The fight continues as judge says “No”

The fight continues as judge says “No”



News Comments

United States

Judge says OCC can’t issue fintech charters. This is not a huge surprise, but the fight is not over yet. The OCC still has an appeal option. This could go to the Supreme Court.
Kabbage almost reaches $100 million in revenue in Q3. Kabbage has grown into one of the major players in SMB lending. The number of loans issued is growing, and that means revenues are growing–as long as the economy remains strong.
Q3 bank earnings, Venmo and AmEx cards. Anyone who thinks fintech is not making a dent in traditional banking needs to read this. Fintech and alternative lending platforms are forcing banks to change their business models, or go out of business.
Balboa Capital completes largest securitization in history. Congratulations! This is a great achievement.
2019 Financial Fears Survey. 78 million Americans refer to their finances as a “horror show.” People are most fearful of medical bills, but credit card debt and car loans also make the list. Oh, and they’re afraid the economy will turn sour, but that’s no surprise.
Bank charter is still a long way off for fintechs.
Is this the end of the OCC fintech charter?
What the judge said about bank charters, and why Kabbage is back in court.
OnDeck subsidiary, Investors Bancorp partner on loans.
ABS professionals look to new financial partners.
IIRR Management Services on RealtyShares acquisition.
Crowdstreet democratizes real estate investment.
Finitive receives $2 million.
Best online lender in Iowa, according to Benzinga.
Bitcoin IRA partners with crypto lender on interest-earning accounts.
RippleWorks expands its reach.
Kabbage launches payment service for SMBs to get paid in 24 hours.
Fundbox makes IDC Fintech Rankings.
Online calculators. Bad?

United Kingdom

China

Other

News SummaryUnited StatesFintech unicorn Kabbage ends Q3 with nearly $100 million in revenue amid loan growth (MarketWatch), Rated: AAAUS fintech Kabbage launches new payment service to help small businesses get paid quicker (AltFi), Rated: BJudge Rules OCC Unable to Issue Fintech Charters (Lend Academy), Rated: AAABanking charter remains a long way off for fintechs after court ruling (American Banker), Rated: AIs This the End for the OCC Fintech Charter? (Payments Journal), Rated: BNew Jersey bank partners with On Deck Capital (Biz Journals), Rated: AMarketplace Lending Update #7: This and That (The National Law Review), Rated: AQ3 Bank Earnings, Venmo & AmEx Card Launch (PeerIQ), Rated: AAABalboa Completes Largest Securitization in Company History at $ 409MM (Monitor Daily), Rated: AAAABS Professionals Look to New Financial Partners Amidst Changing Economic Landscape, Capital One (ABL Advisor), Rated: A2019 Financial Fears Survey (Wallet Hub), Rated: AAACurrent Mortgage Rates in Iowa (Benzinga), Rated: AIIRR Management Services Discusses RealtyShares Acquisition (Crowdfund Insider), Rated: ACrowdStreet: A Platform that Democratizes Real Estate Investment Opportunities While Diversifying Portfolios (CardRates), Rated: AFinitive Receives $ 2M in Venture Debt from Silicon Valley Bank (FINSMES), Rated: ABitcoin IRA to Launch Interest-Earning Crypto Accounts (Altcoin Buzz), Rated: ACrypto-powered foundation Rippleworks expands its reach (Devex), Rated: AFintech Innovator Fundbox Named to Prestigious IDC FinTech Rankings by IDC Financial Insights (Yahoo! Finance), Rated: BBeware Online Loan Calculators (WSJ), Rated: BUnited KingdomShares in Funding Circle up over 10 per cent, after loans under management jump by more than 30 per cent (AltFi), Rated: AAAFundingSecure goes into administration (P2P Finance News), Rated: AAAFundingSecure administration not a ‘reflection of P2P as a whole’, claims major platform (Bridging and Commercial), Rated: AIndustry raises concerns as Funding Secure enters administration (Mortgage Introducer), Rated: AStarling Bank Raises £30 Million to Fund its Expansion as it Approaches its Millionth Account (The Fintech Times), Rated: AAndrew Lawson joins Oodle Car Finance as chief product officer (Asset Finance International), Rated: ACelsius Network Now Supports Tether At 12% Interest (CryptoBriefing), Rated: AWayfair, Klarna bring flexible payments to UK shoppers (The Paypers), Rated: ASix bids made for stricken reseller (Channel Web), Rated: BCapitalise.com launches partnership with iwoca and a high street bank to enable instant funding quotes for SMEs (Fintech Finance), Rated: BChinaThe Meteoric Rise and Spectacular Fall of Peer to Peer Lending in China (Lend Academy), Rated: AAAChinese Regulators Forcing More P2P Platform Closures With Stricter Rules (Business Times), Rated: AChina’s Incredible Shrinking P2P Lending Industry (Caixin Global), Rated: AEuropean UnionDigital lending platform Roostify plots expansion with new investment from Santander (Housingwire), Rated: AAAInternationalTax Rates on P2P Lending – Low versus High (P2P-Banking), Rated: AAABanks That Can’t Keep Pace With Fintech Firms Risk $ 88 Billion Revenue Loss (Forbes), Rated: AAAAsiaFintech companies need strict law to protect consumers, ensure fair business (The Jakarta Post), Rated: AAAThe Explosion of FinTech in Indonesia and how Companies like Gojek and Weyland Tech, Inc. are Winning (Investor Ideas), Rated: ACanadaLuge Capital raises $ 85M to invest in Canadian fintech startups (TechCrunch), Rated: AAA

United States

Financial technology unicorn Kabbage finished the third quarter with just shy of $100 million in revenue as the company continued to grow its small-business lending platform.
The decade-old company told MarketWatch that it generated $99.4 million in third-quarter revenue as loan originations ticked up 43% on a year-over-year basis. The company said it extended $715 million in loans to customers during the quarter.

Kabbage, a US fintech backed by Softbank which uses AI-based algorithms to help work out the terms of small business lending, is launching a payments service which it says will cut the time it takes small businesses to get paid from 90 days to 24 hours.

Yesterday, a federal judge ruled that the OCC does not have the legal authority to issue bank charters to non-banks. Judge Victor Marrero ruled on the fact that a clause in the National Bank Act’s business of banking requires that only firms which take deposits can receive a national bank charter.

Fintech firms continue to face a murky path into the banking system after a federal court ruling that threw out the Office of the Comptroller of the Currency’s special-purpose charter, observers said.
The charter has already been on unsteady ground. No firm has yet applied with the OCC facing legal challenges. But the decision Monday out of the U.S. District Court for the Southern District of New York shines an even brighter light on potential alternatives for fintech companies seeking a national licensing solution.

The story isn’t over yet. The OCC has said it will appeal the decision.

In striking down the OCC’s interpretation of Section 5.20(e)(1), Judge Marrero reasoned that the National Bank Act “unambiguously requires that, absent a statutory provision to the contrary, only depository institutions are eligible to receive national bank charters from the OCC.”
Kabbage Heads to Court (Again)
Non-bank marketplace lender Kabbage joins the growing number of online lenders who are defending Madden and “true lender” claims in New York’s federal courts. Unlike prior lawsuits, such as those recently filed against Capital One and Chase Bank,2 the putative class action against Kabbage targets small business loans, not credit card or other consumer loans.

PayPal is launching a Venmo credit card (expected 2H 2020). Venmo’s credit card launch follows a flurry of launches from Avant, Upgrade, Ollo, Brex and others in recent years. PayPal has a unique edge – the breadth of customers on its payment network. Relatedly, PayPal and Synchrony extending their overall 15-year consumer credit relationship.
Bank Earnings Season Underway
JPM

Industry leading ROE of 18% driven by consumer banking ROE 30%+ [!!]

Source: PeerIQ, JPMorgan Chase & Co
Citi

Strongest 35% YTD share price gain in KBW index (stock trading below book value)
66% of new deposits coming from areas where they do not have branches

GS

ROE in the 12% range, profit drops 26%. ROE will be low for the foreseeable future while GS pours billions in investing in building a consumer franchise
CEO David Solomon: “In three short years, we have raised $55 billion in deposits on the Marcus platform, generated $5 billion in loans, and built a new credit-card platform and launched Apple Card,” adding “which we believe is the most successful credit card launch ever.”

Bank of America

Profits up 8% YOY; NIM robust at 244 bps just shy of recent peak of 251 bps
#1 in mobile banking and online banking. Digital banking users have increased by 5% over the past year and number of active mobile users has increased by almost 11%. – Number of branches has decreased by 1.9

Online lender Balboa Capital successfully completed a $409 million asset-backed securitization (ABS) of small and mid-ticket equipment loans and leases, its sixth and largest transaction to date.

A Capital One survey conducted at ABS East 2019, a conference convening professionals from across the asset-backed securities (ABS) industry, found more than one-third (38 percent) of professionals plan to engage with new financial partners and implement new technologies, over the next 12 months, to prepare for the changing economic landscape. Additionally, 34 percent of respondents plan on reviewing or reshaping their credit and underwriting risks over the next 12 months.
Of the various challenges facing the industry, ABS professionals elected that regulatory uncertainty (22 percent), increased credit risk (18 percent) and increased competition (18 percent) pose the greatest challenges for their businesses over the next 12 months. Fluctuations in interest rates was listed as the greatest challenge for 15 percent of respondents.

IIRR Management Services (IRM) claims to be one of the largest crowdfunded real estate investment firms in the world. IRM is owned by RREAF Holdings and iintoo Investments. The company recently took over management of Realtyshares’​ portfolio – once a prominent entrant in the real estate crowdfunding sector that unexpectedly collapsed in 2018 stunning the industry. Today, IRM claims over $1.5 billion in combined assets salvaged from RealtyShares.

CrowdStreet indicates a total average annual return rate of 25.5% across all fully realized deals, according to the company website. The company believes markets are stronger when they are more accessible, transparent, and efficient.
Since CrowdStreet launched in 2014, the company has posted over 360 projects on its Marketplace and has raised more than $800 million from thousands of investors, he said.
The platform allows accredited investors to diversify their portfolios by investing in individual projects or funds for as little as $25,000.

Finitive, a NYC-based financial technology platform providing institutional investors with direct access to alternative lending investments, closed a $2m venture debt.

Bitcoin IRA has partnered with the leading crypto trading and lending firm Genesis Capital to launch interest-earning cryptocurrency accounts.
The crypto trading firm will accept Bitcoin (BTC), Ether (ETH), Litecoin (LTC), and ZCASH.

Galen and Larsen, who built the online lender E-Loan together, are both interested in broadening the perspectives of Silicon Valley executives who might otherwise be detached from ways to make an impact on the rest of the world.

According to a study published online in the Journal of Behavioral and Experimental Finance in June, borrowers unconsciously could be manipulated into choosing a more expensive loan, depending on the calculator’s default settings.

United Kingdom

Shares in peer-to-peer lender Funding Circle climbed over 10 percent after its loans under management soared 31 percent to £3.7bn, but the company cautioned of “an uncertain economic environment”.
It said loans under management had grown to £3.7bn compared to £2.8bn the year previous.
Funding Circle reported that loan originations were up from £1.6bn in 2018 to £1.8bn in 2019.

FUNDINGSECURE, the peer-to-peer pawnbroker and property lender, has gone into administration.

Jonathan Avery-Gee, Edward Avery-Gee and Daniel Richardson at CG & Co have been appointed administrators of the company and are working closely with the FCA.
Stuart Law, CEO at Assetz Capital, claimed that smaller P2P lenders were “clearly struggling to keep up”.
Assetz chief rules out purchase of FundingSecure loanbook

The collapse of the P2P firm has left around 3,500 investors facing an unclear future as the administrator works their way through the loans.

Starling Bank, the UK digital bank, has raised £30 million in a new funding round. Merian Chrysalis Investment Company Limited is leading the round with an investment of £20 million, while Starling’s existing investor, JTC, has added a further £10 million.

Oodle Car Finance has appointed Andrew Lawson as chief product officer.
He joins from Zopa, the world’s first peer-to-peer lender, where he spent five years as chief product officer responsible for business growth during a period of expansion that saw the brand become the UK’s largest online open market lender.

Celsius Network will begin supporting Tether (USDT), the largest stablecoin in the market, in its interest-earning wallet. That will enable users to leverage their holdings in order to receive a passive income.

Klarna’s range of flexible payments are available to shoppers online at Wayfair.co.uk, with additional new features on Wayfair.de. Joining Klarna’s partner list, Wayfair customers across the UK now have control over how and when they pay for their purchases, with payments options such as Pay later and Pay in 3.

Six offers have been made for welsh education reseller Gaia, which fell into administration earlier this year.
A number of lenders were also revealed to be owed hundreds of thousands of pounds, with White Oak UK and Funding Circle owed £703,000 and £500,000 respectively. HMRC is owed £866,148.

Capitalise.com, the business funding platform for accountants, has today announced a partnership with small business lender, iwoca, and a high street bank, to launch Instant Offers. The partnership enables accountants to receive instant quotes on funding applications for their clients. Accountants benefit from offering their clients exceptional customer service with instant quotations and eligibility on suitable financial products whilst lenders can onboard high credit quality businesses, faster.
China

I first wrote about the Chinese p2p lending industry later that year and introduced the west to CreditEase, the company that was the largest p2p lending platform in the world. Over the next couple of years the industry thrived with thousands of platforms launching and the total loan volume skyrocketing to over $150 billion in 2015, which was four times the loan volume of 2014.
China’s Biggest Ever Financial Scandal
We got the first inkling that something was not quite right when China was rocked by the biggest financial scandal in its history. Ezubao, one of China’s largest p2p lending platforms, collapsed as it was revealed the business was nothing more than an elaborate Ponzi scheme. Around 900,000 investors collectively lost $7.6 billion in what was the second largest Ponzi scheme the world had ever seen (Madoff being the largest).
There Will Be No LendIt China in 2019
We have held LendIt China every year since 2016 in Shanghai and I am sad to report that in 2019 there will be no event. While we have expanded beyond online lending it still represented a significant part of our business in 2018 but given the recent challenges we expect no lending companies will be interested in speaking, sponsoring or even attending this year. So, we made the difficult decision to cancel the event. We will regroup in 2020 and hopefully will be able to bring our unique event back to China.

The newly imposed rules by the China Banking and Insurance Regulatory Commission (CBIRC) will mainly be targeting online P2P lending companies. These companies often entail high-risk lending activities that result in massive defaults, suicide, deaths, and illegal debt collections.
Since 2017, the country has had an estimated $692.8 billion in bad loans. The sector has tried to dispose of these bad loans as best they can through different methods.

The draconian cleanup campaign of China’s scandal-ridden peer-to-peer (P2P) industry has led to a three-year implosion that has put the sector almost back to where it was in 2014.
The number of functioning P2P lending platforms fell to 646 in September, a decline of nine compared with August and the lowest since early 2014 when the industry was booming, data compiled by Wangdaizhijia, an online lending research portal, show. The scale of the drop has been dramatic — at its peak in November 2015, the sector had more than 3,600 platforms.
European Union

Roostify, which powers the digital mortgage platforms of JPMorgan Chase, TD Bank, Guild Mortgage, HSBC Bank USA and more, is plotting an expansion in the U.S. and internationally thanks to a new injection of funding from Santander Group and others.
International

In the countries colored in black the income tax rate is applied on interest earned on p2p lending investments. That means the individual rate of taxation depends on the other and overall income of the investor. For example in the UK the tax bands are 20%, 40% and 45% dependent on overall income. In Ireland tax bands are 20% and 40%.
Source: P2P-Banking

Days after it was announced that banks across the world are currently in a ‘do-or-die dilemma,’ Accenture’s 2019 Global Payments Survey reveals that 60 percent of the participants believe they will lose up to 15 percent of payments revenue – $88 billion – in the next three years after being displaced by emerging, competing financial services players.
38 percent of respondents said that big technology companies pose a competitive threat and 32 percent of those surveyed feel the same about fintech firms, which makes sense with the latter attracting nearly $11 billion through over 800 deals between 2016 and 2018.
Asia

Indonesia’s growing financial technology (fintech) companies have called on the government and legislators to issue a new law to ensure fair business for and better protection of both the industry and consumers. The Indonesian Fintech Lenders Association (AFPI) said that fintech companies, especially those involved in peer-to-peer (P2P) lending or online lending, needed a stricter regulation to ensure that all the stakeholders, such as borrowers and investors, would receive better protection.

According to one recent report, “Indonesia’s fintech industry is in the midst of a period of significant growth. P2P lending recorded a triple-digit increase in 2018, while e-payment services have grown more than six-fold since 2012, prompting a surge of new foreign investment into a vibrant and increasingly diverse start-up community.”
Canada

There are 831 financial technology startups headquartered in or operating in Canada, according to data collected by Fintech Growth Syndicate, yet only a handful of venture capital funds specializing in the region and sector.
Luge Capital, a fintech and AI-focused venture capital fund headquartered in Montreal and Toronto, is looking to close that gap. The firm has raised $85 million for its debut fund and plans to make seed investments as small as $150,000 and as large as $2 million.
Authors:
George Popescu
Allen Taylor



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