Srividya's work has appeared in publications like Money magazine, Advertising Age, FirstPost and The Economic Times. She has also dabbled in business intelligence solutions, and holds a Masters degree in Business and Economic Reporting from NYU. Articles by Srividya Kalyanaraman
JP Morgan Opens Doors for Startups. Literally.
June 30, 2016
JP Morgan is luring fintech startups by dangling a key card to its doors.
The bank plans to start an “in-residence” program for startups on the block who show potential to ‘disrupt’ and solve problems in areas of automation, blockchain and analytics.
The online program will give chosen startups access to JP Morgan’s systems and network to work on common problems in the bespoke areas of technology. The New York-based banking behemoth has been beefing up its tech arm and has invested nearly $3 billion towards new investments. It has been asserting its presence on the fintech block with the launch of a Venmo-like real time payment service.
Earlier this year, it hired former economic advisor to President Obama, Seth Wheeler to lead its fintech and innovation strategy.
Morgan Stanley, Deutsche Bank and Santander Stress Under Fed’s Test
June 30, 2016The unemployment rate is 10 percent, the stock market is worth half its value and short-term treasury rates are negative making investors pay the US government to hold their money.
This was the Fed’s hypothetical scenario for this year’s stress test for big banks, and all but three of 33 banks passed.
Wednesday’s stress test announcement pertained to the Fed’s evaluation of how well big banks planned for risk and allocated capital under stress. The first part of the tests announced last week, examined and monitored whether big banks had sufficient capital to sail through economic turbulence, which all 33 banks passed.
Deutsche Bank, Banco Santander and Morgan Stanley were among 33 banks that felt the stress during the second round. The regulator objected to the capital distribution plans put forth by the US subsidiaries of Deutsche Bank and Banco Santander and stopped them from issuing dividends or making share buybacks and asked Morgan Stanley to submit a revised plan for “qualitative reasons.” The banks who passed the test will be able to pay out as much as two thirds of the projected net income for the next four quarters and can also continue to retain capital.
Deutsche Bank has failed the test two years in a row and Santander for three. The Fed is concerned about the banks’ ability to measure risk but in practice, the Fed’s rejection means that these banks cannot send US profits back home until they pass the test.
Santander blamed its regulatory trouble on “growing pains” and said that the bank is building up a holding company to oversee the banking unit and consumer-lending subsidiary.
In part, these capital restrictions placed on big banks under Dodd Frank is what bolsters the alternative non-bank lending sector where lenders pride themselves on being lean and agile. While the industry is still negotiating its relationship with Wall Street, total insulation from bank capital for now seems like a distant dream. Santander is an investor in Atlanta-based small business lender Kabbage and also uses its technology to underwrite loans for small businesses quickly.
Invoice Financing Startup Fundbox Hires ex-Google Exec to Lead Product Strategy
June 29, 2016Invoice financing startup Fundbox has hired Prashant Fuloria as chief product officer. Fuloria comes from Google and Facebook where he led product management and most recently was the senior vice president of advertising at Yahoo.
At Fundbox, Fuloria will spearhead product and engineering efforts, including product strategy, design and delivery. The three year old San Francisco-based startup also hired Oren Katz to head R&D. Katz has managed R&D for digital marketing startup eXelate, which was recently acquired by Nielsen.
It also appointed former senior counsel of The Bank of New York Mellon Michal Cieplinski as chief compliance officer and Johnson Ma from Trial Pay to head business development.
Fundbox does invoice financing for small businesses. It assesses invoices individually by plugging into the company’s accounting software and makes a deposit for the amount to the company’s bank account the next day.
The startup was founded by Eyal Shinar, former VP at Battery Ventures in January 2013 and has raised $108 million in venture capital from investors like Spark Capital, Khosla Ventures and Blumberg Capital. It competes with startups like BlueVine and C2FO in invoice-financing and factoring business.
Bizfi Secures Additional $20 Million Financing
June 28, 2016Small business capital marketplace Bizfi has secured a $20 million investment from New York-based investment manager Metropolitan Equity Partners, supplementing the $65 million infusion in December last year.
Bizfi said this capital will be used to expand and optimize its funding programs and develop an effective marketing campaign to advertise those better.
“Our relationship has deepened over the past few months and when the opportunity to raise additional capital presented itself, MEP was the most logical partner,” said Stephen Sheinbaum, Bizfi founder.
Bizfi has so far crossed $1.7 billion in financing to more than 30,000 small businesses since 2005 with partners like OnDeck, Funding Circle and Kabbage.
Lending Club: Road to Investor Confidence is Paved in Negative Returns
June 28, 2016It’s been an eventful Tuesday for Lending Club. The company held its previously adjourned annual meeting where it upgraded Scott Sanborn’s status to permanent CEO, appointed temporary executive chairman Hans Morris as Chairman of the board and slashed 179 jobs.
The new management has tasked itself with restoring investor confidence that’s necessary after Sanborn said that its Broad Based Consumer Credit fund will see its first negative return after five years of performing well. It is the largest inhouse portfolio for the company with regular returns of 0.5 percent. Subsequently, the board has established new policies prohibiting investments in ecosystem partners that invest in lending club loans and also imposed restrictions on investors requesting redemptions worth $442 million in its consumer credit fund.
An internal review also discovered that Renaud Laplanche and three members of his family borrowed $722,800 in 2009, which was not reported as a personal investment.
Lending Club hired an independent firm to assess the valuation of its marketplace assets and found assets held by six private funds to be inconsistent with GAAP standards.
Loan originations fell by a third in Q2 2016 compared to the previous quarter but in a necessary attempt to appease investors, the company has committed to spend $9 million in the current quarter on investor incentives and another $20 million on employee retention, due diligence and advisory relationships. Earlier this month it purchased $19 million of its own loans until it rebuilds its funding base.
It resolves to be back on track and resume revenue and EBITDA growth by the first half of 2017. As if these troubles weren’t enough, it also faces mounting pressure rising from Britain’s exit from the European Union and the market volatility that followed. This could cause hedge funds and loan buyers to retreat at a time when the beleaguered lender is trying to score funding deals with hedge funds.
Sam Hodges, CEO of London-based Funding Circle definitely feels the burn. “We have to hunker down and recalibrate our growth plan and credit models to account for how the U.K. economy will be more stressed in the near term,” he told WSJ.
Click here for the Lending Club timeline.
OnDeck’s New Marketing Channel: Accountants
June 27, 2016What if accountants replaced loan brokers?
OnDeck has been on it. The New York-based online lending company unveiled a new medium of reaching potential borrowers. Through its ‘Accountant Advisor Program,’ launched in March this year, the lender wants to reach small businesses through accountants, bookkeepers and CPAs.
OnDeck is rolling out the program in Kentucky, Florida and Alabama and recruiting accountants in these states to refer their clients to OnDeck. What do they get in exchange? They can either choose to get a revenue share of 5 percent of the total loan volume, or have OnDeck give the small business a 2 percent discount on the loan cost for loans of up to $500,000 with terms of 3 to 36 months and lines of credit ranging from $6,000 to $100,000.
“We’ve put this program together, realizing that the accountant community is the most trusted advisor to small business,” said Frank Orofino, director of the OnDeck Accountant Advisor Program was quoted as saying.
The company isn’t shaken by the troubled environs of online lending. Earlier this month, (June 16th), the company expanded its operation in Denver buying a bigger office space and hiring staff along side forging new partnerships.
“I think it’s a smart idea to partner with CPAs,” said Justin Benton who runs Lenders Marketing, a lead generation site for loans. “These are people who are helping with taxes and investments. They are going straight to the horse’s mouth,”
Will this new channel yield results?
Don’t Look Now, But The US Treasury is Staring At Marketplace Lending
June 24, 2016
The US Department of Treasury is concerned about marketplace lending. Again.
The Financial Stability Oversight Council which was established per Dodd Frank to monitor excess risks to the financial system by bank and nonbank financial entities categorized marketplace lending as one in its annual report.
Concerned by the quick proliferation of nonbank lenders, the FSOC said that new financial products, its delivery mechanism and the business practices involved although contribute to “efficient” financial intermediation, the technology-backed underwriting models pose credit risk.
“Marketplace lending is an emerging way to extend credit using algorithmic underwriting which has not been tested during a business cycle, so there is a risk that marketplace loan investors may prove to be less willing than other types of creditors to fund new lending during times of stress,” the report said, worrying about the possible erosion of lending standards.
The Treasury however recognizes that the threat is still moderate but is still cautious.
“Financial regulators will need to continue to be vigilant in monitoring new and rapidly growing financial products and business practices, even if those products and practices are relatively nascent and may not constitute a current risk to financial stability.”
This is not the first time marketplace lending industry has garnered attention from authorities. Last month, (May 10th) the Treasury released a white paper titled “Opportunities and Challenges in Online Marketplace Lending” listing the risks associated with data and modeling techniques and the new data model being untested through a complete credit cycle.
The CFPB is also turning its attention towards small business lenders. Bloomberg reported that the agency wants to collect credit data in small business lending.
However, there are some who believe that regulating the lending industry cannot have a one-size-fits-all solution, nor does it need one. Thomas Weinberger, partner at Schulte Roth and Zapel is less inclined to believe that this will affect different market segments. “Marketplace lending has a self correcting system where if default rates go up, investors won’t buy,” he said. “The discipline is enforced by the capital.”
Kabbage Boosts Platform Biz, Partners with Canadian Bank Nova Scotia
June 22, 2016Online lender Kabbage loans has partnered with Canada’s third-largest bank, Bank of Nova Scotia to offer online loans to small businesses.
Small businesses in Canada can apply for loans online and get a decision quickly. The program will be extended to businesses in Mexico later this year. Customers will have the flexibility to draw the funds as individual term loans, from as little as $1,000 in Canada and each loan can have its own repayment terms.
In an interview with deBanked earlier this month, Kabbage co-founder Kathryn Petralia said that the company wants to grow its platform business with such partnerships. In April this year, Spanish bank Banco Santander said that it will use Kabbage’s technology to underwrite loans up to £100,000 the same day for loans that typically take 2-12 weeks to process.
Santander, Nova Scotia and ING together invested $135 million in Kabbage’s series E funding.
