Thursday October 10 2019, Weekly News Digest

Thursday October 10 2019, Weekly News Digest



News Comments

United States

Affirm debuts new app for shoppers. The app allows consumers to shop and check out with “virtually any retailer.” This Business Insider article highlights Affirm’s need to step up its game in order to compete with Amazon, 66 percent of whose customers begin their search for new product at Amazon. Affirm will have to offer better deals for consumers and make it easy to purchase things. With Affirm’s relationship with Walmart, that shouldn’t be too much of a challenge. However, it will be a challenge.
Affirm app allows for bill splitting.
Interview with Max Levchin, founder and CEO of Affirm.
OnDeck survey indicates small businesses are concerned about economy. Old news, still interesting.
Marcus, jobs, the economy, housing prices, and Oportun. From PeerIQ, well worth the read.
Peter Renton’s quarterly MPL results. For Q2 2019. Always interesting to read how Renton’s investments have been doing. With lots of charts.
The rose of “loans for sneakers” as a business. The focus is on Afterpay, an Affirm competitor, but this is a good read because it tackles POS lending from a consumer’s perspective. Insightful and interesting.
What happened to Borro?
Auto, home equity are soft spots in consumer lending.
Maker offers multi-collateral DAI lending.
A $40 billion pile of leveraged loans battered by huge losses.
CFPB ruling shorts debt collectors.
The SEC is hiring a data chief.
Voyager selects Celsius Network for asset management.

United Kingdom

European Union

International

Other

News SummaryUnited StatesOnDeck Survey: Economy is Top Concern for Small Businesses Ahead of 2020 Election (New Kerala), Rated: AAAAffirm debuted a new app encouraging customers to start their shopping journeys with it (Business Insider), Rated: AAAAffirm ships new shopping and bill splitting app (Finextra), Rated: AMax Levchin On The Future-Present Of Everywhere POS Lending (PYMNTS), Rated: ALatest Macro; latest from Marcus; Oportun goes IPO (PeerIQ), Rated: AAAMy Quarterly Marketplace Lending Results – Q2 2019 (Lend Academy), Rated: AAAThe Maybe-Dubious Rise of the Loans-for-Sneaker Business (GQ), Rated: AAAWhat Happened to Borro? (deBanked), Rated: AAuto, home equity are soft spots in consumer lending (American Banker), Rated: AFinally! Maker Offers Multi-Collateral DAI Lending (Cryptovest), Rated: AA $ 40 Billion Pile of Leveraged Loans Is Battered by Big Losses (Bloomberg), Rated: ARuling cuts short debt collectors’ victory lap over CFPB proposal (American Banker), Rated: BThe SEC is hiring a chief data officer (Business Insider), Rated: BVoyager Selects Celsius Network to Manage Certain Assets (AP News), Rated: BUnited KingdomZopa’s P2P profits tick up but group losses widen due to heavy investment in bank (P2P Finance News), Rated: AAAZopa: nine in 10 shoppers confused by car finance options (Verdict), Rated: ARatesetter recovering from loan scandal (The Times), Rated: AAAWonga customers’ average compensation payout may be just £118 (The Guardian), Rated: APayday loan alternative Savvy secures £20 million funding facility (Finextra), Rated: AMEET THE FRENCHMAN WHO WANTS TO SOLVE THE UK’S HOUSING CRISIS (Business Leader), Rated: ACrowdfunding a start up options explained for businesses and investors (What Investment), Rated: ALandlords wary of tax changes (Money International), Rated: AChinaPPDAI Stock Soars 7% on Increase in Institutionally-Funded Loans (Capital Watch), Rated: AAAEuropean UnionWhat we learned at this year’s LendIt Fintech Europe (Business Insider), Rated: AAALinked Finance launches ‘Beyond Brexit’ business loans (Bridging and Commercial), Rated: AID on track to double revenues as it eyes €300m+ of revenue within 2 years (Fintech Finance), Rated: ABinance Launches New Lending Program Phase (CoinCodex), Rated: AInternationalA Guide to What’s Happening in the Fintech Revolution (Bloomberg), Rated: AAAGoldman’s $ 1.3B Marcus burn, Neobank £200MM loss; plus 14 short takes on top developments (Lex), Rated: AAABlockchain: the future of finance (Financier Worldwide), Rated: AAustraliaHot home loan rates starting with a 2 (mozo), Rated: AAAloans.com.au jumps on October RBA home loan rate cut party (mozo), Rated: AAAOnDeck appoints Robbie Fidler as new national broker chief (IT Wire), Rated: BAsiaSPV 2030: Sharing of risks and reward (The Malaysian Reserve), Rated: AMENABeehive funds first SME in Bahrain (Arabian Business), Rated: AAACanadaBFS Capital Opens New Data Science and Engineering Hub in Toronto (Financial Post), Rated: B

United States

OnDeck today announced the results of a national survey of U.S. small business owners that finds economic issues are the most important factors in determining their choice for president in 2020.

Economic concerns arise in several dimensions, including tax policy, job growth, support for small businesses, government spending and the overall economic climate. These issues were cited as the top concerns of more than 33% of those surveyed;
Immigration was an issue of interest for 11.3% of small business owners surveyed, ranking second behind the economy as a concern.
57% of small businesses surveyed said they were either Very Optimistic or Somewhat Optimistic about the economic outlook for their businesses;
93% of those surveyed said they plan to vote in the 2020 election.
60% of small business owners surveyed said they already know who they plan to vote for in the 2020 presidential election.

The point-of-sale (POS) financing provider announced that the new app allows consumers to find and shop with the thousands of merchants that have integrated Affirm into their checkout experience as well as “virtually any retailer.”
Consumers can use the app to view what Affirm will enable them to spend and receive a single-use virtual card to make payments using Affirm’s payment plans. The app can also facilitate payments at brick-and-mortar stores that accept Apple Pay or Google Pay.
Source: Business Insider

Affirm’s app also allows consumers to pay at any brick-and-mortar store that accepts Apple Pay or Google Pay, which is increasingly important as 24% of consumers want the flexibility to look online and shop in-store.
Those with Apple Pay or Google Pay enabled have also seen up to 14% of transactions driven in-store, making the Affirm app a rare omnichannel solution for customer acquisition.

Since Affirm’s launch, the landscape in the POS space is radically different than it was when Affirm entered. It is, first and foremost, a much bigger and more populated space than it once was. Other startups have come to the field — Afterpay, Uplift and Sezzle for example — but also bigger and more established names in financial services. In the last 12 months alone Square, Mastercard, PayPal and Chase have all rolled out POS installment lending products or enhancements as the market continues to pick up popularity among consumers, particularly younger ones.

Q4 is off to a brisk start. The jobs report released this past Friday shows 114K in net new jobs (vs expectations of 120K), generally flat wages, and a drop in the unemployment rate to 3.5%.
On the one hand, the US economy is near ‘stall speed’ – around 1 to 1.5% growth rate.
Source: PeerIQ, The Daily Shot, Conference Board
House prices are expected to rise 5.8% over the next year due to low mortgage rates.
Two major financing announcements this week. FinTech lender, Oportun, led by CEO Raul Vazquez, ends its Nasdaq debut with an 8% gain. The debut is notable as it represents a positive shift in the sentiment to the reception of lenders to the IPO market.

The upward trend in my returns continued in Q2, making it the fifth quarter in a row with increasing returns. My preliminary return for the 12 months ending June 30, 2019 is 6.20% (one investment is still not final), the best I have achieved since Q3 2017.
Source: Lend Academy

In 2013, Borro, an innovative online lending company that was poised to disrupt pawn shop lending forever, invited me to their stylish offices at 767 Third Avenue in Manhattan.
Borro made $50 million worth of such loans in 2013 and doubled that number in 2014.

In its quarterly report that tracks consumer delinquency trends, the American Bankers Association said that 30-day past-due rates ticked up in eight of 11 categories in the second quarter when compared with the first quarter, but stressed that delinquencies remain well below historic norms.

Maker DAO, the most active decentralized finance app on the Ethereum network, has announced a date for its long-awaited multi-collateral DAI generation. According to observers, November 18 may be the date MKR starts accepting other assets as collateral.
Multi-collateral DAI creation has the potential to be riskier in comparison to ETH-based models. Currently, Maker is deliberately over-collateralized at above 300%, with the minimum at 150%, due to the high volatility of crypto assets.

Loans tied to more than 50 companies have lost at least 10 percentage points of face value in just three months, according to data compiled by Bloomberg. Some have dropped a lot more, with lenders lucky to get back just two-thirds of their investment if they tried to sell.
It’s hardly a full-blown apocalypse for the junk-rated leveraged loan market, which totals $1.2 trillion.

Energy is the hardest-hit sector on the list, with more than $12 billion of loans falling more than 10 cents on the dollar. Consumer and health care follow, comprising around $8 billion and $5 billion of loans outstanding, respectively.
Source: Bloomberg

Under the CFPB’s May proposal, debt collectors could have unlimited contact with debtors through email and text messages, though consumers could opt out of such communications. Additionally, collectors could satisfy disclosure requirements with a hyperlink embedded in an email that takes consumers to a description about how they can dispute a debt.

The Securities and Exchange Commission is hiring its first chief data officer, according to a job posting for the role.

Voyager Digital, LLC, a subsidiary of publicly-traded Voyager Digital (Canada) Ltd (Ticker VYGR.CN), an industry-leading best execution crypto asset broker, today announced a partnership with Celsius Network, in which Celsius will manage a portion of Voyager’s digital assets.

United Kingdom

Zopa Group – which incorporates the P2P platform and upcoming digital bank – reported a pre-tax loss of £18.295m for the year ended 31 December 2018, compared to a pre-tax loss of £5.536m the previous year.

In a survey of 2,000 consumers, 47% of people who had recently bought a car with finance are unable to identify which type of finance deal they signed up for. Zopa estimates that the average car buyer could save up to £11,000 over the course of their lifetime by working out the best finance deal available.

One of Britain’s largest peer-to-peer lenders appears to be recovering from a toxic loan scandal after its latest results showed it edging towards breaking even.
Accounts for Ratesetter, which links 56,000 ordinary investors with consumer and business borrowers, show that pre-tax losses narrowed by 69 per cent in the year to March.

Stockport and Wilmslow based fintech company Savvy.co.uk is to create 25 jobs after securing a £20 million investment.
The funding, from London-based Cairn Capital, will increase lending capacity for the company who provide an ethical alternative to pay-day loans.

WHY DID YOU START BLEND NETWORK?
I started working in the financial industry as an FX trader before moving to trading gold and copper, both much more inefficient markets than FX. I realised that the UK property market was a hugely inefficient market in the sense that lenders and borrowers are not meeting. On the one hand, you have very experienced property developers across the country who are trying to access funds to build homes but traditional lenders are no longer active in providing development finance.
Instead, we lend in places such as Coventry, East Anglia, Doncaster, Northern Ireland. Northern Ireland is a very good example of our strategic approach to lending. Last year, we did around 80-85% of our business in Northern Ireland.

Crowdfunding a start up brings to mind the statement ‘Nothing worth having comes easy’, never truer than in the case of launching a start-up. Getting a new business off the ground will often require capital. Something which a lot of people don’t know how to go about getting.

These are:

Reward based crowdfunding;
Equity based crowdfunding;
Debt based crowdfunding, and
Donation based crowdfunding.

Half of the 200 landlords approached agreed tax changes and tougher mortgage borrowing criteria have thwarted their plans to buy more properties, while 15% admitted they had been put off buying homes to rent.
A third who still wanted to invest are considering a switch from buy to let to peer-to-peer lending secured against property, while 8% have already done so.

China

The stock in PPDAI Group Inc (NYSE: PPDF) closed 7% higher on Wednesday, at $2.83 per American depositary share, after it announced a positive trend in funding of loans by its institutional partners and increased loan origination volume.
For the third quarter, the Shanghai-based company, which operates an online consumer finance marketplace, said in a statement on Wednesday that the volume of loans facilitated by its institutional funding partners jumped to $2.64 billion, up 91% from the second quarter. Total loan origination volume was above PPDAI’s guidance, it said, as it reached $3.51 billion, up 14% from the previous quarter.
European Union

At the conference, Business Insider Intelligence identified four emerging themes that we expect to set the tone for the space for the next year: further proliferation of partnerships between banks and fintechs, increased focus on digital banks’ sustainability, accelerated innovation and disruption from small- and medium-sized business (SMB) lenders, and more challenges ahead for the UK’s P2P lenders.

CYBG bank and price comparison site GoCompare recently partnered to offer an energy compare and switch service for all of CYBG’s B customers.
Barclays bank partnered with SMB finance fintech MarketInvoice last year to give Barclays’ SMB clients access to MarkeInvoice’s solutions. 
French Banking-as-a-Service platform Treezor was acquired by Société Générale last year, as the bank looked to enhance its ability to innovate and decrease time to market.

Source: Business Insider

The new 18-month loan period will allow borrowers to access working capital facilities of up to €300,000 (approximately £265,194) in just 24 hours.

ID Finance, the fintech operating in Europe and Latin America, saw revenue growth of over 100% in the first 9 months of 2019 and is on track to double its revenues to €90m revenue this year. The data science, credit scoring and digital finance company is now planning its first equity crowdfunding round via Crowdcube as it targets €300m+ of revenue within 2 years.

The Binance cryptocurrency exchange has launched the latest phase of its relatively new lending program. For the program’s eighth installment, Binance is sticking with the model of short-term loans, as users only have to commit their crypto for 14 days.
International

These underbanked markets, led by countries in Asia and Africa, have inspired fintech innovation that’s leapfrogging the technology available in the developed world. Ant Financial Services Group’s Alipay and Tencent Holdings’ WeChat Pay in China, Paytm in India, and Safaricom’s M-Pesa in Kenya are some well-known examples.
Source: Bloomberg
Take Facebook Inc.’s plan to launch a digital currency called Libra in 2020. The social network’s gigantic reach—more than 2.4 billion active monthly users—could draw a much wider audience to Libra than has used previous cryptocurrencies. For instance, global remittances by migrants reached a record $689 billion last year, according to the World Bank.
Source: Bloomberg
San Francisco-based 500 Startups staked 43 such companies in the 12 months ended June 30.

Goldman is losing $1.3 billion on Marcus, trying to build a Fintech leader. Etrade is going to lose $75 million from cutting trading fees to $0 to keep up with Robinhood. Revolut is losing £35 million on £60 million in revenue, with another £140 million burned by Atom, Monzo, Tandem, and the rest.
Source FT Research and Future of Finance
Generally speaking, from a deposit point of view, these are still all small businesses at £1 billion in assets (e.g., Betterment manages $20 billion).
Source: ARK Invest and Future of Finance
The first is that the Robinhoods and Monzos of the world are 10x overpriced relative to the payments apps. I can sort of buy this — though money in motion is way easier to capture than money at rest. The second is that venture investors think a finance user is worth $1,500 in a digital bank.
Source: Future of Finance

Recent examples of blockchain’s impact on financial markets go well beyond these initial applications or P2P lending or crowdfunding.
The first wave of applications in finance and banking is being driven by easily achievable gains in actively traded assets.
MasterCard incorporated a blockchain payment system providing vendors real time, lower cost settlements on cross-border transactions. Representing a consortium of more than 40 of the world’s largest banks, fintech firm R3 launched a payment system built on DLT platform Corda, to expedite intra-bank transfers.
St. Regis Aspen, a Colorado resort, is a partnership formed with a crowdfunding site, Indiegogo, that in lieu of a traditional IPO completed a private placement via DLT financing real estate. This sale of ‘tokens’ – fractional interests in the underlying property – raised $18m, compliant with securities laws.
Australia

The RBA has cut official interest rates for the third time this year, and already a handful of lenders have responded by slashing rates across their range of variable rate home loans. Right now, if your home loan doesn’t have a ‘2’ in front of it, you’re missing out.

The online lender has announced its response to the 0.25% drop in the official cash rate though, with loans.com.au taking 0.15% off a number of variable rate home loan offers for both owner occupiers and investors.
The changes, which come into effect on October 17, will have an impact on a number of  loans.com.au home loan offers including:
• Essentials Variable loan – reduced by 0.15% with rates now as low as 3.04% (3.06% comparison rate*).
• Smart Home Loan – reduced by 0.15% with rates now as low as 2.88% (2.90% comparison rate*).
• ZIP Home Loan – reduced by 0.15% with rates now as low as 3.08% (3.10% comparison rate*).
• Offset Variable loan – reduced by 0.15% with rates now as low as 3.12% (3.14% comparison rate*).

Online SME lender OnDeck Australia has appointed experienced commercial lending operator Robbie Fidler as its national broker channel manager.

Asia

The growth and success of peer-to-peer (P2P) lending is a testament of the viability of risk-sharing contracts, where the investors take on some risks (for higher return) from the ventures they are financing. This way, finance will be grounded in the real economy, which is another core principle of Islamic finance.
MENA

Dubai-based Beehive, the region’s first regulated peer-to-peer lending platform, has funded its first SME in Bahrain.

Canada

BFS Capital, a leader in small business lending, has officially launched a data science and engineering hub in Toronto as the company accelerates its plans to develop best-in-class digital financial products for small businesses across the globe.
Authors:
George Popescu
Allen Taylor



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