 times forward earnings even after a selloff promoted by disappointing results on Thursday. The consumer finance sector on average trades at less than 11 times forward earnings, according to Eikon.
Hedge fund Kreos Capital is first in line for Wonga payout deal after lending the collapsed payday loan company around £34m (This is Money) Rated: A
A Mayfair hedge fund is at the front of the queue to be paid by collapsed Wonga as fears grow that thousands of its hard-up customers will get nothing.
Kreos Capital lent Wonga about £34million two years ago and is understood to be still owed around £10million by the payday loan company.
Under the arrangement, it is thought to be in line to collect that sum ahead of other creditors.
P2P lenders record £300m intake in second year of the IFISA (P2P Finance News), Rated: AAA
ALMOST £300m was invested across Innovative Finance ISAs (IFISA) in the previous tax year, HMRC data reveals.
The latest ISA statistics from the taxman shows £290m of subscriptions in IFISA for the 2017/2018 tax year across 31,000 accounts.
P2P lenders saved £9,355 on average.
Zopa revealed it received more than £150m in its IFISA during the previous tax year.
The end of the Cash Isa? Number of new accounts hits 18-year low (Moneywise), Rated: A
The data shows that savers subscribed to 10.8 million Isa accounts during the 2017-18 tax year, down from 11.1 million in the previous tax year. This represents a fall of 10%.
P2P marketing clampdown ‘may restrict IFISA takeup’ (P2P Finance News), Rated: A
Stuart Law, who heads up the business P2P lender, warned that the strong take-up of the IFISA could be hampered by the FCA’s proposed marketing restrictions for the sector.
Under the proposed changes, platforms would be restricted to marketing to those who are certified as sophisticated or high-net-worth investors or those that certify that they will not invest more than 10 per cent of their net portfolio in P2P agreements.
Northern Irish housebuilder secures £250,000 from P2P platform (Development Finance Today), Rated: A
The loan from Blend Network came after the housebuilder was turned down for a loan by Barclays.
Mattress start-up Casper offered credit in UK without permission (Financial Times), Rated: B
A US online mattress start-up backed by rapper 50 Cent has been forced to stop offering credit to UK customers, after it emerged it had been doing so without permission from the regulator.
Casper, a five-year-old company that is on a major European expansion drive, was allowing UK customers to buy on credit from Swedish bank Klarna.
China’s Fintech Giants Have The Money And Means To Dominate Despite The Wider Slowdown (Forbes), Rated: AAA
China has experienced a fintech explosion in recent years, with top companies dominating the industry. It’s not an accident that Alibaba spinoff Ant Financial and Tencent rule the digital payments industry, or that Creditease‘s Yirendai and Lufax are major players in the online lending sector. All of these companies have garnered large amounts of investment, expanded into areas with high levels of demand and have successfully diversified out of their core business into other areas.
Ant Financial is not yet publicly listed, but it recently received Series C funding in the amount of $14 billion in June. While Tencent’s WeChat Pay is not part of a subsidiary, it continues to reap funding from Tencent investors. Tencent is listed on the Hong Kong Stock Exchange, and its stock has risen greatly in price to $45.74 per share since its IPO in June 2004, when shares were poised to be sold at $0.47 each. Tencent’s market cap reached a high of $576.7 billion in January, before coming down to its current level of $437.7 billion. Creditease’s peer-to-peer lending company Yirendai is also listed. Its shares are listed on the Nasdaq at $17.66, with a total market cap of $1.2 billion. Lufax has reportedly postponed a possible listing in Hong Kong, but was said to be targeting another injection of funds in the amount of $2 billion this summer.
HKMA Receives 29 Bids for First Round of Virtual Bank Licences (Regulation Asia) Rated: AAA
Standard Chartered, WeLab, Zhong An Bank and HKT among several banking, technology and telecom firms applying for virtual banking licenses.
Twenty-nine financial and technology firms, including Standard Chartered and WeLab have submitted applications to obtain Hong Kong’s first online-only banking licenses.
The company shifted its headquarters to Hong Kong from Melbourne earlier this month as it prepares to submit a virtual banking license application, along with partners, ahead of Friday’s deadline.
Airwallex co-founder and chief executive Jack Zhang said the company will team up with a traditional bank and other local partners as part of the application process, although he declined to reveal their identities.
Another reason for the relocation to Hong Kong is proximity to major clients, including Tencent, online travel operator Ctrip, e-commerce JD.com as well as traditional lender Bank of East Asia.
And Beijing’s crackdown on the peer-to-peer lending sector – the shadow banking system that saw rampant illicit and risky behaviour continue in the first half of this year – has helped increase demand for corporate lending levels too.
The country’s big four banks – Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of Chinaand Bank of China – reported profit rises of between 5.2 and 7.9 per cent in the three months ending June.
China’s state banks to boost lending as Beijing fans economy (Nikkei), Rated: A
First-half earnings showed the lenders rallying after several years of low growth. Collective net profit rose 5.7% year on year to 532.1 billion yuan ($77.9 billion), while the lenders’ average ratio of bad debt fell 0.06 percentage point in six months to 1.52% at the end of June.
INSTANTOR OPENS UP BANK API – PROVIDING UNIQUE ACCESS TO HALF A BILLION PEOPLE (Fintech Finance), Rated: B
Today Instantor, the Swedish fintech company making financial decisions easy, announces, WDSK, The World Domination Starter Kit. The WDSK is an initiative to support start-ups and scale-ups to develop next-generation products by giving them access to Instantor´s Bank API with no associated costs for new Instantor customers. By using Instantors bank API, developers will have access to transactional data from over 300 banks in 25 countries, with the potential to reach half a billion people. Instantor´s bank API has an unrivaled reach, and the WDSK initiative includes access to several markets outside new Open Banking legislation. The authentication and the end user’s interaction with banks are handled by Instantor, and the data can be accessed once the end user has given their consent.
Robo-advice not dead: GlobalData (Financial Standard) Rated: A
The analyst suggested robo-adviser may be ahead of their time, given high net-worth demand for robo-advice is on the rise among the next generation of investors.
“While robo-advice is here to stay, it will take time to cement itself. The digitally-savvy next generation will embrace an automated service and big banks should capitalize on this. However, a big brand is not enough to justify much higher fees,” Woldemichael said.
To succeed, incumbents will have to provide a level of service, and prices, that are genuinely competitive with those offered by startups.”
Collapse of UK payday lender Wonga sounds warning for Aussie fintech vigilance (Australian Financial Review) Rated:AAA
The collapse of Wonga, one of Britain’s most high-profile fintech lenders, provides salient lessons for Australia, which considers the UK a template for financial technology policy and where tighter laws to protect vulnerable customers from payday lenders appear to have stalled.
Wonga, built around a slick app allowing customers to get expensive loans via their mobile phone, was “notorious for its extortionate interest rates and was a toxic symbol of Britain’s household debt crisis”, said The Guardian last week.
The payday lender “failed because it was too greedy and at times crossed the ethical line”, it said, quoting prominent UK financial columnist Martin Lewis, who described Wonga’s loans as “the crack cocaine of debt – unneeded, unwanted, unhelpful, destructive and addictive”.
Micro lender makes big difference (Latrobe Valley Express) Rated: A
Her heartfelt story was told at Good Money’s one-year anniversary last week during what Carol described as a “life-changing event” after borrowing money to buy essential appliances like a new fridge and washing machine.
The low to no-interest lender was set up in July last year in partnership with Good Shepherd Microfinance and the National Australia Bank, following a $2.3 million investment from the state government.
More than 2900 people made enquiries in the hub’s first year, and the store has provided more than 500 no and low-interest loans for household appliances, car-related expenses, household furniture and costs such as medical and education expenses.
China’s FinUp, existing investors back digital lending startup SlicePay (VC Circle) Rated: AAA
SlicePay, a digital lending platform which caters to college students and young professionals, has raised an undisclosed amount in an extended Series A round of funding led by Chinese firm FinUp Finance Technology Group.
The company said in a statement that existing investors Blume Ventures, Japan’s Das Capital, and Russia’s Simile Ventures had also participated in the round.
A person close to the development who did not wish to be named pegged the deal at $14.9 million (around Rs 105 crore at current exchange rates).
Southeast Asia’s startups suffer from Series B funding crunch, says Kredivo’s Gar (Deal Street Asia), Rated: AAA
Having recently raised what is estimated to be the largest Series B funding round for a fintech firm in Southeast Asia, Indonesia-focused lending platform Kredivo says the process was far from smooth sailing.
The company was forced to look beyond the region to raise the majority of its fund, as it found that there were simply very few investors in the region that specialized in doing Series B investments.
Tel Aviv University is among the top ten global undergraduate programs in terms of producing venture capital-backed entrepreneurs, according to a report published last week by Seattle-based market research company Pitchbook. Pitchbook ranked Tel Aviv in eighth place, up from ninth last year, above Yale, Princeton, and Brown.
Two other Israeli universities made the top 50 list: the Technion-Israel Institute of Technology came in at 14, while the Hebrew University of Jerusalem placed at 35.