Articles by deBanked Staff
Dear Fintech, The OCC Wants to Welcome You to The Family
March 16, 2017
Congratulations fintech, you did it. The OCC wants fintech companies who are interested and meet the criteria, to apply for a Special Purpose National Bank (SPNB) charter if they so choose, according to a licensing manual published by the agency.
“Providing a path for fintech companies to become national banks can make the financial system stronger by promoting growth, modernization, and competition,” is one of several arguments they make in their decision to move forward. And it would be optional, something a company could choose to pursue.
“The OCC will expect an SPNB applicant whose business plan includes lending or providing financial services to consumers or small businesses to demonstrate a commitment to financial inclusion,” they say and that commitment must be documented in an official plan which must be put up and submitted for public comment. Basically, the entire process will be very public so it’s unlikely that companies will slip through and become banks without anyone really knowing.
New York’s Department of Financial Services nonetheless issued a heated response to the proposal. “The imposition of an entirely new federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape will invite efforts to evade state usury laws and other consumer protections, stifle small business innovation, create institutions that are too big to fail, and increase the risks presented by nonbank entities,” they wrote. They see the move as an attack on their in-state regulatory powers. “The proposal threatens to create an entirely new federal regulatory program, creating serious regulatory uncertainty that threatens to invade state authority and sovereignty.”
Read the OCC’s charter licensing manual here
Read the NYDFS response here
How Whitepages Turned Their Data into an Identity Verification Tool for Online Lenders
March 15, 2017
Whitepages might be a 20-year old company but the data they’ve amassed over time can add significant value to online lenders, the company claims. Whitepages Pro, which offers identify verification, allows lenders to gauge if an individual is real. “It examines fraud risk, not credit risk,” company CEO Rob Eleveld said in a brief interview at LendIt last week.
A simple query of an individual’s name, phone number, email, address or business name will return results not easily accessible elsewhere, like how long that person’s email address has been in their system or the likelihood that the email address was generated by a bot, not a real person. A match is good, no match might not be good, they say. Their system can also do things like identify the carrier the phone number belongs to and whether or not that carrier, if it’s VOIP or something, might have a higher propensity for fraud.
Eleveld said that an impostor could try applying for a loan with a stolen social security number, but it’s harder for them to fake an entire online profile. These queries, he confirmed, can all be done through an API since online lenders are typically driven by speed. Big names are already using it such as Quicken Loans and loandepot, and those are just a couple of names from the online lending space alone.
“The company houses more than 5 billion global identity records,” according to their website, and customers such as “Wells Fargo, Microsoft, Western Union, Under Armour, Priceline, and American Airlines use Whitepages Pro data to mitigate risk and improve the customer experience.”
Kabbage CEO Rob Frohwein Pokes Fun at “Alternative Lending”
March 14, 2017
At LendIt, Kabbage CEO Rob Frohwein poked fun at alternative lending, suggesting that it should just be called lending. His presentation, titled “Alternative Lending is Dead Long Live Data,” put the last few years of irrational exuberance into perspective. Below are some of his one-liners:
“You don’t disrupt banks by focusing on the advantages that banks have over you.”
“Most online lenders thought by calling themselves a technology company, they are one.”
“However, the biggest piece of technology that most of them promote is an online application.”
“There’s nothing special about an online application.”
Frohwein also revealed some interesting facts about Kabbage during the presentation, including that their customers borrow from them on average 20-25 times over the course of 4 years, whereas their competitors only make only 2.2 loans to their customers on average.
Brief: Former CAN Capital CFO Moves On
March 9, 2017According to the WSJ, Aman Verjee, who was CAN Capital’s CFO up until late last year, has taken the COO position at 500 Startups. The company has invested in more than 1,800 startups across more than 60 countries. According to the website, “500 Startups was founded in 2010 by former PayPal and Google alumni Dave McClure and Christine Tsai, along with many other friends and supporters.”
CAN Capital has not yet named a replacement CFO.
In The UK, Regulators Advise Where The Line Between Banks and Non-banks Lies
March 1, 2017Online lenders shouldn’t be borrowing money from other online lenders and using that money to lend, the Financial Conduct Authority in the UK warned on Tuesday. Doing so without regulatory permission, they explained, would constitute accepting deposits and be a criminal offense.
A copy of the official letter signed by Jonathan Davidson, Director of Supervision – Retail and Authorisations, is publicly available.
According to the Financial Times, the warning was prompted after RateSetter asked the government in October 2016 if such activity was acceptable. They had been engaged in such wholesale lending, as it’s called, since 2016 but have since stopped.
For Lending Club Borrowers, Interest Now Accrues During Grace Periods
February 26, 2017On February 24th, Lending Club eliminated a courtesy that had long been afforded to borrowers, interest waivers during grace periods. Specifically, borrowers who missed a monthly payment were given 15 extra days to make the payment with no extra interest assessed or late fees. Going forward, interest will indeed accrue during grace periods.
“we are eliminating the grace period interest waiver in order to better align borrower payment incentives as we seek to deliver solid returns to our investors,” Lending Club said in an email.
Since this will not affect a borrower’s monthly payment, all additional accrued interest will be extended to another month beyond the maturity date.
Square Capital Made More Loans, Maintained Default Percentage, Continued to Show Why They’re A Tough Competitor in Fintech Loan Market
February 22, 2017Square has continued to set itself apart in the fintech lending space. The company announced Wednesday that Square Capital had facilitated 40,000 business loans for a total of $248 million in the fourth quarter of 2016. And they did that while holding their default rate at 4%.
A look at their recent loan volume compared to their competitor OnDeck:
| 2016 | Square | OnDeck |
| Q1 | $153,000,000 | $570,000,000 |
| Q2 | $189,000,000 | $590,000,000 |
| Q3 | $208,000,000 | $613,000,000 |
| Q4 | $248,000,000 | $632,000,000 |
Square Capital’s biggest competitive advantage is that they have practically no acquisition cost for their borrowers. “We’re able to upsell and cross-sell to our base of millions of sellers with minimal incremental cost,” Square’s Q4 earnings presentation says. Their payment’s customers, which they can convert to borrowers, processed around $50 billion in transactions last year.
Square had a net loss of $171.6 million across 2016 however, the bulk of which originated in the first quarter. The net loss for Q4 was only $15 million.
Catching Up With Marketplace Lending – A Timeline
February 20, 2017This is the expanded update to the timeline of events taking place in the industry.
12/16 Chicago-based Argon Credit filed for bankruptcy
12/20 Bizfi announced that it had surpassed $2 billion in originations since inception
1/4 Strategic Funding integrated US operations of Capify
1/9 Two US Senators protested the OCC’s plans to create a limited fintech charter
1/11 Funding Circle announced a new $100 million equity round led by Accel
1/12 Marketplace Lending Association announced 11 new members
1/16
- The WSJ broke a story revealing that CAN Capital had breached its covenants with its big-bank creditors, laid off about 250 staffers, hired a restructuring firm for assistance in negotiating with creditors, and hired Jefferies Group for advice on strategic alternatives
- NY proposed broad changes to its lender licensing laws
1/17
- OnDeck announced a partnership with Wex, a provider of corporate and small business payment solutions
- New York Department of Financial Services protested the OCC’s plans to create a limited fintech charter
1/18 Credible raised $10 million in a Series B round from investors that included Ron Suber, the president of Prosper Marketplace.
1/19
- LendIt announced finalists of its first ever industry awards
- Sean Murray of deBanked selected as a finalist for Best Journalist Coverage
1/20
- Fifth Third announced a partnership with QED Investors to advance fintech strategy
- President Trump issued an executive order freezing all new regulations
1/25 loanDepot surpassed $100 billion in loans
1/26 LendingRobot launched a marketplace lending hedge fund
1/30 Prosper Marketplace’s EVP of capital markets, Eric Thaller, departed from the company
2/1 Prosper Marketplace appointed new CFO, Usama Ashraf
2/4 OnDeck announced departure of COO James Hobson
2/8
- Breakout Capital announced a $25 million credit facility
- Lendio announced that it had facilitated $240 million in funding last year
2/13 OnDeck announced a partnership with payroll company Wave
2/14 Lending Club reported a $146 million loss for the year and an increase in bank funding
2/16
- OnDeck reported a $86 million loss for the year, layoffs
- The DC circuit decided to rehear the PHH v CFPB case
