MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?
Digital banking and lending is evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem, empowering lenders to process loans faster and smarter. In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!
- 11/28/18 Government to channel another £150m through Funding Circle(Alt Fi)
The UK government is lending £150 million through the small-business lending platform Funding Circle. The lending will go through the British Business Bank and is estimated to help fund over 2,000 small businesses. This is a big boost for alt-lending platforms in the UK.
- 11/27/2018 A shakeout is coming in small business lending (American Banker)
Online lenders accounted for more than $6 billion in small-business loans in 2017, according to S&P. Even more importantly, 24% of small businesses applied for credit online in 2017. Traditional banks are now looking to muscle back in with either lower interest rates or easing credit standards. Both are a recipe for a disaster in an economy which is poised to slowdown after almost a decade of relentless growth.
- 11/26/2018 How Marcus by Goldman Sachs took to the streets of New York to market its high yield savings account (Tearsheet)
Marcus, Goldman Sachs’ alt-lending platform is transforming into a digital bank with a savings product targeted at the millennial population. In a new marketing campaign, the company focuses on a survey which indicates that 60% of Americans have no idea about the savings account’s interest rate. This also marks the integration of Clarity Money with Marcus.
- 11/26/2018 P2P lending in Europe and the US is growing more than expected, thanks to the entry of the FAANG (LMF)
Access to credit through traditional channels is extremely restricted in Europe due to first the economic recession and then the sovereign debt crisis. P2P lending is filling in the gap. The UK recorded an increase of 11% and continental Europe of 10% in P2P lending. Alt Fi predicts that p2p lenders in United Kingdom will have disbursed 6 billion euros and Europe 3 billion in p2p loans by the end of the year. The article also details how tech companies like PayPal, Square and Amazon are rewriting the rules and growing their lending business.
- 11/26/2018 PeerIQ’s Q4 2018 Lending Earnings Insights Report (Lend it)
The economy is strong and the delinquencies are low according to the PeerIQ’s latest report. An interesting development is that though banks seem hesitant in lending to small businesses and consumers, their lending to non-bank lenders, who primarily serve the same segment, has grown by 6x since 2010. But lenders are increasing their reserves as they are anticipating turbulence in the future. And though all companies recorded double digit revenue and origination growth, CEOs believe that this tranquility will end sooner rather than later.
- 11/23/2018 UK alternative finance market swells 35% in 2017 (Alt fi)
The alternative finance market in the UK has grown by 35 percent in 2017, to £6.2 billion. Institutional lenders provided almost 40% of funding for P2P business lending in the UK. P2P lending to SMEs marked a 65 percent year-on-year growth. P2P business lending was estimated to be 29.2 percent of all new bank loans to small businesses in 2017 – nearly double the 15.3 percent figure in 2016.
- 11/22/2018 Banks flock to personal lending, but at what risk? (American Banker)
Traditional banks are peddling personal loans by convincing plastic-wielding Americans to refinance their existing debt at a lower interest rate. But as more and more banks adopt this strategy, the risks are building. Total personal loan balances reached $132 billion in the third quarter, a 59% increase in just three years. Many borrowers are using loans to fuel additional consumption, rather than pay down existing debt.
- 11/21/2018 LendingClub issues $1bn in ‘CLUB Certificates’ (Alt fi)
Club certificates launched by Lending Club in December last year have helped expand and diversify Lending Club’s investor base. It is a channel for institutional investors and designed as an alternative to invest in a whole loan, which can be illiquid with long maturity dates. They are structured as pass-through securities. It is basically securitization without the tranching. The company is looking to launch new products in 2019 to further grow its investor base.
- 11/20/2018 Biz2Credit, HSBC Launch HSBC eCredit to Streamline Small Business Banking (Lend it)
The collaboration of Biz2Credit and HSBC Bank Canada allows small business owners to apply for funding online. The HSBC eCredit is a digital-first approach to lending. It has currently been launched in a few areas. It will be available across country in English by December 2018 and in French the following month. It also delivers a straightforward and efficient borrowing experience to small business banking customers. It provides them the freedom & flexibility to apply for credit online and get a decision in as little as 24 hours.
- 11/20/2018 Finnovista Talks Latin America Fintech with TearSheet (Teersheet)
Together with the Inter-American Development Bank, Finnovista published a detailed report on Fintech in Latin America. With over 1200 Fintechs operating in Latin America, venture capital flowing and its first unicorn emerge in the form of Nubank-an online Brazilian bank; Latin American fintech ecosystem is on a roll. Latin American fintech players are on the radar of Chinese investors and companies as well. The report categorizes the fintech boom in three classes: Payments, Lending and Small business services.
- 11/20/2018 Foreign online banks are keen on US expansion (Business Insider)
Leumini, the Israel headquartered bank, is planning to launch its “digital bank” dubbed pepper (opened in Israel in 2017) in the US market. Pepper allows users to manage their finances through its mobile app, without being charged any monthly fees. The bank uses Artificial intelligence (AI) to manage loans and other transactions. It will face competition from existing players “Marcus” and “Finn” and new entrants like Barclays, German N26 and UK-based Revolut who have already announced their plans to expand to the US. Lending will be a critical piece of the profitability puzzle for all these challenger “no-fee” banks.
- 11/19/2018 ApplePie Capital Milestone: Surpasses $300 Million in Franchise Business Loans (Crowdfund insider)
Apple Pie is an innovative alt-lender focused on the franchise industry. It has partnership with more than 40 growing franchise brands, which include Jimmy John’s, Scooter’s etc. Amounts range from $10,000 equipment loans to $10 million multi-unit acquisitions and refinancing. Since 2015 they have achieved various milestones:
- Recently ApplePie surpassed $300 million in loans originated to franchise entrepreneurs opening or expanding their businesses.
- Completed transactions in more than 80 brands overall
- Creation of over 10,000 jobs through new unit financing
- Repeat borrower rate of over 20%
- 11/14/2018 Prosper branches out, shifts strategy as it launches second product (American Banker)
Prosper has focused exclusively on personal loans for the last 12 years. The bet seems to have paid off with over $13 billion in total originations. But the company now believes that its new product, Home Equity Line of Credit (HELOC) will be a game changer for the market. The product will be launched in 2019 and Prosper will partner with banks to offer this product to borrowers. This partnership model is a departure from normal fintech practices as online banks and lenders rise to challenge incumbent banks.
- 11/12/2018 Payday Lending Reform and the Need to Reduce Demand (Lend Academy)
Colorado has capped payday loans to a 36% APR cap. This ballot initiative had broad public support and will become a law from February 1, 2019. But the question is that whether this is a short gap solution and does it really solve the underlying problem of predatory lending. CFPB announced a more constructive change by proposing that payday lenders will also need to evaluate the borrower’s ability to repay.
- 11/09/2018 Funding Circle Sets Its Sights On U.S. Small Business Lending Market (Forbes)
Funding Circle is looking to enter the US small business lending market. The UK giant recently raised 300 million in its IPO. It believes the US market is divided into three categories- traditional lenders, fintech lenders and tech players like Paypal and Amazon. The company believes it will be able to create strong demand for its products as it provides long-term loans as compared to the current 1-3 years term loans offered in the U.S.
- 11/08/2018 LendingClub’s Q3 results: Expectations exceeded (Alt Fi)
Lending Club’s Q3 results exceeded expectations with an increase in their loan originations by 18 percent from $6.55bn to $8.01bn. The net revenue improved by 20 percent from $418m to $513m. Adjusted EBITDA margins have more than doubled to 13.5 percent. The results are strong, but will this lead to a sustained rally in the stock price is the big question.
- 11/08/2018 Chinese P2P lending giant opts for blockchain future (Alt fi)
Lufax, the Chinese P2P lending giant is exploring moving its loan assets on blockchain. The Chinese P2P lending industry collapsed in 2018 due to a regulatory crackdown. Lufax is moving its entire peer-to-peer (P2P) lending portfolio, valued at “tens of billions US dollars”, to blockchain for enhanced transparency.
- 11/07/2018 Fintechs interested in OCC charter despite lawsuits: Otting (American Banker)
Conference of State Bank Supervisors and New York banking regulators had filed a lawsuit against Office of Comptroller of Currency (OCC) claiming that it has overstepped its authority in awarding national banking charters to digital banks and lenders. Despite the brewing legal battle, fintechs seem to believe in the inherent advantage of applying for the charter. The OCC will start accepting new applications in summer.
- 11/07/2018 P2P sector responds to bank lobbying revelations (Alt fi)
High street banks in the UK are forcing regulators to tighten the grip on the peer-to-peer lending sector. The key demand of the banks is to hold peer-to-peer lenders to the same standards as conventional lenders. FCA seems to be in agreement and is due to announce new rules after it completes it consultation process with industry participant. P2P platforms have sensed major headwinds and have developed online appropriateness tests to safeguard investors. Helping investors properly appreciate the potential risks involved in peer-to-peer lending tops the wish list.
- 11/06/2018 OnDeck plots expansion for 2019 after 3Q profit (American Banker)
OnDeck had recently announced in October that it was creating ODX, a new subsidiary to focus on partnerships with banks. One such deal was announced with PNC Financial Services Group, which followed an earlier partnership with JPMorgan Chase. It will invest around $10 million on ODX, while approximately $5 million will be spent on international expansion and general technology infrastructure. OnDeck currently offers online loans to small businesses in the U.S, Canada, and Australia.
- 11/01/2018 Upgrade completes $282m securitization (Alt fi)
Upgrade, launched by Lending Club founder Renaud Laplanche in 2016, has raised $142m in equity capital and facilitated over $1bn in loans since launch. Recently, it closed a $282m securitization of personal loans. Over 20 banks and trusts subscribed to the offering. It was rated by Kroll Bond Rating Agency and included $185m in A rated notes and the rest of the notes had ratings of BBB and lower.
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