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LendIt Fintech News: Daily Coverage of Fintech & Online Lending


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LendIt Fintech Launching New Webinar Series

The first two webinars, as part of our new digital initiatives, are launching later this week.

March 24, 2020 By Ryan Lichtenwald Leave a Comment

Views: 162

Now more than ever it is important to bring the fintech community together. Many readers are already aware that we have made the tough decision to postpone LendIt Fintech USA 2020 to late summer/early fall. To help you navigate these unpredictable times and continue to engage with your clients and peers, we are rolling out a series of regular digital events including: webinars, virtual panels and virtual roundtables. Keep an eye out for more topics in various formats to be covered in the coming weeks. The first two webinars are beginning this week.

How Small Business Lenders are Responding to the Rapidly Changing Economic Conditions

Thursday March 26th • 1:00 PM ET

These are uncertain times. While lenders need to do everything they can to support affected borrowers they also need to make sure they maintain a healthy and sustainable business. Learn how these lenders are balancing these issues during this time of crisis.

Some of the topics to be addressed include:

  • What small business lenders are doing to help existing borrowers
  • What they are hearing from small business owners
  • Current discussions around the government stimulus
  • How fintech companies might play a role in getting government money to small business owners
  • Differences between how banks are handling the current situation
  • Predictions on what the next three months could look like
  • and much more!

Register now

Consumer, Paystubs & Fraud: Insights & Digital Solutions

Tuesday March 31 • 2:00 PM ET

Many customers want to improve their risk profile while offering decisions to their customers quickly. Join us for this webinar to learn: the red flags associated with consumer provided pay stubs, the money that consumers don’t tell you about, the way verified data can help increase your funded loans.

Register now

Filed Under: Fintech Tagged With: Brock Blake, consumer, digital solutions, Equifax, fraud, Kabbage, Kathryn Petralia, Lendio, Luz Urrutia, Opportunity Fund, paystubs, small business lending, webinar

Views: 162

Behavioral Changes Will Have Profound Impact on Financial Services

We discuss what changes we can expect from consumers coming out of the recent pandemic.

March 23, 2020 By Ryan Lichtenwald Leave a Comment

Views: 262

Amid the current pandemic consumers in the United States are facing a new reality, one that increasingly means transacting online whether they want to or not. While some younger generations have embraced fintech in recent years, others have held their current traditional banking relationships firm. These forced behavioral changes are likely to shape what financial services will look like in the next decade. In this post we have collected some of the biggest changes we see coming to financial services.

Work from Home Culture

Employees that have the ability to work at home are now doing so. In the early days of the pandemic some companies started testing out having all employees working from home to make sure any hiccups could be addressed. Other firms split their teams in different locations to avoid contamination at both sites, but now that the coronavirus is widespread this too has shifted. Now even stock traders are staying home stymied by their slower internet connections.

Last week JPMorgan Chase announced that they were temporarily cutting 20% of their branches, at the same time sharing that they would be able to continue to serve communities where they currently operate. Financial firms of all sizes are now working to manage the increased security risks of employees working from home. After the kinks are worked out, I expect going forward that even some of the most regulated financial institutions may be more open to having their employees work from home. Banks such as JPMorgan Chase may soon realize that they didn’t need those extra branches in the first place which brings me to my next prediction.

Online Banking for Everyone

With bank branches closing, many are quickly realizing the benefits of online banking, including some of the features that they didn’t know existed. Once this convenience is realized it is likely that some will never return to their bank branch. It is amazing that with all of the sophisticated digital banking services on offer today that it takes a pandemic to force users out of their routines. Banks will have to respond and change how they offer support to these consumers who are leveraging new technology for the first time but the net result is a shot in the arm for digital banking.

Increased Adoption of Contactless Payments

It is inevitable that contactless payments will be the payment type of choice at a time when we are distancing ourselves from other people and surfaces. For me personally it is the often ignored corner of my phone but that will soon change as I add my credit cards. Once consumers get over this initial hurdle we’ll likely see contactless payments more commonplace and cash transactions continue to decrease.

A Digital Home Buying Experience

Realtors are working to continue to help real estate buyers and sellers in this time of uncertainty. A close friend had their initial showing for a property purchase happen via a video from their realtor in an attempt to cut down on unnecessary visits to the property. While seeing a property in person will always be important when transacting real estate we’re going to start to see more lenders adapt their processes to handle a more digital transaction. As a homeowner I am keeping a close eye on refinance rates and it will be interesting to see what new processes are in place if rates were to fall to record low levels. I see service providers that partner with banks being the major benefactor here.

Fintech Small Business Lenders May Help SBA

While it’s too early to tell, it’s possible that fintechs will play a role in distributing funds to small businesses. Some fintechs are already lobbying legislators to leverage their technology including the way they underwrite small businesses. There are concerns that traditional lenders will move too slowly to get desperately needed money to affected small businesses in time. This recent Forbes article shares the current news in this area.

More Innovation Coming from Fintech companies

Uncertainty inevitably leads to increased innovation. Just as we saw coming out of the recession in 2008 I expect we will see new companies come out of this recession stronger than ever. It is hard to imagine at this point which companies this will be but fintech companies are already looking for ways they can help ease the burden on consumers, small businesses and other financial institutions. Ron Shevlin published a piece today containing a list of fintechs who are “extending free, discounted, or accelerated deployment offers to financial institutions.” The growing list of companies cover many areas of financial services. We also saw Kabbage launch an offering which allows consumers to purchase gift certificates for small businesses. The funds are deposited as early as next business day to help keep small businesses afloat during turbulent times.

Conclusion

Much of the news lately has focused on the profound negative impacts that the coronavirus is having on the economy across the globe. While I don’t want to downplay the seriousness of the virus and the pain that many families are experiencing, it’s important to also look forward to what the future may hold. While there will likely be many more long term changes beyond what I have detailed here above, we can see many of the changes happening in real time. I personally look forward to seeing how financial services is going to evolve as a result of the sudden disruption we are facing today.

Filed Under: Fintech Tagged With: behavior, consumer, coronavirus, innovation, recession

Views: 262

P2P and Marketplace Lending Options for Non-Accredited Retail Investors

We share the platforms across consumer, small business and real estate that allow for retail investors.

March 29, 2017 By Ryan Lichtenwald 4 Comments

Views: 2,138

For online platforms there is considerable cost to be able to accept retail dollars. This is one of the reasons that Lending Club and Prosper were the only two platforms that allowed for retail investor participation for many years. Since many firms are just a few years old it’s much easier to target accredited individual and institutional investors due to the capital those investors have to deploy. However, there are now online lending platforms spanning almost every lending vertical that are open to retail investors. Below we share all of the opportunities retail investors should be aware of.

Lending Club – Consumer Lending

Lending Club allows retail investors access to consumer loans and has the most loan volume out of any other platform on this list. Investors can purchase fractions of loans starting at $25 and so can build a diversified portfolio with a relatively small investment. Borrowers are given loan grades from A-G and investors can decide which grades they would like to invest in. Lending Club advertises historical returns between 5%-7% with 99% of investors with over 100 loans achieving positive returns. In addition to the primary market, investors can buy and sell loans on Lending Club’s secondary market FOLIOfn which provides liquidity to investors.

Lending Club’s state and financial suitability conditions can be found on their website.

Prosper – Consumer Lending

Prosper’s platform is similar to Lending Club’s. Investors can purchase consumer loans ranging from grades AA-HR. One difference is that Prosper shut down their secondary market recently which means investors must hold notes to their maturity once purchased. Estimated returns vary from 3.83% to 13.04%

There are additional suitability standards for certain states which are outlined on Prosper’s website. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: consumer, online platforms, real estate, Retail Investors, small business

Views: 2,138

Orchard Report Highlights Unsecured Lending Trends For Q2 2016

Orchard shares insights on charge offs, originations and interest rates in their latest industry report.

August 25, 2016 By Ryan Lichtenwald Leave a Comment

Views: 19

Out of all the service providers in the marketplace lending industry Orchard has the broadest set of data on online lenders here in the US. Orchard serves as a platform to connect originators looking for capital with institutional investors who are seeking opportunities in the space and they have data feeds to many of the leading originators. Today, they released their Q2 industry report focusing on consumer unsecured lending. Although Orchard doesn’t break down the originators included, the report should serve as a view of market level trends as opposed to trends by any one originator.

Originations has been the hottest topic as of late as Lending Club and Prosper shared their Q2 results. More broadly the report highlights originations down approximately 34% from Q1 2016 and down 16% from Q2 2015. Below is a chart of quarterly originations since Q3 2013.

Unsecured_Marketplace_Lending_Originations_Q2_2016

Orchard also shared that 2014 vintage charge offs have increased compared to some previous vintages. Although we saw some pockets of underperformance last year with Lending Club, Orchard also notes that this trend is also in part due to the increase of subprime loan origination platforms.

Unsecured_Lending_Charge_Offs_Q2_2016

The final piece of the report shares data on interest rates, both average interest rates and interest rates by loan size. Q2 2016 saw a significant increase in average borrower interest rate to 16.4%, up from 15.5% in Q1 2016. The increasing average interest rate is not surprising given the fact that both Lending Club and Prosper have raised rates several times over the last few quarters and we can assume some other lenders are doing the same to attract investors. However it is surprising to see a 72 bps drop in average interest rates in Q1 2016. We see the trend of increasing average rate first begin in Q2 2015 and continues to increase quarter over quarter until the drop off in Q1 2016.

Unsecured_borrower_interest_rates_q2_2016

Conclusion

We are well aware of trends from leading originators Lending Club and Prosper. Lending Club is a public company so we have insight into their operations and Prosper files quarterly with the SEC even though they aren’t public. However, there are many other originators who are private companies and do not share information publicly. This report from Orchard gives us a broader perspective of what trends are happening in the unsecured consumer lending market. You can view the full report on Orchard’s website.

Filed Under: Peer to Peer Lending Tagged With: consumer, Industry Report, Orchard, Unsecured

Views: 19

A 23 Year Old Backed By Mark Cuban, Eric Schmidt, and Peter Thiel Leads Upstart to Take on Lending Club and Prosper

April 23, 2014 By Jason Jones 16 Comments

Views: 2,246

upstart
At 23 years old, Paul Gu has attended Yale, been awarded a $100,000 grant as a Thiel fellow, co-founded Upstart, attracted millions in venture capital money, and is earning a 6-figure salary as Head of Product. Wow – what were you doing at 23?

Surprisingly, Paul found it nearly impossible to get a good rate for a loan. The banks wouldn’t lend, Prosper rejected him, and Lending Club offered him a loan with an interest rate in the high 20s. What gives? Using traditional credit scoring metrics, Paul has less than 3 years of credit history and is deemed high-risk.

Paul and his team at Upstart came to the realization that he is not alone and that there is an entire category of select “thin file” borrowers who have been overlooked by the system. These are recent graduates who have entered into the workforce with very promising career trajectories.

“We’re identifying prime borrowers before anybody else sees them,” said Dave Girouard, co-founder and CEO of Upstart.

In addition to credit and salary data, Upstart uses education-related variables to predict a borrower’s earning potential, employability and their propensity to repay the loan.

“We want to support those who just finished their education and are starting a job,” said Girouard, “In addition to looking at [your credit] and your income, we look at where you went to college, what your area of study was, how you performed academically.”

Since early 2013 Upstart has originated $3.5 million worth of income-sharing agreements to 309 people backed by 2,192 lenders. Upstart has used their intelligence in the income sharing business to formulate their new product that is launching today.

Introducing the Upstart Marketplace

Starting today, Upstart has launched a marketplace much like Lending Club and Prosper to offer three-year standard term loans available in all 50 states. Borrowers can request loans of $5,000 up to $25,000, and interest rates can range from 6.5% up to 20% APR.

Upstart’s new product crosses the boundaries of consumer and student loans, which means borrowers can use the funds for pretty much anything: to pay off credit cards, retire student loans, or pay tuition for a course.

Upstart’s investor marketplace will be available to accredited investors only and will offer fractional ownership in $100 increments. As you can see in the screen shot below, Upstart loans are given a letter grade and interest rate along with a progress chart to monitor funding levels. Investors can view details of each loan, but will not be able to see the identity of the borrowers.

browse_loans

Upstart also levels the field among individual and institutional investors by making all loans available on equal terms. In contrast to Lending Club and Prosper, Girouard said, all investors have access to every published loan since there is only a single pool of loans. Upstart’s platform offers lenders the ability to create filters for loans in which they’re interested. The investor, then, can automatically make a bid for those types of loans as they become available.

“Investors can set up as many rules as they want,” such as setting the maximum amount, risk grade of the loan, or even how the loan is (claimed to be) used, according to Girouard.

Borrower Acquisition Strategy

“We’ll have a steady flow of borrowers,” he continued. Upstart already has partnered with 13 coding bootcamps, which normally aren’t eligible for education loans, in the United States.

Borrowers, once verified and approved, can receive funds within 7 days, and can opt to defer their first payment for 3 or 6 months.

Aside from being able to discover early prime investments, Upstart has also structured itself to bolster loan repayment by not imposing fees for early repayment, and by educating borrowers on their finances and on how to improve their credit.

This education push has already paid off for Upstart’s investments, where they’ve “seen 3,056 unique repayments to backers in 14 months without a single default.”

“We understand that our borrowers are recent graduates, so we’re adding an educational component,” said Girouard.

Upstart is Well Positioned for A Borrower’s Life Cycle

Upstart is using educational data in a new way to bring something unique to market. They are able to expand the prime borrower market by uncovering a large overlooked pocket of borrowers. They are also in a great position to establish themselves early with borrowers who will need credit for many of life’s major purchases like a new car or a new home. While nothing has been announced, we can see how Upstart may be in a position to expand their offerings to other lending categories over time.

Paul Gu will be speaking at LendIt on May 6, and his panel will be available by webcast. We hope that he posts his loan request on Upstart. We will be the first in line to fund him!

Correction: The above post misidentified Paul Gu’s title. He is the Head of Product at Upstart. Also, Paul attended Yale University and has not graduated.

Filed Under: Investing/Lending, Peer to Peer Lending, Student Loans Tagged With: consumer, marketplace, thin file, Upstart

Views: 2,246

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ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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