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Register Now for LendIt Fintech Europe 2018 in London

Launch pricing for the 5th annual LendIt Fintech Europe event ends tomorrow

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LendIt is returning to London for the fifth time in November for the LendIt Europe show. Now known as LendIt Fintech Europe, to reflect our broadening scope beyond lending, it will be held on November 19 & 20 at a new location, the Business Design Centre. We are expecting well over 1,000 people at the event this year.

Planning has been underway for a month or so now and we have finalized the list of topics we will be covering:

Day One – November 19

  • Future of Banking
  • Legal and Regulatory Issues
  • Credit, Risk and Identity
  • Future of Fintech

Day Two – November 20

  • Lending Innovation and Financial Inclusion
  • Blockchain
  • Investing & Entrepreneurship
  • AI & Data Analytics.

While we have expanded beyond lending rest assured that lending will still be front and center at the event. We have seen a blurring of the lines between lending and other areas of fintech as banks offer online lending, lending platforms become banks and neo-banks now partner with lending platforms. As the online lending industry has matured we are broadening our purview.

In the last month we have started reaching out to potential speakers and we will be adding new speakers regularly over the next several months.

Signature Keynote Speaker: Rt Hon George Osborne CH

I am pleased to report that we have secured a signature keynote speaker for this year, former Chancellor of the Exchequer, George Osborne. When he was in government he was always very bullish about fintech and he was the driving force behind the new Innovative Finance ISA. I am looking forward to hearing his thoughts on open banking, bitcoin, blockchain, AI in financial services, Brexit, the current direction of the financial regulatory landscape in Britain and more.

More keynote speakers will be announced shortly as we expect to have the best speaker lineup ever this year with many people who have never presented at LendIt before.

What Else to Expect at LendIt Fintech Europe 2018

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New Technologies and New Customer Experiences Drive Banking Today

Key Takeaways from American Banker’s Digital Banking Conference

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The discussion at American Banker’s annual Digital Banking Conference in Austin last week revolved around new technologies like AI and blockchain and the future of customer experience. Banks of all sizes have implemented some level of technology in recent years, almost all have mobile apps and they have begun the process of digitizing their core functions.

There were also a lot of lessons from non-banks that were on display, Starbucks mobile payments adoption and p2p payments app Venmo were popular discussion points on the keynote stage. Starbucks has seen over 40% of the 55 million U.S. smartphone users make an in-store mobile payment through the Starbucks’s app at least once in the last 6 months. Venmo’s payment volume continues to rise, even with competition from Zelle, and it was interesting to hear where the idea came from. Venmo founder Iqram Magdon-Ismail explained that he and fellow co-founder Andrew Kortina thought of the idea because paying one another back was awkward. They devised an app where you can exchange money quickly without having the awkward conversation.

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LendStreet and Its Unique Approach to the Debt Settlement Space

LendStreet recently closed a significant funding round as it looks to help struggling consumers get back on their feet

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The entrepreneurial life is not for the faint of heart. The journey is fraught with challenges and unforeseen obstacles are often encountered along the way. It can also take a lot longer than the entrepreneur anticipates to create a successful startup.

Such is the case with Jerry Nemorin, the CEO and Founder of LendStreet. I have known Jerry a long time, in fact I first wrote about his company on Lend Academy way back in 2011 when LendStreet was nothing more than an idea. We have kept in touch over the years and I was really pleased when I read last week that LendStreet had closed its Series A and secured a significant round of debt funding.

So, I reached out to Jerry to discuss this news and get an update on his company. First, we need to understand what LendStreet does because it is very different than most companies I profile. LendStreet is a lender that works with consumers who are experiencing financial difficulties. These are people who have taken on too much debt and find themselves in a hole, unable to pay it all back. But rather than declaring bankruptcy, these people want to work things out and reduce their debt through a debt settlement.

This is the point when the debt settlement companies come in. LendStreet lends only to customers whose debt is being or will be negotiated by a debt settlement company. Most of LendStreet’s customers are already enrolled with debt settlement companies before getting to LendStreet. Those who come directly to LendStreet are paired with a debt settlement company to negotiate down their debt, which will be funded by a LendStreet loan.

How the Process Works

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The Center for Financial Inclusion Digs Into the Global Findex 2017 Numbers

CFI has analyzed the Global Findex 2017 database, released by the World Bank in April, and finds a less than rosy picture

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A few weeks ago the World Bank released the triennial Global Findex Database for 2017. We covered the release on Lend Academy touting the progress the world has made towards more financial inclusion, particularly in developing countries. Now, the Center for Financial Inclusion, part of Accion, have released a follow up report digging into the Findex data and the picture is less rosy than what was highlighted in the World Bank’s initial report.

On the surface it looks like the world is making good progress towards financial inclusion with the Findex report showing that 68% of adults globally having some kind of bank account versus 61% in 2014 and 51% in 2011. That is rapid progress.

But CFI found a different story when just focusing on active accounts, those accounts that had some kind of transaction in the past 12 months. This takes the percentage down to 55% and what is worse the gap is widening between total accounts and active accounts indicating a growing number of people who open an account but never use it. This is true for both developing and high income countries but the gap is getting much wider in developing countries as shown in the graphic below.

For true financial inclusion to materialize we need to focus on account usage not just total accounts, that much is clear. But there are hundreds of millions of people now with inactive accounts. From the report: [Read more…]

Confident Financial Solutions to Offer Repair Financing Powered by WebBank

The latest bank partnership in fintech is tackling a new niche: auto repair finance

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Auto lending is a segment that has seen a lot of traction in the last couple of years, but most of the innovation has centered around improving the new and used car financing process. One of more innovative players in this space is Confident Financial Solutions (CFS) and they are tackling a different niche within auto, car repairs.

Today, they announced a partnership with WebBank. WebBank was one of the first banks on the fintech scene having first partnered with LendingClub and Prosper almost a decade ago. Now they work with many fintech companies to provide banking services across a variety of lending verticals.

Traditionally consumers have relied on credit cards or even worse, payday loans to finance unexpected auto repairs. CFS and WebBank together have launched a product that allows the service center to offer financing at the point of sale. The process is all done on a smartphone in four steps with the consumer receiving a decision in just a few minutes for up to $7,500. Similar to WebBank’s other relationships, they are the ones who actually issue and hold the loan as a nationally-licensed, FDIC-insured, state-chartered bank. What makes this relationship unique is that WebBank will hold the loans on their own balance sheet.

Richard Counihan, CFS’ CEO included this statement in the press release:

CFS, over the past four years, has grown to be one of the nation’s largest providers of installment loans to consumers made through auto repair service centers and car dealerships. As such, we understand how hectic things can get in a service department. This innovative solution will help improve service advisor productivity and enhance the customer experience at an often tension-filled moment. What’s more, this fueled-by WebBank solution will aid our expansion plans as it supports our drive to offer ‘auto loans you can trust’ to more people in more places.

While this type of partnership with a bank isn’t unique, the niche that CFS is targeting is. According to a recent survey by AAA, 1 in 3 motorists or 64 million US drivers are unable to pay for an unexpected repair cost without going into debt. It is important for consumers to have access to more options at cheaper costs when they face vehicle repair bills.

There is a lot to like about this point of sale or “point of need” model as the company likes to call it. By building relationships with service centers across the US, CFS will be able to tap into millions of Americans without having to acquire customers directly.

Goldman Sachs Shares Their Vision for the Future of the Marcus Platform

At the recent Bernstein Strategic Decisions Conference Goldman Sachs President David Solomon provides some insight into the future direction of Marcus

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I write a lot here on Lend Academy about Marcus by Goldman Sachs. The reason I do so is because they are such a great example of what is possible when a well funded incumbent gets serious about fintech. Now, Goldman is an unusual case in that they have been around for about 150 years as an investment bank but they have only been a commercial bank since 2008. So, they have the big advantage of having a globally trusted brand but no legacy technology infrastructure or processes when it comes to consumer banking.

Anyway, last week at the Bernstein Strategic Decisions Conference we learned a little more about what Goldman has planned for Marcus. This is an annual event run by AllianceBernstein that goes back decades and it attracts CEOs from some of the largest companies in the world as they share plans for the company’s growth. David Solomon, the President of Goldman Sachs, and the handpicked future CEO to Lloyd Blankfein, gave the presentation.

You can listen to the full presentation here where you can also download the PDF of his slide deck. While the bulk of the presentation was on the many other Goldman Sachs initiatives towards the end he spent some time discussing Marcus. We learned that Goldman has contributed a significant amount of capital already to Marcus:

Since we started working on Marcus, we’re very pleased with our progress and have invested, through capital spend and operating losses, $600 million, including reserves. That’s up $100 million from $500 million, including reserves, at the end of 2017. It’s important to note that we’ve done this out of our operating earnings while, at the same point in 2017 and the first quarter of 2018, delivering strong returns to our shareholders.

In the slide deck there was just one slide on Marcus (slide 14) but it did reveal some interesting plans for the first time. I have reproduced the slide below (click to view it at full size):

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New Report on the Impact of Online Lenders on Small Businesses

A new report by economic research firm NDP Analytics shares data on how online lenders are helping small businesses thrive.

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Today a new report was released on how online lenders are helping small businesses which in turn is creating economic activity across the US. The report titled “The Economic Benefits of Online Lending to Small Businesses and the U.S. Economy” was put together by NDP Analytics and was sponsored by the Electronic Transactions Association, the Innovative Lending Platform Association (ILPA) and the Small Business Finance Association (SBFA).

Most of us are aware of the importance of small businesses in the US economy. Small businesses employ over half of private-sector workers in the US, so access to capital for small businesses is critical to their success. Fortunately, online lenders such as the ones mentioned in the report have focused on serving the needs of businesses and activity has picked up over the last few years. Both awareness of these alternative options and the amount lent on these platforms is increasing. Originations at five leading online small business lenders increased by 50% in three years, from $2.6 billion in 2015 to $3.9 billion in 2017.

Nearly $10 billion of funding was provided to 180,000 small businesses from 2015 to 2017 according to data which included leading platforms OnDeck, Kabbage and Lendio. This activity has generated $37.7 billion in gross output, created 358,911 jobs and $12.6 billion in wages.

Another highlight of the study was reporting on where these small businesses are operating. Almost one third of small business borrowers are in lower-income communities and about 24% of this borrower demographic are micro businesses with less than $100,000 in annual sales.

What makes small business lending unique is the amount of capital needed can vary widely and one of the reasons online small business lenders have been successful is because they have been able to efficiently underwrite smaller dollar loans. According to the study:

About 42 percent of small businesses borrowed between $10,000 and $50,000 from five online small business lenders with the average amount being $55,498.

One of the most interesting data points from the research was that on average, for every $1 lent to small businesses, sales for these small business borrowers increased by $2.31, creating $3.79 in gross output in local communities across the country.

As Nam Pham, Ph.D., report author and Managing Partner at NDP said in the press release:

The economic benefits of online lending are far reaching and extend beyond the funding used by small businesses to maintain or expand their operations. As these businesses succeed, so do the communities around them. Small businesses are increasingly turning to online lenders to help cover inventory, payroll for employees, and other expenses at critical junctures in their growth. The loan impacts not just the borrower, but those who work and engage with that business.

Conclusion

The small business lending market looks vastly different than it did 10 years ago. Not only are there more lending choices for small business owners than ever before but these choices are quicker and more convenient than in the past. The platforms included in this study and other innovative online small business lenders have been the driving force behind this shift. It’s a great to see a report put together which highlights just how impactful access to capital can be and it is a sign of great things to come as this market continues to grow.

Ant Financial is Now a Top 10 “Bank” Globally

Based on market capitalization Ant Financial is the 10th largest banking group in the world

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It had been rumored for some time now. Ant Financial, the Chinese financial behemoth, was raising a very large funding round that would value the company at $150 billion. It has been reported extensively today that this funding round has in fact closed. Ant Financial has raised $10 billion at a $150 billion valuation.

For a brief primer on Ant Financial there is a decent summary on their English language website but for a deeper understanding I recommend you read Chris Skinner’s new book, Digital Human (the Kindle version is available now). This has a 30,000 word case study that not only shares the history of Ant Financial but also why they are one of the world’s most forward thinking companies. And if you think they are just a Chinese story, think again. Ant Financial embodies the future of financial services and they will, in my opinion, shape the future of financial services more than any other fintech company on the planet.

Having said that, calling Ant Financial a fintech company is a bit like calling Amazon an e-commerce company. Ant Financial is a fully diversified financial services firm with payments (AliPay), wealth management (Yu’e bao is the largest money market fund in the world), lending, insurance and even a credit bureau. They look more like a banking conglomerate than a fintech company.

It is actually very interesting to compare Ant Financial to the leading global banks. Over the weekend I read this piece in Disruptive Finance (written before the news broke this morning) that compared the market capitalization of the largest banking groups in the world. The author, Huy Nguyen Trieu, pulled together market cap numbers that I shared in the graphic above. Every other organization on that list has roots going back decades, some even centuries. Ant Financial is the only company that was started in the 21st century.

Ant Financial is planning what may well become the largest IPO in history, eclipsing that of its former parent company, Alibaba. That company raised $21.77 billion back in 2014 debuting with a market value of $168 billion. It is quite possible that Ant Financial could eclipse that valuation and we will find it moving up the top 10 list above.

Who would have thought ten years ago that in 2018 the largest companies in the world by market cap would be Apple, Google and Amazon. I expect in ten years time we will see a very different list of the ten most valuable banking groups in the world.

GreenSky Completes Largest Fintech IPO of the Year

GreenSky, the point of sale lender went public today, raising $874 million

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There has been a lull in US based fintech IPOs over the past several years. Both LendingClub and OnDeck went public in late 2014. At the time I thought it would open the floodgates for other more established fintech players, a story which did not come to fruition. Since then we have mostly seen IPOs from Chinese based fintechs such as Yirendai and China Rapid Finance.

This morning, GreenSky broke the streak, listing on the Nasdaq under ticker GSKY.

There is a lot that sets GreenSky apart from many of the fintech companies that exist today. The biggest differentiator is that the company is profitable and runs a high margin business. In fact, the company has been profitable for the last five years. They reported $139 million in net income on revenues of $326 million last year. They also have a highly differentiated, boots on the ground model to originating loans, empowering contractors to offer financing to homeowners at the point of sale. They also partner with other types of merchants to offer financing. GreenSky only holds a small portion of loans on their own balance sheet with most loans being funded through around 15 bank partners.

Forbes did an excellent profile on their David Zalik back in September 2017 which shares exactly how the business operates. We learned at that time, Zalik still owned more than half of the company. GreenSky’s IPO priced at the top end of their estimated range at $23. They offered 38 million shares which means the company raised $874 million. At time of writing, GreenSky was trading around their IPO price.

Conclusion

It’s going to be interesting to both watch GreenSky as a public company and also keep an eye on what this means for other fintech companies who may want to go public. There are a few IPOs on the horizon with Lufax in China and Funding Circle in the UK, but there are no other near term plans for US fintech IPOs that we know. Last week we learned that iZettle wouldn’t be doing an IPO as PayPal swooped in and bought the company.

My Quarterly Marketplace Lending Results – Q1 2018

My latest quarterly investment results show an overall 4.70% return* for the year ending March 31, 2018

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It is that time again when I share my quarterly investment returns. This is something I have been doing for many years now and I know it is one of the most popular features on Lend Academy. I started out investing in marketplace lending many years ago with just Lending Club and Prosper but slowly have added new investments over the years. I share all the details in this post.

Before I get started I do need to provide one caveat with this quarter’s returns. I do not have final numbers for our own Lend Academy P2P fund yet. We are reviewing valuation methodologies and we have several service providers working with us on that possible change. This process is taking quite a bit longer than we expected. I know my quarterly returns are keenly anticipated by many of you and I like to publish them around this time. So rather than wait until the valuation is final I decided to publish my quarterly report now and I will adjust when we get final numbers. In the meantime I have used the December 31 numbers, assuming a flat Q1, to provide a returns estimate.

I have one new addition this quarter, Fundrise, they are a real estate platform that is open to non-accredited investors. While I had invested a very small amount with them several years ago I added to it substantially last year and so I am including it in my returns update now. You can find out more by listening to my podcast with the CEO, Ben Miller, from last year.

Overall Marketplace Lending Return at 4.70%*

After a downward trend that has continued for many years I am wondering when I will reach a bottom. My preliminary return of 4.70% is close to where it was last quarter but still down. I don’t expect my final Lend Academy P2P Fund return to increase this number so I am still stuck in the downward trend of returns.

My six original accounts at Lending Club and Prosper have all been open for at least six years so they are very mature accounts that have experienced several turns of capital as I have kept reinvesting over the years. I separate these out because these were the accounts I had when I first started doing these reports so readers can go back and see how they have trended over time. The returns for the past year are still bad at 2.34% as I continue to pay for poor underwriting performance in 2015 and 2016 at both companies. When you see today that you can get 3% on a 10-year Treasury Note a sub 3% return is just not acceptable for an unsecured consumer loan.

While I continue to reinvest the principal and interest earned in my LendingClub and Prosper accounts in the hope and expectation of a rebound I am committing new capital elsewhere. I like real estate where you can still get mid to high single digit returns with the added security of an asset backing the loan. That is why I have added new money in the last 12 months to companies like Peerstreet, Alphaflow, Money360 and Fundrise. All are detailed here.

Now on to the numbers. Click the table below to see it at full size.

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About Lend Academy

Lend Academy has been bringing you all the news and information about peer to peer lending since 2010. Founded by Peter Renton, Lend Academy not only has the most active news site, but also the largest online forum and the first and most popular podcast in the industry.

The Lend Academy team loves peer to peer lending and our staff have all invested their own personal money in one or more of the platforms. Lend Academy Media is part of Cardinal Rose Group which also owns LendIt, the leading industry conference, and has a majority interest in NSR Invest.

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