The evolving landscape of digital lending is turning traditional bank loans and credit analysis into a distant memory. The rise of big data and technological progress have led to alternatives or augmentations to Fair Isaac Corp.’s proprietary FICO score, the dominant credit score used to vet consumers’ creditworthiness. Now, a bill is making its way through the U.S. legislative process that would require Ginnie Mae and Fannie Mae to consider credit scores beyond FICO. Although these proposals are focused on mortgages, one can infer that alternatives to FICO are welcome across the board, including consumer loans. And we now have the technical means to deliver.
When it comes to consumer lending, lenders have traditionally relied upon a loan applicant’s FICO credit score obtained through a credit bureau such as Experian or Equifax to help determine an applicant’s creditworthiness. These three-digit scores are derived using a proprietary formula that uses data like payment history, credit history length, and credit line amounts. The lower the score, the less likely an applicant is to secure a loan. The exact formula is a trade secret, known only to Fair Isaac Corp. Hence, we are already relying on a proprietary “black box” to make a credit decision. We’ll get back to that point later when we discuss machine learning algorithms. Enter digital lending.
Digital Lending Creates a New Way to Vet Applicants
New credit models are based on the proposition that the old ways of approving applicants based on FICO credit score alone do not paint a complete picture of an applicant’s creditworthiness. The proliferation of new data points about consumers provides a wealth of raw data ready for analysis.
With the use of machine learning algorithms, and more broadly artificial intelligence, new models are looking at hundreds, and thousands of other data points, and not all are related to traditional financial risk. Enhanced use of personal information may include educational history, employment history, and even seemingly non-financial information such as bedtime, website browsing patterns, spelling on loan applications, social media data, and even messaging patterns.
While using big data could muddy the waters by creating more confusion than clarity, artificial intelligence could have a big impact on how alternative lenders perform.
Artificial Intelligence Streamlines Sales and Strategy
Savvy digital lending startups are testing the waters with machine learning to make underwriting decisions and enhance their loans. Machine learning algorithms can help to determine if applicants are telling the truth about income by looking at past employment history and comparing it to similar applicants. However, this technology can also favor the applicant by finding hidden patterns.
This data collection is advantageous for people with insufficient credit history, low incomes, and young borrowers who are typically charged with higher interest rates if they obtain credit at all. These methods may also appeal to mortgage companies looking to automate less risky applicants through a similar process.
Yet several challenges exist with these new credit models:
First is what we’ll call a slow rinse and repeat the cycle. Machine learning algorithms, like humans, learn by doing and repeating while making correctional adjustments along the way. Economic credit cycles can last 5-7 years. Even if we back test a model using historical data, how do we know it will work in the future? A cliche in finance is that “past performance is not indicative of future returns.” It may take a long time to prove that a model is right or wrong because the model itself, like an inexperienced loan officer, hasn’t seen enough credit cycles.
Second, models need to explain their black box to gain trust. FICO gets away with being a “black box,” but artificial intelligence cannot. Even if a model works, humans need to have some kind of explanation to feel comfortable with the output.
Bank regulators need to know what’s going on. Fair credit regulators require that lenders keep records for the reason that credit was denied. The applicant has a right to inquire about why they were rejected. Disclosing the reason for a rejection is easy to do with an old-fashioned credit scorecard, based on a transparent point system. But what would regulators or auditors do with machine learning model outputs? For now, the practical answer is to run a traditional model as a backup whenever a machine learning model rejects an applicant, and hope that they both give the same answer! If so, record the traditional model’s output as the reason for credit denial.
For now, the most beneficial result of machine learning is the ability to detect consumer fraud by analyzing customer behavior with baseline data of ordinary customers and singling out outliers, such as how much time people spend considering application questions, reading contracts, or looking at pricing options. This filter alone leads to more accurate underwriting decisions, which, in turn, reduces defaults for lenders and lowers interest rates for consumers.
Blockchain Changes the Future of Funding
Peer-to-peer lending platforms originated out of one simplistic idea, one peer borrower asks for a loan, and another peer lender will decide to fund the loan. Both parties benefited by “cutting out the middleman” – the borrow paid a rate lower than that of a traditional loan, and the lender received a rate higher than that of a traditional savings account. But the peer-to-peer, or “people helping people” model, changed as large lending companies and institutional investors entered the space to become lenders, and, in institutional parlance, “buy loans” in bulk. Moreover, peers lack the expertise or ability to perform proper credit risk on other peers. Peer-to-peer became institutional-to-peer.
However, what if blockchain or distributed ledger technology could return us to the original concept of peer-to-peer lending? Blockchain-based solutions are currently developing identity and reputation models. With blockchain, an entire loan process can live online. Many parties share a record of transactions and supporting documents eliminating the need for intermediaries and third parties. Once I transfer the ownership to you, it’s done. I no longer have it. Currently, we can transfer ownership, but we need someone to record the transfer.
Eliminating the Need for Third-Party Risk Managers
With distributed ledgers, you can create a smart contract on a public utility blockchain without the need for a third party to execute the contract. This allows you to build a low-cost, high-trust platform that didn’t exist before. A handful of startups are designing platforms offering secured loans on a blockchain for those that are holding digital assets for the long term. Cryptocurrency investors will be able to earn interest on their holdings while the digital lender uses them as collateral for consumer loans.
Others are testing mechanisms for collateralized lending based on the value being stored in a smart contract on a blockchain. Collateral could be a security, a bond, a property, a title, data, or gold. The asset must have been digitized and recorded on a blockchain. For instance, the Perth Mint, Australia’s official bullion mint, announced plans to issue cryptocurrency backed by gold.
Mehul Agarwal is a Customer Success, Business Development and Marketing expert working with both users and creators of technologies to achieve their Engineering & Technology goals.
Mehul has worked with several startups, mid-size and large companies from the Valley and outside especially in the FinTech, Medical Devices, Connected Devices amongst others. He has generated over $45 Mil in revenue in the last couple years building one of the largest customer accounts for one of the companies he has worked with.
He mentors startups from around the world around Sales, Strategy, Growth & Marketing both as part of accelerator programs and independent companies.
On the education front, he has a bachelor’s and master’s degree in Economics from Pune University and also a Master’s in Customer Relationship Management from Symbiosis University.
PayPal to acquire iZettle for about $2.2 billion. AT: “This is huge news. If PayPal becomes a regular option in retail stores alongside Visa and Mastercard, it could become the defacto payment option for the majority of consumers. Of course, it will still have to compete with Square, Affirm, and Klarna. It’s bright spot is the massive head start is has over all of the above.”
Bitcoin boosts fintechs. AT: “I just can’t see any way that lenders and othe fintech companies to lose by offering crypto alternatives to their current products.”
-Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Avant Loans Funding Trust 2018-A (“AVNT 2018-A”). This is a $221.935 million consumer loan ABS transaction that is expected to close on May 31, 2018.
Preliminary Ratings Assigned: Avant Loans Funding Trust 2018-A
SeedInvest, one of the largest investment crowdfunding platforms in the US, has released a performance report on investor returns. SeedInvest has been in operation since 2013 following the creation of accredited crowdfunding under Title II of the JOBS Act (Reg D 506c). Since that date, SeedInvest has become a full stack crowdfunding platform offering investments in the three different crowdfunding exemptions to both accredited and non-accredited investors.
Source: Crowdfund Insider
According to SeedInvest, investors on their platform have generated an unrealized Internal Rate of Return (IRR) of 17.4%1 since 2013. In comparison, this number is 1.5x greater than the 11.7% median return calculated by research firm Cambridge Associates for U.S. venture capital funds of the same vintage. The term of the report was up to the end of 2017.
SeedInvest said that the top 10% of their listed investors generated an a whopping 76.86% IRR while the bottom 10% delivered a negative 7.4% IRR. SeedInvest estimated that only 1.3% of their platform investors who have invested in three or more companies have generated negative unrealized IRR.
Crowdsourcing has emerged as a positive platform for women. The National Women’s Business Council released a report — Crowdfunding as a Capital Source for Women Entrepreneurs — based on exclusive and original data from the two leading crowdsourcing platforms, Kickstarter and Kiva. The goal was to determine various predictors of success on crowdsourcing platforms for women business owners, and if those predictors of success were different than their male counterparts.
Recently, Small Change has listed their first side-by-side Reg D 506c / Reg CF offering thus leveraging a work around other securities crowdfunding platforms in the early stage space have incorporated.
The regulator announced Wednesday it has launched a mock ICO called HoweyCoin, presumably named after the Howey Test, which “touts an all too good to be true investment opportunity.”
However, the company notes, “the offer isn’t real.” Users who try to invest in the token sale will instead be redirected to the regulator’s education tools, which are aimed at pointing out the signs of fraudulent token sales.
BlackRock’s investment in microinvesting app Acorns underscores an evolution occurring in financial services in its shift toward digital — that gaining scale early will be essential to amassing future client assets.
The world’s largest asset manager is leading a $50 million funding round that will build out the startup’s portfolio stack with new investment options. It also gives BlackRock an inside look into the behavior of next generation investors, which it says will help fine-tune future releases and broaden its appeal beyond large institutions and pension funds.
Fundation Group LLC, a lender and credit solutions provider, has secured a $120 million credit facility from SunTrust Bank. Fundation is also backed by Waterfall Asset Management and is majority-owned by Garrison Investment Group.
TransUnion (NYSE:TRU) has agreed to acquire iovation, one of the most advanced providers of device-based information in the world, strengthening its leadership position in fraud and identity management.
SS&C Technologies Holdings, Inc. (Nasdaq:SSNC), a global provider of financial services software and software-enabled services, today announced that PR Mortgage & Investment Corp. (“PR Mortgage”) has selected SS&C Precision LM to support loan servicing and origination for HUD/Ginnie Mae, Fannie Mae, Freddie Mac and its banking programs. SS&C Precision LM will also enhance PR Mortgage’s asset management and investor reporting, and provide secure web-based portals for borrower self-service and document workflow automation.
On Thursday, specialist property finance lender LendInvest announced it has expanded on its long-term partnership with Stripe by integrated the payments platform in order to streamline its loan application process. According to the online lender, the new integration will be embedded in the primary stages of the buy-to-let loan application process. LendInvest reported:
“Stripe allows the broker to pay the valuation fee through LendInvest’s online buy-to-let portal immediately after the borrower’s application forms have been signed. This process was previously handled manually, with the case manager having to call the broker and then the borrower to arrange payment. Managing these payments centrally through LendInvest’s self-service online portal cuts down the overall time taken to complete the application, whilst providing a transparent way to track this stage of the application process.”
Tech is expanding 2.6 times faster than the rest of the UK economy, according to Tech Nation’s 2018 report. The digital tech sector is worth nearly £184 billion to UK economy, up from £170 billion in 2016.
London ranks as second most connected place for tech in the world, after Silicon Valley. But, when it comes to proportion of overseas customers, the UK capital trumps the self-appointed tech capital of the world.
The UK’s digital tech sector continues to accelerate faster than the rest of the economy, according to Tech Nation 2018. Turnover of digital tech companies grew by 4.5% between 2016-17 compared to UK GDP which grew by 1.7% over the same period, according to the figures.
HSBC UK is set to capitalise on the opportunities presented by Open Banking after agreeing to a partnership with consents.online, an Account Information Service Provider (AISP).
Under the deal, HSBC can access consumer transaction data held by other organisations. The bank plans to use this information to launch new consumer products.
It will also use consents.online’s consent management architecture, which allows consumers to view and control how their data is used. The platform gives consumers and small businesses the ability to see who is accessing their data and to control access – with the power to revoke it at any time.
Borrowers and lenders should be aware that currently Ireland’s withholding tax regime has not been amended for P2P Lending (aside the ability in certain circumstances to group payments together to the same lender in a calendar year) and in that regard the Irish Revenue Commissioners have issued a timely Revenue eBrief reminding Irish corporate borrowers (as well as lenders) of their Irish tax obligations. In particular the general obligation on an Irish corporate borrower2 to, amongst other things, withhold tax on interest payments made on the finance raised, at the standard rate (currently 20%) subject to certain exceptions, most of which will not apply where the lender is an individual, regardless of where resident.
Digital banking app Atom has launched first-time buyer products on its standalone Digital Mortgages platform.
The new loans will offer first-time home-buyers £500 cashback, along with a free valuation and no product fee. The newly-launched range will be available for mortgages between 80-95 per cent loan-to-value (LTV). The range consists of two, three and five-year fixed rates mortgages, with rates starting at 2.24 per cent.
The platform has also extended its existing range by adding 95 per cent LTV products for its purchase and remortgage products.
Furthermore, Atom has removed the £300,000 limit on first-time buyer applications and increased its maximum mortgage term from 35 to 40 years – changes meant to increase its flexibility and in line with broker feedback.
Why the credit card boom may have peaked. AT: “As instant financing becomes more popular, or POS financing if you prefer, I think we’ll see the need for credit cards become obsolete. It’s quite possible we’ll see smartphone credit apps, or some equivalent, that holds encrypted personal data for credit purposes.”
Chime announced it surpassed one million accounts to date last month and has now processed more than $4.5 billion in total transaction volume, solidifying Chime’s position as the clear leader in the U.S. challenger banking segment.
Unlike traditional banks that charged consumers over $34 billion in fees in 2017, Chime is transforming the consumer banking experience. The company’s unique business model, which doesn’t rely on fees, allows Chime to relentlessly focus on its mission of helping members lead healthy financial lives.
CreditShop LLC, a finance company focused on developing, marketing and servicing consumer-friendly credit products, today announced the introduction of the Mercury Mastercard. Mercury cards will provide cardmembers with complementary access to their FICO score, and account performance will be reported to major credit bureaus. The cards will be issued by First Bank & Trust of Brookings, South Dakota.
There are about 75 million Americans in the “middle market” with FICO scores ranging between 575 and 675, and many are charged high fees by sub-prime credit card issuers.
LendingPoint today announced it has closed an up to $600 million, committed credit facility arranged by Guggenheim Securities, the investment banking and capital markets division of Guggenheim Partners.
With this new deal, LendingPoint has secured up to $1.1 billion of senior credit financing in less than one year. In September 2017, the company announced it had secured an up to $500 million committed credit facility, also arranged by Guggenheim Securities.
Some 58 percent of U.S. homeowners will pay for home improvements this year, roughly the same level of interest in 2017, according to the fifth annual LightStream Home Improvement Survey. LightStream is the national online lending division of SunTrust Banks.
But spending plans tell a different story, one that works in favor of the GreenSky IPO. “The percentage of people intending to use a home improvement loan has grown 29 percent from 2017, with 54 percent more 18- to 34-year-olds planning to fund projects through home improvement financing,” the report said. “While overall, 30 percent of homeowners say they’ll pay for some portion of their 2018 project with a credit card, 16 percent fewer homeowners aged 18 to 34 plan to use them” compared to 2017.
On Tuesday, the company announced the launch of four services, all centered on attracting financial institutions to its platform. The new tools include options like Coinbase Custody, a custodian partnership similar to the custodian offerings typically provided by banks to secure customers’ cash, and Coinbase Prime, a platform centered on research and market data geared toward institutional clients.
After collaborating previously at Exeter Finance and AmeriCredit, auto finance industry veterans Mark Floyd and Kenneth Wardle are teaming up again; this time to leverage what’s happening online when consumers search for financing.
According to a news release sent to SubPrime Auto Finance News this week, Floyd and Wardle have acquired an equity stake in Horizon Digital Financial Holdings, an online auto finance technology firm located in the Dallas-Fort Worth Metroplex. The transaction was effective May 1.
Horizon Digital is the parent company for online consumer loan marketplace participant myAutoloan.com.
Floyd will serve as chairman and chief executive officer of Horizon Digital, and Wardle will serve as chief operating officer.
At well over $400 billon, Envestnet has more than six times the assets of its nearest competitor in its core asset management platform business. Tamarac, the firm’s rebalancing, reporting and practice management software powerhouse, has seen revenue grow approximately eight-fold since Envestnet bought the company six years ago.
The always-opportunistic Envestnet insured itself a pole position in data aggregation and analytics, one of the sexiest tech areas in the business, by acquiring the innovative Silicon Valley firm Yodlee three years ago.
Bitcoin and blockchain startup Circle Internet Financial, Inc. has raised $110 million in new funding as a “strategic investment” while also announcing its intent to launch a new cryptocurrency tied to the U.S. dollar.
The new round announced Tuesday, the first since 2016, was led by Bitmain, with the participation of IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group, Pantera, Blockchain Capital and Tusk Ventures.
The fintech startup Regalii, which originally built technology to help immigrants pay bills back home, has pivoted. Under a new name, arcus, it is now helping banks reissue credit and debit cards to customers whose cards have been lost, stolen or breached.
Elix is an Ethereum-based platform for payments, loans, and crowdfunding. The team is uniquely taking a mobile-first approach and focusing on usability to attract as large of a user base as possible from the start.
Elix also includes a platform, Boost, to facilitate decentralized crowdfunding campaigns using smart contracts.
Peer-to-Peer (P2P) Lending
With Elix, though, both the lender and the borrower are incentivized to follow the terms of the loan. When setting up a loan, the participants can opt to include a mining period once the loan is complete to gain additional rewards. If enabled, as a lender, you must hold the ELIX in your wallet for a certain amount of time in a system similar to Proof-of-Stake. When that holding period is complete, Elix hands out the rewards in the form of a new token, Token P. This token will most likely have a different name in the future.
If the borrower pays back the loan on time, the reward is split with the lender receiving 65% and the borrower receiving 35%. If the borrower has late payments, though, the lender receives 100% of the reward.
To help, here’s our list of the top five lenders. Interest rates were current as of May 16, 2018. Some rates include a discount for setting up autopay. LightStream rates can vary by loan amount, repayment period, and the purpose of the debt.
However, when you invest in P2P lending, you’re only purchasing notes, not entire loans. The notes represent $25 slivers of individual loans. That means that you can invest in 40 different loans with an investment of $1,000. That will help to minimize your risk.
Compound wants to let you borrow cryptocurrency, or lend it and earn an interest rate. Most cryptocurrency is shoved in a wallet or metaphorically hidden under a mattress, failing to generate interest the way traditionally banked assets do. But Compound wants to create liquid money markets for cryptocurrency by algorithmically setting interest rates, and letting you gamble by borrowing and then short-selling coins you think will sink. It plans to launch its first five for Ether, a stable coin, and a few others, by October.
Today, Compound is announcing some ridiculously powerful allies for that quest. It’s just become the first-ever investment by crypto exchange juggernaut Coinbase’s new venture fund. It’s part of an $8.2 million seed round led by top-tier VC Andreessen Horowitz, crypto hedge fund Polychain Capital and Bain Capital Ventures — the startup arm of the big investment firm. [Update: Compound told us it was Coinbase Ventures’ first investment when it closed its round, though Coinbase notes that it’s done 8 rapid-fire investments over the past two months alongside this funding.]
The Alternative Credit Council (ACC) is hosting its inaugural flagship event for the private credit sector. This will take place on the morning of 22 May 2018 at Farmers’ & Fletchers’ Hall in the City.
Date: 22 May 2018 Time: 8:30AM – 2:00PM Location: Farmers & Fletchers
3 Cloth Street
Discussions will look at a range of themes including:
Building an asset class to last: market discipline in private credit
Responsible lending, investor protection and access to finance
Technology in private credit: enthusiastic adoption or reluctant acceptance
Standing out from the crowd
Confirmed speakers include:
Deborah Zurkow, Allianz GI
Iain Forrester, Aviva Investors
Steve Sabatier, Chenavari Credit Partners
Stuart Fiertz, Cheyne Capital
Chris Fowler, CVC Credit Partners
Max Mitchell, ICG
Ludo Bammens, KKR
Rod Lockhart, Lendinvest
Elissa Kluever, OMNI Partners
Christian Hinze, Stepstone
Maxime Laurent-Bellue, Tikehau Investment Management
But it’s the growth of new products at SoFi that will most likely attract the attention of investors, as the company tries to justify its $4.4 billionprivate market valuation.
In the letter, Noto said the SoFi at Work program, which partners with companies to help their employees pay off student loans and other debt, expanded its funded loan volume by 118 percent from a year earlier. The program, used by over 700 businesses, was launched in September 2016, so the growth is coming off a small base from last year at this time.
Based in Charlotte, NC, LendingTree, Inc.TREE operates as an online loan marketplace for consumers seeking loans and other credit-based offerings. This Zacks Rank #5 stock has a VGM Score of D. Shares of the company have lost 18% so far this year. The 2018 earnings estimates have been revised 5.7% down over the last 30 days.
The emergence of fintech and blockchain are making the loan experience streamlined and accessible to ordinary consumers, as well as to people who have issues with their credit score, businesses interested in alternative interest plans and people who are hesitant about taking loans from banks for whatever reason.
Peers Over Institutions
P2P lenders pool together smaller amounts contributed by investors and lend the money out to consumers through digital platforms. Recently, P2P platforms like Lending Club and Prosper are making available loanable amounts of around $30,000 to $40,000 at competitive interest rates and with easier application processes.
Credit Scores Matter Less
As of 2017, those aged 18-29 have an average score of just 652 which is lower than previous generations and has become an issue as they start settling down and are in need of loans for mortgages.
Fintech and blockchain, however, are starting to minimize the overall impact of credit scores in an effort to bring more financial inclusion. They can include factors such as: salary, purchasing history, educational attainment, and even social media activity.
The Drive to Decentralize
The centralized approach of financial institutions controlling the people using their systems financial activities is also being challenged.
Decentralization has been key to blockchain’s growing appeal.
Private equity firms smell money in the financial advice business. Last month, Hellman & Friedman LLC paid $3 billion to buy Financial Engines Inc., an online retirement planning service. Thomas H. Lee Partners LP in October took a stake in HighTower, a Chicago-based wealth adviser with $50 billion under management at the time. And in April 2017, private equity giant KKR & Co. and Stone Point Capital LLC bought a majority share of Focus Financial Partners LLC in a deal that valued the wealth manager at $2 billion.
Fair Square Financial LLC, the two-year-old, 50-worker Wilmington company that markets the Ollo credit card, says it has raised $100 million more from Orogen Group, the New York investment firm headed by former Citigroup CEO Vikram Pandit; Atairos Group, headed by former Comcast chief financial officer Michael Angelakis; and others.
Fair Square, which has lent MasterCard holders about $400 million since early last year (using the Bank of Missouri’s lending powers), is one of a string of software-intensive lenders and financial service firms that have sprung up in Wilmington in recent years, capitalizing on the area’s concentration of credit card managers and workers.
Of the many informative and innovative sessions powering the 2018 Benzinga Global Fintech Awards, none may be as important to the future of lending as the fireside chat between Cornelius Hurley, Executive Director at Online Lending Policy Institute, Colin Darke, General Counsel at Rocket Loans, and Jeremy Potter, Associate Counsel at Quicken Loans.
One of the main catalysts of the chat was a discussion about Hurley’s two main myths surrounding the future of lending:
Online lending is unregulated and is a shadow banking component.
There is a nexus between payday lending and online lending.
A longstanding real estate and private equity firm, Muirfield Investment Partners, has joined with AlphaPoint in an effort to offer its investors a more easily tradeable way to participate in the property market.
The idea is to use blockchain as a conduit for introducing more liquidity into the real estate market.
AlphaPoint’s plan is to see everything go on the blockchain. The actual asset won’t be on paper and tokenized, but that documentation will be stored using the tech. Further, it can use software to pay out dividends, if those are part of the deal, and to ensure that assets aren’t transferred to people they shouldn’t be.
If you want to attract and retain millennials, it’s all about the benefits. And no perks are more sought after among this group than studen loan benefits. In this post, guest author Alyssa Schaefer, the chief marketing officer of Laurel Road, a national online lender, explains why employers can’t wait to roll out student loan benefits if they’re serious about hiring the best and brightest millennials.
That’s why it’s so frustrating when the company you borrowed from sells your loan to another lender or stops servicing loans altogether.
Unfortunately, if you have BorrowersFirst personal loans, that’s exactly the position you’re in. BorrowersFirst no longer offers personal loans or manages loans for people who borrowed from it in the past.
In the new guide, Gartner discusses these key findings:
Data breaches have led to rampant compromise of personally identifiable information (PII). As a result, correctly reciting PII is worthless as a stand-alone method of corroborating a person’s claimed identity.
Onerous “identity proofing” methods for new-account opening and as part of step-up or multifactor authentication use cases increase customer abandonment. This creates a competitive liability when customer attrition and market share loss exceed the potential fraud loss.
Many technologies used in online fraud detection use cases, such as device reputation, can be used in identity proofing and substantiation use cases. In addition, these technologies can be invoked to elevate trust during subsequent interactions.
Peer-to-peer (P2P) lending has increased in popularity over recent decades, spurred on by the age of connectivity. Blockchain startups have been quick to recognize the benefits that the new technology can bring to P2P finance, directly connecting individuals who wish to exchange value without the need of any intermediaries such as banks.
Now, one startup plans to use artificial intelligence (AI) and machine learning in combination with blockchain technology to create a P2P lending platform for home loans. This could prove to be an ideal solution for frustrated millennials, who may be more open to using new technology to achieve their property ownership goals.
Possible social good applications include peer to peer lending, digital identities (ideal for refugees), protection against runaway inflation, campaign finance reform, direct democratic votes, solar energy trading and freedom of speech free from censorship.
UK Peer-to-peer lending platform RateSetter has topped the milestone of returning £100 million in pre-tax interest payments to its investors. RateSetter reports accomplishing this without any individual investor losing a penny.
THE Funding Circle SME Income Fund (FCIF) has reported its first drop in net asset value since 2016 after adopting new IFRS 9 reporting standards.
The new accountancy standards mean funds have to include potential losses in their portfolio. The fund, which invests in loans originated by peer-to-peer lender Funding Circle, revealed its returns were down 0.6 per cent in April after allowing for a 1.1 per cent provision.
This was the first drop in NAV since the fund’s first monthly update in November 2015 when it was down 0.1 per cent. The NAV had been consistently positive up until last month.
As Marcus looks to launch a UK savings product soon the bank is already eyeing additional European markets; they plan to make Germany the next stop, though it might be looking at 2019 or beyond; Marcus is slowly becoming an important part of the overall Goldman strategy as they look to diversify; their consumer brand has a goal to boost Goldmans’ revenues by 5 percent in three years.
Azbit, found online at Azbit.com, is an online trading platform that comes with built-in margin trading and algorithmic trading tools.
A pre-ICO Azbit tokens begins on July 1, 2018.
Azbit has an electronic payment system that will provide support and processing for all online and cryptocurrency payments, then offer additional services like instant exchange, a P2P debt platform, and P2P lending backed by your crypto portfolio.
Prosper loan originations and co-sponsored securitizations. AT: “A look at Prosper’s earnings results. Reports like these prove that alternative lending is still on the rise. It may not be growing as fast as it once was, but every industry has a slow down when it moves from growth to maturity. Slower growth is still growth.”
Sharestates: From startup to $1 billion in three years. AT: “Sharestates has made incredible moves in a sector that already had a lot going on when they stepped in. I think the key to their success is their leadership and the fact that they came to the table with real estate investing experience. Disclosure: I write for the company, but you can make up your own mind.”
Prosper today reported financial results for the first quarter of 2018. Loan originations increased 27% year-over-year to $744 million, driven by strong demand for the company’s personal loan product and stable funding.
Financial highlights include:
Total Net Revenue, which includes the non-cash impact related to warrants to purchase preferred stock, was flat year-over-year at $30.5 million in Q1 2018 compared to $30.8 million in Q1 2017.
Core Revenue(1), which excludes the non-cash impact related to warrants to purchase preferred stock, increased $11.6 million or 34% year-over-year to $45.7 million in Q1 2018 compared to $34.2 million in Q1 2017.
Net Loss decreased by $12.6 million to ($11.4) million in Q1 2018 compared to a Net Loss of ($24.0) million in Q1 2017.
Adjusted EBITDA(1) increased $13.6 million to $4.5 million in Q1 2018 compared to ($9.0) million in Q1 2017, the fourth consecutive quarter of positive Adjusted EBITDA(1) generated by Prosper.
Baird: And the microfinance industry is — $30 billion a year around the world is lent in $500 chunks to small businesses, near a 100% repayment rate.
Microfinance is a tool. All investing is a tool. Every microfinance bank, every bank is neither good nor bad, they’re amoral. It’s just what are people trying to do with it. I’ve seen microfinance banks that act in extractive ways and their primary goal is extract as much profit out of poor communities as possible. I’ve seen payday lenders do the same thing. I’ve also seen microfinance banks that are very good and say, “Our core goal is building wealth for the community and we’ve structured our business in a way that works for us.”
One percent of start-up investment goes to African-Americans. Two percent of start-up investment goes to women. There are a lot of people who are overlooked. So roughly 80% of start-up investment goes to three states: New York, Massachusetts, California. If you’re in Ohio or Florida or Nairobi or Mumbai, it’s really hard to get your idea into the system.
Now, just over a year later, they have announced they recently crossed the $1 billion mark in originations. The company did so in just over 3 years, having officially launched in February 2015, just before LendIt USA that year. They are the second company in the real estate crowdfunding space to do so and are on our list as one of the ten options available for accredited investors in the marketplace lending space.
Originations in the lending space is only one metric. Any lending company’s survival depends on the quality of the loans they are making. According to the Sharestates’ website, investors have earned an average 10.54 percent annualized return. They also report 0% loss of principal for their investors. As of last year when we checked in the company was profitable which sets them up for continued success going forward. We’ve seen very few companies in the marketplace lending space broadly achieve this goal.
BuildDirect, the first technology platform for the home improvement industry, today announced its partnership with Affirm Inc., a financial technology company that provides transparent payment alternatives to traditional credit. Now, U.S.-based BuildDirect customers have easy access to flexible and transparent financing options to pay for home improvement and renovation materials over time. At the point of sale, shoppers will see exactly how much they’ll pay in fixed monthly installments over the term they choose.
Digital banking has been a big positive for the financial services industry, though it has opened companies to greater cyber risk; cyber criminals now have a lot more entry points when it comes to getting access to funds illicitly; banks have increased their spending on defense but it isn’t enough as they also need to construct better, more secure systems; the CEO of Standard Chartered writes in the FT that banks can better utilize the data they collect, design tech better and work more closely with governments to catch bad actors.
The advancement of blockchain technology, this is poised to change. Through the technology, anyone anywhere in the world can raise financing from peers without having to rely on the traditional credit scores and the often heavily bureaucratic conventional mortgage processes.
Blockchain solutions such as Homelend are making it possible for borrowers to directly reach lenders without depending on any intermediary and with no paperwork. The whole process is safeguarded by smart contracts to ensure that all parties in the deal adhere to their part of the bargain. According to Aneeza Haleem , a senior account manager at Cognizant Technology Solutions, blockchain-powered peer-to-peer mortgage financing significantly reduces the costs involved in the mortgage process.
The irony of the explosive growth of mobile P2P is this: As consumers get more comfortable with paying one another through mobile devices, they’re thinking of P2P less as a service that one should find within a bank’s app.
This is a problem for Early Warning’s Zelle, the bank-run P2P network whose main selling point is its integration with banks. It’s a sharp contrast to rivals such as Venmo, which styled itself on a social media app; and Facebook and Apple, which took their own messaging platforms and blended P2P payments into the interface.
Capital One has acquired San Francisco-based digital identity start-up Confyrm as it seeks to capture the market for consumer identity services.
Financial details were not disclosed, but as part of the deal Andrew Nash, founder and CEO of Confyrm, has become managing vice-president of Capital One’s consumer identity services. No word on what happens to the rest of the staff.
Confyrm was founded five years ago and offers help against online fraud.
Bank of America spends $3 billion developing and buying technology every year, and about three times that on keeping its existing IT infrastructure going, says David Reilly, global banking and markets technology chief information officer.
As you might expect, some of that goes to artificial intelligence technology. The bank does not disclose how much.
An old-school fraud analytics program might see a customer using a card in a place they have never used a card before and block the transaction.
Banks, fintech firms and data aggregators are asking regulators to provide more clarity on how to handle consumer data and who is responsible for leaks when it is shared between firms — a request that’s seemingly a reversal from the deregulatory approach the industry often takes.
The potential liability stemming from consumer data has become a critical concern for the..
There are currently two major issues with crypto payments – currency volatility and network transmission time. The recipient wants to receive the exact amount owed them. But, because cryptocurrencies are volatile and experience rapid price changes multiple times every day, that’s a difficult task to handle for crypto payment providers. Price swings can be more than 20% a day, so many merchants don’t accept crypto assets payments. Also, the merchant wants the payment instantaneously and is not willing to wait for it under any circumstance.
To solve these issues, Ben Way, CEO of Digits, conceptualized a new instrument he calls a hedge lending network. This is a service that provides instant loans thereby enabling its users to pay with fiat currency using their cryptocurrency. Its framework runs on a machine learning algorithm and is the first time the concept of hedging and lending has been combined together in a financial instrument.
How Hedge Lending Works
In the process, the user swipes his Digits registered card for making a transaction. Let’s say $100 is turned into a smart contract-backed loan, which is paid for by the hedge lending network. The merchant receives the money instantaneously. The $100 becomes a loan for the customer for a period of 366 days. If the consumer does not pay back the loan, the crypto is taken out of her wallet after the 12 months, gets liquidated, and the lender is paid back.
The customer is able to save almost 33 percent in capital gains if she is able to wait out the one-year period for holding a crypto asset. She can pay the loan back within 12 months and get her currency back. If she had spent $100 while her crypto asset doubled in price, she can pay the original $100 and take her cryptocurrency back. It’s similar to an escrow account in that it can either be liquidated or paid back. At the end of 366 days, the transaction is liquidated and the lender gets the money or the borrower pays it off, taking the difference.
The Hedge Lending Network uses the lender’s invested fiat currency in exchange for the Digits user’s cryptocurrency-backed smart contract. In doing this, Digits can overcome the payment issues faced when customers pay in cryptocurrency. The main objective is to find the lowest interest rates and reduce the cost of the network to the minimum possible level. Apart from this, the lending network accounts for volatility, as wel.
If a cryptocurrency price goes up during the transmission time, Digits takes the gain and puts it in the buffer to account for the decreases in crypto prices during transmission. Being currency agnostic, the firm supports every cryptocurrency the interacting exchange supports. Currently, Digits works with Coinbase with relationship expected soon for other crypto exchanges. The company has its own wallet system and does not need to prepay for transactions. This is important in its journey to scale up and support the payments ecosystem.
The Benefits of Paying Through Digits
Way estimates that, by 2025, five percent of the population will be using a crypto wallet. Digits turns any credit or debit card in the world into a means to pay with cryptocurrency assets. The solution is extremely elegant as it settles on the MasterCard and Visa Network and allows any existing card to be converted into a crypto card. The user just needs to type in his credit card details and connect it to Coinbase for making the crypto payments. The Digits technology interrupts the payment, executes the necessary conversions and then settles the transaction on the existing network only. This allows the merchant and MasterCard/Visa to not deal with cryptocurrencies, a major hurdle in the growth of crypto payments thus far.
Way and Co-Founder Laura Wagner founded Digits in September 2017 in the San Francisco Bay Area. Way had been a tech prodigy from a very young age. When he was six, he received a laptop that helped him enter the world of technology. At 15, he was earning good money online consulting with people to solve their computer issues. He later founded Pulsar, an e-commerce search engine that went on to raise $33 million.
That company eventually failed during the dotcom bust of 2000-2001. He lost everything he had, but he was able to start over and launched multiple companies and projects over the years since.
During the Clinton years, Way was a senior consultant to the White House on matters of technology. He is currently the CEO of Rainmakers, one of the first incubators in Europe and has helped launch around 200 companies.
Priot to starting Digits, Way was associated with a traditional payments company where he learned a lot about the payments industry and its inherent complexity. Being there, he realized how difficult it was to use cryptocurrency in the real world and came up with an idea to build a crypto payments company to make paying with cryptocurrency as easy as paying with a credit or debit card. This led to the launch of Digits.
For the last six months, he and his team have been building the platform and the technology. Currently, they are in the Pre-ICO stage on their way to raising $50 million.
Digits is currently in the alpha phase and Way expects a product release in the next six months. He believes there is little competition in this space right now. There are a few crypto lenders and hedgers, but no one has been able to combine the two in a way Digits has accomplished. He wants his competitors to use his technology stack to build new products for their clients and believes this will allow for the entire space to grow.
Cryptocurrencies were expected to change the way our payment systems work. But almost nine years after the creation of Bitcoin, the ability to pay via crypto assets is restricted in the real world. Ben Way has come up with an innovative solution that will end the difference between a debit/credit card payment and a crypto card payment without interfering in the present debit/credit card system.
Digits is looking to capture a segment that has some major competition. But the company’s ability to transmit payments instantaneously without having the merchant or payment processors touch cryptocurrences and simultaneously create a potential 33 percent capital gain tax savings for the user is a win-win for all involved.
Revolut is coming to America. AT: “The market is not too crowded for a UK-based unicorn. This should get interesting with Robinhood seeking to compete with Coinbase, and now Revolut wants to compete with Robinhood on its home turf. This could signal a heating up of international competition in marketplace lending. I think it’s about time.”
LendingTree, Inc. (NASDAQ: TREE) announced today that it has entered into a definitive agreement to acquire Ovation Credit Services, Inc., a provider of credit services with a strong customer service reputation. Ovation Credit Services utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors.
The London-based fintech start-up allows users to buy and trade cryptocurrencies, making it a direct competitor to the U.S.-based Robinhood. Revolut also sees itself as a disruptor of the traditional banking industry, as it offers checking accounts, peer-to-peer payments, and international money transfers, says Chad West, the company’s chief marketing officer.
The FTC noted that the site did feature a small green dot (known as a tooltip) with a white question mark inside, which appeared next to the term “APR.” If a consumer clicked on the tooltip, a pop-up bubble appeared with a disclosure that read: “APR stands for Annual Percentage Rate and is a measure of the total cost of credit as an annual rate. The APR is comprised of the annual interest you pay at a rate of 6.99%—which is ultimately paid each month to the investors who enable your loan—and a one-time origination fee of 3.5% ($350.00) that is collected out of your loan proceeds.”
The complaint reminds lenders of the continued importance of accuracy and completeness in advertising and other marketing in order to avoid UDAAP claims, including under Section 5 of the FTC Act.
The market has responded well to LC’s earnings and the stock price has surged 17% post earnings.
OnDeck’s stock price has enjoyed a 10% rise since earnings.
Deal Deep Dive KABB 2017-1 Additional Notes
Kabbage is issuing $60 Mn in additional notes under the expandable option on its $550 Mn KABB 2017-1 deal. The additional notes classes A to D have balances of $44.4 Mn, $9.5 Mn, $3.2 Mn, and $2.9 Mn respectively. KBRA has rated the tranches A, BBB, BB, and B respectively. Kabbage issued $525 Mn in bonds originally on the KABB 2017-1 deal, and subsequently issued $25 Mn in additional notes.
KABB 2017-1 is passing all its triggers and has a weighted average yield of 42.9% and a 3-month average DQ percentage of 9.7%. The bonds are locked out from receiving principal for 36 months since issuance and the additional cashflow is used to purchase receivables that keep the weighted average receivables yield for the entire pool above 38% and individually yield at least 19%.
Jefferies Group lifted their Q2 2018 earnings per share estimates for shares of Elevate Credit in a report released on Tuesday, May 1st, according to Zacks Investment Research. Jefferies Group analyst J. Hecht now forecasts that the company will earn $0.19 per share for the quarter, up from their previous estimate of $0.18. Jefferies Group also issued estimates for Elevate Credit’s FY2018 earnings at $0.83 EPS, Q1 2019 earnings at $0.37 EPS and FY2019 earnings at $1.09 EPS.
“Soft spoken and unfailingly polite”, as Forbes noted in 2015, Laplanche claimed, with some justification, to be “transforming” the banking industry – bypassing banks to link would-be borrowers with lenders online. He swiftly established his outfit as the market leader, originating some $20bn in loans and winning copious “disruptive innovator” awards. Then came the shipwreck.
He is now focused on “what can I learn from it, what can I do better. Upgrade has been part of that.” Last year, Upgrade raised $60m – “the biggest ever series A funding round for a US fintech start-up”, backed by “many of Lending Club’s original investors”. The market is now more crowded than ever, notes the Lending Times, and “margins have shrunk”. Still, many reckon that if anyone can steer a clear course it’s “the guy credited with creating the industry in the first place”.
The world is rapidly digitizing. You look at every industry, whether it’s media publishing or entertainment and you are now seeing different value propositions being driven by software and mobile connectivity. Financial services is no different. I think you are going to see more changes in the financial services industry in the next five or 10 years than maybe we have seen in the last 25 or 30 years.
The world is rapidly digitizing. People are writing many less checks than they ever have before. Peer to peer lending, which once involved giving cash to a friend to split a bill at a restaurant, that’s now happening digitally.
In our latest map of the most well-funded American tech startup in each state, some companies with the deepest pockets were found in Florida (Magic Leap, $1.89B), Virginia (OneWeb, $2.2B), Utah (Domo, $698M), and Illinois (Avant, $655M).
Under the authority granted by the Congressional Review Act, the House of Representatives passed a measure on May 8 to roll back an Obama-era rule on auto lending practices issued by the Consumer Financial Protection Bureau (CFPB). It should be noted that the rollback pertains to a set of administrative guidelines issued by the CFPB, not a law ratified by Congress.
The House vote was 234-175, reversing a 2013 rule established by the CFPB to stop auto lenders from charging higher fees to borrowers based on their religion, sex, race, or age. The vote follows a Senate vote in April to also repeal this measure. It will now go to President Donald Trump’s desk for his approval.
The complaint alleges that the lender, one of the largest online lenders in Virginia, operated without a Virginia license, and misled borrowers about its licensure status in another state in order to avoid Virginia’s 12% interest rate usury cap. Virginia Code § 6.2-303. Specifically, the complaint alleges that the installment loan agreements’ Utah choice-of-law provisions are void, and that Virginia law, including Virginia’s usury cap, applies to the loans. The VA Attorney General also alleges that the lender attempted to collect on loans from borrowers who were in bankruptcy and entitled to protection from debt collection.
On Friday, Revolut introduced a feature called “Near Me” which lets its customers find other Revolut customers using the same feature and send them money without knowing their contact details. On Monday, Monzo rolled out a capability called “Nearby Friends.”
The use cases for location-based peer-to-peer payments among consumers may not be compelling enough for providers to consider it, said Paygility Advisors partner Deborah Baxley.
However, last month’s announcement that London FinTech Revolut is now a so-called unicorn with a $1.7 billion valuation and TransferWise working with the Bank of England and launching a ‘borderless’ card that drastically slashes transaction costs, the future for the city may be companies such as these.
Another fellow London FinTech 11:FS is also making waves offering a range of FinTech services, not least being able to ‘make a challenger bank in 12 weeks’. Here company Co-Founder Simon Taylor speaks exclusively to Forbes about what these moves and also on Swedish company iZettle’s recent IPO announcement.
Robinhood raises $363 million. AT: “Robinhood has already established itself as a leading alternative investing mobile app. Now they want to take on the largest cryptocurrency exchange, Coinbase, and this raise should help them get there and be more competitive.”
SoFi, which recently confirmed it had 500,000 members, is on a customer acquisition push.
The company, which initially offered student loan refinancing for high-earning top-tier graduates and has since expanded its offerings, differentiates with VIP-style “member” benefits.
It’s a customer-for-life strategy other digital banking upstarts are pursuing. Luvleen Sidhu, CEO of BankMobile, recently told Tearsheet that a “customer for life” strategy is underpinned by the reality that “every customer is a potential customer,” with product offerings tailored for different life stages. SoFi has been known to pay a high price to gain customers; last year, it reportedly acquired customers at $756 apiece. The non-financial member services are valued at $795 per customer, according to the company.
Hey Future SoFi Money Member (SoFo Money Email), Rated: A
Higher interest (1.09% for May—21x the national checking account average of 0.05%!)
Reimbursed ATM fees worldwide (up to 6 per month)
No foreign transaction fees
No overdraft fees or account fees whatsoever!
Easy-to-use mobile app
SoFi Money Visa Debit Card
Mobile check deposit
Top notch customer support
Send money to friends and family with easy P2P at no cost
PLUS access to SoFi membership including complimentary career coaching and member events when you set up direct deposit
Did we mention that if you sign up for an account and set up direct deposit you’ll get $200?
Such a strong reaction to LendingClub hasn’t happened in years. The company is still down 20% year to date, and more than 40% in the last twelve months. LendingClub has struggled to find its footing ever since the ouster of its CEO, Renaud Laplanche, after controversy over the parking of LendingClub notes in a related third-party firm. More recently, in the wake of Wells Fargo’s (WFC) fake-account scandal, the FTC has also charged LendingClub with charging improper fees to borrowers, sending the stock to new all-time lows of $2.57.
Source: Seeking Alpha
But with this earnings quarter – the first time in a long time that LendingClub has rallied to earnings news (in Q4, LendingClub dropped 9% after missing revenue estimates; the quarter before that, it tanked 17% for doing the same). What’s interesting is that even in this quarter, LendingClub continued a three-quarter streak of missing analysts’ revenue expectations.
As the housing market has gone from recovering to roaring over the last five years, home flipping has also increased.
According to data provided by ATTOM Data Solutions, a real estate data provider, some 138,410 flippers invested $56 billion in home flipping in 2017, 34.8 percent of which was financed as opposed to executed in all cash. Prior to the housing bust, the same type of easy credit that infected the traditional mortgage market was also present in home flipping. At the peak of the housing bubble in 2005, more than $100 billion worth of homes were flipped by 287,929 investors, and 66 percent of those home flips were financed with loans.
Koizumi won his fight, his party crushing all opposition in a landslide, and his plan was set in motion, though the process has taken more than a decade. The company’s initial public offering in 2015 was the world’s biggest in that year. The government still owns most of Japan Post Holdings Co., and periodically sells off shares, with the goal of eventually reducing its stake to only a third from more than half now. But privatization hasn’t shrunk Japan’s postal bank itself, which remains one of the largest and most important in the world:
The problem was that Japan’s postal bank didn’t just take deposits — it also lent money, including to so-called zombie companies, or inefficient enterprises that survive due to below-market-rate loans.
Bond Fund Inflows, Dollar Rally and Buyback Surge (INTL FCStone Email), Rated: AAA
Source: INTL FCStone
U.S. equity ETFs have lost $35 billion since the Nasdaq index peaked in mid-March. This is the longest stretch of ETF outflows I can remember since the end of the great financial crisis. Inflows into bond funds accelerated to $16 billion over the same time. Jumping from stock to bond funds at the first sign of volatility was a logical reaction when bond yields were falling to record lows amidst the deflationary fears of the beginning of 2016.
It makes a lot less sense when corporate earnings are soaring, when deficit-related treasury issuance is exploding, and when the New York Fed underlying inflation gauge is clocking above 3%. Last but not least, the equity selloff was in large part driven by a bond market rout that pushed 10-year yields above the economically meaningless but psychologically symbolic 3% level.
Zeus CrowdFunding, Zeus Hard Money and Zeus Mortgage Bank—made the switch to monotheism. The three successful businesses are now united under a single brand: ZeusLending.com.
Zeus Founder and Chief Acceleration Officer Steven Kaufman claims to have consolidated all three financing businesses into a single organization to better serve the community of real estate buyers and investors who rely upon fast, no-hassle loans to conduct timely transactions.
LendingTree today released its first Consumer Debt Outlook for May 2018. Americans are on pace to amass a collective $4 trillion in consumer debt by the end of 2018. Collectively, Americans owe more than 26 percent of their income on consumer debt, up from 22 percent in 2010.
Incomes growing, but consumer borrowing growing faster Overall, the percentage of total non-housing debt, at 26 percent of Disposable Personal Income, is now even higher than during the credit boom in the mid-2000s.
Excellent credit (760+ score): Offered APRs to consumers with a credit score of 760+ averaged 7.35% in April.
The average best APR offered to all borrowers with credit scores of 760 or above was 7.35%, a decrease of 7 basis points from the prior month and 2 basis points from the same period one year ago.
At $22,774, the average loan amounts offered with the best APRs to all borrowers with a score of 760, up 0.57% ($130) from last month, and over 17.86% ($4,067) from the same period one year ago.
The top 10% of offers, presented to borrowers with the best profiles within this group, had offered APRs of 4.87% on average, and loan amounts of $33,931. A borrower with this APR and loan amount would save $2,877 by consolidating debt with a 10% APR over a three-year term.
Recently, CI had a chance to catch up with Eric Malley, founder & CEO of MG Capital Management during the Crypto Invest Summit in Los Angeles. While not quite there yet, Malley is interested in the potential of blockchain. He is looking at the options of how crypto and property can make sense for both investor and issuer.
MogulREIT I, as part of its diversified income strategy, recently completed two preferred equity investments in community-based retail centers. Community-based retail centers are centrally located within their respective population centers and focus on durable tenancy that serves the needs of the working community, thereby being less susceptible to internet retailing. The transactions include a $3 million preferred equity investment in a retail center in Waterbury, CT, consisting of three multi-tenant strips with 17 suites across 50.5 acres and a $1.9 million preferred equity investment in a retail center comprised of two lots with over 27,000 square feet located in Orange County, CA. CoStar reports that within a one-mile radius of the property, average household income is over $116,000.
Quarz Capital Management, Ltd. (QCM), an investment manager, today issued a letter urging LendingClub to take immediate and decisive steps to address the severe undervaluation of its share price and unlock a potential attractive total return of >70% for shareholders.
US ONLINE MARKETPLACE LENDING BEHEMOTH TRADING AT ‘STARTUP’ VALUATION – POTENTIAL TOTAL RETURN IN EXCESS OF 70% OVER THE NEXT 3 YEARS –
LendingClub is the largest online lending marketplace platform in the US with an estimated ~50% market share1. The firm is projected to generate more than $700million of revenue on ~$11billion of loan originations in 2018E. LC’s substantial loan origination volume of more than $35billion since 2006 and its proprietary credit data increase the effectiveness of credit and risk models and enable the largest institutional investors to undertake the rigorous due diligence required to allocate capital on its platform.
Recommendation 1. Emphasize on cost control to increase profitability
Recommendation 2. Improve alignment of compensation system for top management
Recommendation 3. Increase shareholder return on sizeable cash holdings
During the first quarter, LendingClub is typically affected by the seasonality of the lending business so it’s beneficial to look both at the last quarter as well as the prior year period. In the first quarter of 2018, LendingClub posted originations of $2.3 billion. This represents a 5% decrease from the previous quarter, but an increase of 18% from the prior year period.
Source: Lend Academy
Revenue came in at $151.7 million, down 3% from the previous quarter but up 22% from the prior year period. They incurred a GAAP net loss of $31.2 million which included legal expenses related to legacy issues of $17 million.
The company called for 20% growth in its 2018 outlook, so 22% revenue growth is even better than expected. And, the company’s full-year outlook calls for total revenue in the range of $680-$705 million. At the midpoint, this implies average revenue of more than $180 million per quarter for the rest of the year. Considering that the first quarter’s revenue was “just” $151.7 million, this represents some impressive growth ahead.
During the first quarter of 2018, we continued to observe that credit performance across the industry is returning to long-term averages and interest rates are rising across fixed income assets.1 On the platform, we continue to see both of these trends in action: investors show higher demand for higher quality assets and are looking for higher interest rates overall.
Online real estate investment platform, Sharestates, today announced they have surpassed $1 Billion in loan volume – an incredible milestone that showcases their continued growth in the real estate investment space. To celebrate the achievement, Sharestates is giving away $100,000 to mark the occasion.
LendingTree today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.
Crowdfunding firms have put a lot of effort into educating accredited investors on real estate crowdfunding and real estate investing in general. Those efforts are starting to pay for firms such as CrowdStreet. The firm hit a major milestone in March with more than 99,000 registered investors on its platform. CrowdStreet also is generating a high volume of repeat investors that are using crowdfunding to create diversified real estate portfolios with different sponsors, property types, geographic markets and risk profiles, notes Tore Steen, CEO, CrowdStreet.
The average investor on CrowdStreet has five investments in their portfolio, and over 20 percent of investors on CrowdStreet have invested more than $1 million across 12 unique investments.
Some crowdfunding platforms, such as Fundrise, Realty Mogul and Rich Uncles, have introduced e-REITs as a way to reach non-accredited investors and expand their potential customer base. But for the most part, crowdfunding firms are firmly focused on raising capital from accredited investors.
Groundfloor is one of the few crowdfunding platforms that is providing direct investment opportunities to non-accredited investors.
Even as banks and other financial firms have invested heavily in technology designed to protect customers’ data, fraudsters have become more and more aggressive in trying to steal consumers’ identities to open accounts, take out loans or intercept payments.
According to ThreatMetrix, a global cybersecurity network used by banks and e-commerce firms to help determine the authenticity of digital transactions, 210 million attempted attacks were made on its network during the first quarter of 2018, a 62% increase over the same period last year.
Gary Cohn, the former director of the White House Economic Council, said he’s still weighing options for his next role but one possibility is a digital bank.
“I do have an idea for a company,” Cohn, who was president of Goldman Sachs before joining the Trump administration, said Tuesday in an interview on CNBC. “It would be an interesting concept playing on the knowledge I know from the banking world, in running a regulated bank, but in a digitized world.”
Bank accounts for small businesses is an area of fintech not yet solved; Azlo is looking to fill that void as they believe banks have built their small business offering for the traditional small business owner; the new age business owner doesn’t have years of tax returns to share, providing accounts for them is not a risk banks want to take; Azlo also plans to move into loans later as an alternative to overdraft fees; they believe a straightforward, transparent offering will allow them to serve the type of small business banks have overlooked for years.
Northwestern Mutual is growing its advisory services, building on the technology and expertise of LearnVest, which is currently shutting down and preparing for a rebrand as a content site this year.
In a statement, Northwestern Mutual said it wants to serve customers wanting an “end-to-end experience” with a human adviser using LearnVest’s digital planning platform, alongside a new content site. The integration also allows the parent company to concentrate on full-scale financial planning — a message consistent with a recent job posting that noted the company is scaling its technology and personal finance approach to reach millions of people across both LearnVest and Northwestern Mutual brands.
The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin, according to emails and documents viewed by The New York Times and four people briefed on the effort who asked to remain anonymous because the plans were still confidential.
It’s clear that Laplanche has designed Upgrade from the start with scale in mind. Little more than a year after launching its first product, the company has 250 staff across three centres, San Francisco, Phoenix, and Montreal, and its series A funding round was no minnow at $60m. Originations are running at $100m a month, having reached a level after a year that it took Lending Club more than six years to reach. Laplanche said in April he expects to originate $2bn of loans this year.
Laplanche is scathing about credit cards, labelling them “fundamentally bad products”. They are expensive – the average interest rate on the US’s $1.03 trillion of balances is 17 per cent, he says, which rises to perhaps 25 per cent once fees are accounted for – and borrowers can run up debts without having to pay down the principal every month as they would with a loan. Many don’t even realise they are taking out a loan, and card issuers never use the word.
First Foundation Bank, an 11-year old $4.5 billion-assets bank headquartered in Irvine, Calif., gets that message. Lorrie Asker, senior vice-president, commercial banking, says she’s heard from many clients that they handle their finances and their banking between 10 P.M. and 2 A.M. In the Age of Amazon, everyone, she says, craves immediate online availability of services, including banking.
Marketplace business lenders frequently point out that busy small business owners’ lives often don’t synch with “bankers hours.” Being able to apply for credit with online players like Kabbage or OnDeck any hour of the day is a much touted advantage. It plays to the credit hungry who find their credit by Googling for it.