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How Fintex Capital Enabled the $30M Banco BNI Europa Investment in Upgrade Loans

A unique structure created by Fintex Capital enabled the European digital bank to easily invest in Upgrade loans

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Last month we learned about the new $30 million investment received by Upgrade from the Portuguese digital bank Banco BNI Europa. On the face of it this was not that remarkable, Upgrade has attracted many investors and BNI Europa has demonstrated their commitment to the marketplace lending space with many other investments.

But what caught my attention was the way this deal was structured. In reality BNI Europa did not actually purchase Upgrade loans, they invested in a privately placed bond that was backed by Upgrade loans. This bond was issued by Fintex Capital.

I reached out to Robert Stafler, the CEO and Co-founder of Fintex Capital based in London, to learn more about this transaction. Fintex was founded in 2015 and Robert has been a frequent speaker at our LendIt Europe events so I have gotten to know him and his company reasonably well over the last few years. He agreed to chat with me to explain how their investment structure works.

Fintex Capital SA is the company’s Luxembourg-based proprietary securitization vehicle. They create a bespoke program for every client, one tailored to the specific needs of the client. This is a pass-through securitization meaning there is no fixed coupon on the bond, the bond simply passes through the economics of the underlying assets less a management fee for Fintex.

The Fintex bond is capital markets friendly as it is cleared through Euroclear and has an ISIN number (XS1772189442) so details can be viewed on a Bloomberg terminal. The bond can be increased to as much as $200 million if needed through tap issuance. The loans can be sold directly into the bond which results in no accrued interest leakage unlike the pass-through or cert deals done in the US. Even though this deal just became public in July Fintex has been buying loans on Upgrade’s platform since April and had fully deployed the $30 million by mid-June.

When I asked Robert about exactly what value Fintex provides for investors he had this to say: [Read more…]

Orchard Launches New “Deals” Platform Connecting Institutional Investors and Originators

In an industry first, Orchard Deals is helping facilitate both primary and secondary market transactions

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[Update: There will be a webinar at 11am ET on September 27 on the The Orchard Deals Platform brought to you by LendIt and Crowdfund Insider. Details here.]

When I first invited Orchard Platform CEO, Matt Burton, on the Lend Academy Podcast back in 2014, we talked about their ambitions around launching an institutional secondary market for marketplace lending. It has proven to be a massive undertaking and it has taken several years longer than anticipated but with the launch of Orchard Deals today it has now become a reality.

To be clear, Orchard’s new platform is far more than just a secondary market. It has several new features:

  1. Deals – Pre-qualified investors can browse listings of a range of different investment opportunities offered by originators.
  2. Capital Management – For originators to help monitor and optimize capital utilization across multiple funding sources.
  3. Advanced Analytics – Benchmarking of performance data against an anonymized peer group.
  4. Data Services – Helping originators improve the quality of their data and client reporting.
  5. News & Insights – Industry news and economic data as well as Orchard’s own research and commentary.

I spoke at length with Orchard CEO, Matt Burton, yesterday to get more insight into the new Orchard Platform. The first thing that Matt stressed is that the entire Orchard Platform has been redesigned from the ground up and is a far more robust product than anything they have had before.

The New Orchard Deals Platform

The key piece that I was interested in was the new Orchard Deals platform. The old Orchard Platform provided technology solutions for both originators and institutional investors but Deals is the piece that finally connects the dots. The platform connects institutional investors with origination platforms that have listed specific investment opportunities. Orchard has 55 institutional investors registered on their platform and 25 originators (with several more in the queue). Originators cover the gamut of consumer, small business and real estate lending.

[Read more…]

Peerform is Back With an Interesting New Investment Partner Random Forest Capital

Peerform’s new loan offerings were a perfect fit for machine-learning focused investment firm Random Forest

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I first wrote about Peerform way back in 2010 when they began life as Lendfolio. Even though they are not that well known beyond marketplace lending enthusiasts they are in fact the third oldest platform still operating in the US – behind Prosper and Lending Club.

I haven’t covered Peerform for almost three years so when their founder Mikael Rapaport contacted me recently I was curious to find out what they had been up to. It turns out a lot has happened at Peerform since 2014.

Late last year Strategic Financial Solutions (SFS) a leading debt settlement company, acquired Peerform and they have been building out new product offerings. Speaking of which they have three distinct products today:

  1. Marketplace loans – unsecured consumer loans, typically prime or near prime borrowers, up to $25,000 with rates ranging from 5.99% to 29.99%.
  2. Direct pay consolidation loans – unsecured debt consolidation loans, mostly prime consumers, where the debts are paid directly to the credit card company.
  3. Debt negotiation loans – debt settlement customers who qualify to accelerate their settlements with a loan.

SFS looked at many marketplace lending platforms before deciding to acquire Peerform. They were impressed by their underwriting and regulatory sophistication, their strong brand presence online, their low customer acquisition costs and how they had been frugal with the capital they had raised.

Peerform has been online since 2010 and so have an established web presence. Because of this they get a great deal of free traffic from Google – appearing on the first page of results for many popular search terms. This alone made them a very attractive acquisition target for a company like SFS.

A New Investment Partnership

[Read more…]

A Review of the Biggest Allocations to Consumer Lending Platforms

We take a look at what these investments mean to online lending and fintech overall.

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With worldwide rates continuing to stay low investors continue to look at alternative fixed income assets to earn larger returns. Online lending platforms offer a stable environment for higher yielding products and three large investors have made big plays in the last year.

Credigy, a U.S. subsidiary of National Bank of Canada struck a $1.3bn purchase program with Lending Club. Aegon, Dutch provider of life and annuity insurance products, will invest $1.7bn in loans issued by the German based Auxmoney platform. NewOak, New York-based asset management and institutional advisory firm, partnered with Canadian platform LendingArch to purchase up to $2bn in consumer loans.

Now, those three commitments represent the largest investment commitments to date coming from one firm but by far the largest commitment of all is the $5bn consortium deal for Prosper loans. Here several firms have combined to form a new entity that has been buying Prosper loans for several months. The firms are Jefferies Group LLC, Third Point LLC, Soros Fund Management and New Residential Investment Corp.

These large deals have given the online lending industry a big boost after recent turmoil and the nature of the assets allows for investors to see results fairly quickly. The trend of these sizable allocations shows that the consumer space is in a strong position to provide investors with the type of yield they are more accustomed to seeing.

These platform CEOs all say that big investors like these firms allow them to diversify their funding sources and create a more stable environment. This also helps to create more credibility to the fintech industry in general. One of the bigger barriers to entry that fintech companies have seen is that asset allocators like pension funds, insurance companies and family offices don’t have enough knowledge to be willing to allocate some of their alternative investment capital. [Read more…]

Leading Chinese Platform CreditEase Makes First Investment on Avant and Prosper

The P2P lending platform turned wealth management firm creates the first Chinese offshore fund to invest in loans issued by western platforms.

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CreditEase invests in Avant and Prosper

I first became aware of CreditEase back in June 2013 at the inaugural LendIt conference in New York. We met with some of their management team back then and when they told me their loan origination volume I couldn’t believe it. I really thought they must have got something wrong in the currency conversion. Even back then they were much larger than Lending Club or any other platform I knew.

Today, they are one of the leading lending platforms in China having issued over US$15 billion in loans last year. But they are far more than a lending platform. Wealth management is now a major focus as their clients have sought out their expertise in making investments beyond their P2P lending platform in China – in 2015, approximately 50% of all CreditEase revenue came from non-P2P products.

Which brings us to the focus of today’s article. CreditEase has raised $80 million from their wealth management clients to invest on international marketplace lending platforms. Over the last several months they have conducted a thorough due diligence process where they looked at around 60 different lending platforms from all over the world.

I chatted with Richard Williamson, an Australian who is running corporate strategy for CreditEase, and has been leading this effort. Given the background of their investors in P2P lending the goal was to deploy this capital on similar consumer or small business lending platforms.

[Read more…]

Marlette Funding: the Fastest Growing Marketplace Lender in the US

In just 15 months Marlette Funding has issued over $800 million in consumer loans and is already profitable.

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Marlette Funding logo

You could be forgiven for never having heard of Marlette Funding. They have only been in business for just over 15 months and their major retail brand is called Best Egg. But this unassuming company is quickly becoming a major player in our industry.

I chatted with Marlette’s founder and CEO, Jeffrey Meiler, recently to get the scoop on his company. During our conversation one thing quickly became very clear to me. Unlike many new platforms I speak to, this was a company that is steeped in the consumer credit industry with 80% of their workforce having worked together before, mostly at Barclays in the Barclaycard division.

$400 Million in Their First 10 Months

The growth has come very fast at Marlette. They issued their first loan on March 17, 2014 and by the end of the year they had originated just shy of $400 million in new loans. By May they had already surpassed that number for 2015. They are without a doubt the fastest growing marketplace lender in our industry.

To say their story is all about growth, though, would be missing the point according to Meiler. While growth is important it is only one aspect of a broader business scorecard. He prefers to look at his company through three different lenses: growth, profit and cash flow. In other words, growth is not that important if it doesn’t also lead to the establishment of profitability.

On this count, Marlette is also the industry leader. Despite just launching in March of last year, by Q4 of that year they made money on a GAAP basis. I have never heard of another company in this industry making money so quickly. Year to date they have also made money on a GAAP basis and they will break even on a cumulative basis in the coming weeks. And Meiler expects Marlette to be cash flow positive by Q4 of this year.

[Read more…]

Avant Launches Institutional Marketplace with Some Big Name Investors

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avant

Avant has been somewhat of a quiet achiever in the online lending space. In just over two years CEO Al Goldstein and his team have built a successful business that is set to become a dominant player.

Strictly a balance sheet lender until now, Avant is launching their institutional marketplace today. And they have signed on three very big names for their launch. KKR, the legendary private equity firm, is the lead investor and they are joined by Victory Park Capital, who seem to be in every major deal these days, along with Jefferies, the leading investment bank, who have also invested in CircleBack Lending.

An Introduction to Avant

So who is Avant? They recently rebranded from AvantCredit to just Avant and they are probably the leading near-prime online consumer lender in the US today. They focus on the 600-720 FICO segment and they have an average FICO score of 640.

When I spoke with CEO Al Goldstein a while back he told me that he thinks the mid-prime segment is a huge opportunity but that it is difficult to execute on. At Avant they are very much focused on big data and machine learning algorithms. Goldstein said that all loans are approved within 24 hours and for half the customer base underwriting is completely automated. Their goal is to increase that to 100% of their customers in the near future.

While there is some overlap with Lending Club and Prosper in the 600-720 FICO segment Goldstein said that he didn’t really view them as direct competitors. He views some of the brick and mortar mid-prime lenders as Avant’s competitors.

[Read more…]

Orchard Lands a $12 Million Investment from Some of the Industry’s Biggest Names

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Orchard building out the online lending ecosystem

When I profiled Orchard back in February, the company was just a few months old and fresh off a $2.7 million funding round. But that wasn’t your typical seed round—Orchard attracted the likes of Vikram Pandit, the former CEO of Citigroup and Tom Glocer, the former CEO of Reuters as investors in that round.

While that was impressive, today they have announced a $12 million funding round from a group of A-list players in our industry. These are people with deep histories and intimate knowledge of the inner workings of p2p lending. But before I get to that, a quick primer for those of you who don’t know Orchard.

Orchard Platform traces its roots back to the LendIt Conference in 2013 where co-founders Matt Burton and Angela Ceresnie presented on some of the challenges facing p2p investors. This led them to create the first company devoted to providing the infrastructure that connects institutional investors with loan originators. They started with Lending Club and Prosper and now connect multiple platforms to their growing investor client base. They provide institutional investors with real-time trading and reporting, investment strategy, data analysis as well as access to loan supply.

I caught up with Orchard CEO Matt Burton earlier today to discuss this new funding round and the names that participated.

“We went out trying to get one or two big names into this round,” said Burton. “We had more interest than we expected and we ended up with many big names.”

Who are These New Investors in Orchard?

[Read more…]

Peerform Making a Comeback With a New Underwriting Model

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Peerform-logo

I first wrote about Peerform over three years ago. They had just launched and were looking to be the number three platform in the industry. But they failed to gain much traction and never established themselves as a viable platform.

But CEO and co-founder Mikael Rapaport clearly does not give up easily. Even though he never attracted the equity funding needed, he never closed his operation. And every few months he would contact me to reassure me that Peerform was still operational and one day they would get some momentum again.

Apparently that day has now arrived. Last month they closed on a new $1 million angel round and they now have a new Chairman, Gregg Schoenberg. I talked with both Rapaport and Schoenberg last month about the reborn Peerform.

Allowing Borrowers Down to a 600 FICO Score

This is the really interesting thing about Peerform now. They have created a new underwriting model that assesses risk in very different ways to Lending Club and Prosper. They call this approach the Peerform Loan Analyzer.

According to Rapaport their underwriting model will take a more holistic approach to assessing risk. Rather than having a strict 660 FICO score cutoff they believe that there are creditworthy borrowers all the way down to a 600 score.

“A borrower with a 620 FICO score does not necessarily mean they are riskier than someone with a 660 FICO,” said Rapaport when I spoke with him recently. “FICO score is not the best measurement for risk anymore.”

Two Products for Accredited Investors

[Read more…]

NoteX360 – Order Management and Execution for Institutional Investors

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NoteX360 logo

If you go into any major hedge fund or Wall Street firm today you will likely find graduates of Baruch College’s Masters of Financial Engineering (MFE) program working at the trading desk. The MFE program at Baruch is where many algorithmic traders learn their craft. But not everyone coming out of that program goes to work on Wall Street. Some choose a very different course.

Simon Hermiz, Kenneth Chan and Richard Postelnik all had an entrepreneurial yearning. Sure they could have made great money working at a big bank or hedge fund but they wanted to do something different. They started NoteX360 before they graduated from Baruch because they feel that p2p lending and the broader alternative lending market could benefit from efficient aggregation and execution technology that is available in other asset classes.

Hermiz, Chan and Postelnik have spent most of their careers in finance with backgrounds in lending, trading, and technology. They have a combined 20-years of financial industry experience working at companies like Bank of America Merrill Lynch, BNY Mellon, Fifth Third Bank, Houlihan Lokey, and Pico Quantitative Trading.

After hearing about p2p lending, Hermiz attended the LendIt Conference last year in New York to learn more. He saw there was a huge opportunity to bring equity style execution technology to this new asset class. And he realized he could help build the technology that would help p2p lending become a serious asset class.

So, the three partners went about building the NoteX360 software while continuing with their classes at Baruch. They attracted some angel funding although they would not disclose how much. Regardless, they had a very low cost structure because they did all the development themselves.

Order Management and Execution for Institutional Investors

What does NoteX360 do exactly? They help institutional investors access p2p lending by executing and managing orders for them. They offer both a semi-automated and fully automated service.

[Read more…]

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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