Industry News
Stripe Ventures Into Merchant Cash Advance Financing
September 6, 2019
Stripe, a payments firm lauded as the world’s most valuable private fintech company (at $22.5B), has officially launched a merchant cash advance product.
Dozens of news outlets have announced that the company is providing loans, but that’s not all, deBanked has learned. Both loans and merchant cash advances are available.
The company’s FAQ page originally explained the “Capital” product as a merchant cash advance but it’s since been updated to reflect that they offer access to both merchant cash advances and loans. An official Stripe spokesperson also clarified that an offer could be an MCA or a loan. The updated FAQ says that funding terms would be available in the customer dashboard, in the funding contract, and that which one a customer qualifies for depends on the specifics of their business.
Stripe merchant account customers can find out if they’re eligible for funding in their dashboard. If they’re not, they can still send Stripe a note through the dashboard to signal that they’re interested, say how much they’re looking for, and select what they plan to do with the funds. Stripe says they will not review your credit report and that all offers are based solely on Stripe transaction history.
The new product will not disrupt the separate integration with Funding Circle, according to a statement provided to Digital Transactions. Stripe customers can still apply to Funding Circle by connecting their Stripe account. Funding Circle offers term loans that range from six months to five years.
Stripe’s MCA product is currently only available in the US, but the company’s founders, Patrick and John Collison, brothers, hail from an unlikely place, rural Ireland. The company handles tens of billions of dollars in payments a year across 34 countries.
Like other recent entrants into the small business funding space, Stripe’s advantage is its ability to tap into its existing customer base. Other payments companies such as PayPal and Square, for example, were among the top four largest originators (for which public data is available) of alternative small business funding in 2018.
Note: This article has been updated to reflect the changes made on Stripe’s website as well as an additional clarification from the company.
IOU Financial Originates $38.5M in Q2
August 26, 2019IOU Financial originated $38.5M in loans in Q2, up from $32.8M the quarter before. The company said that the figure was actually a 31.8% increase over Q2 2018.
In a press release, IOU CEO Phil Marleau said, “IOU delivered strong loan origination and revenue growth in the second quarter of 2019 and continued to post positive earnings. We remain committed to our strategy of profitable growth which continues to deliver consistent and favorable results since its implementation.”
IOU is traded on the Toronto Stock Exchange and has a market cap of $19.3M.
Alan Heide, CFO Of 1 Global Capital, Hit With Criminal Charge & SEC Violations
August 15, 2019
Update: Alan Heide has pleaded guilty to one count of conspiracy to commit securities fraud.
The former CFO of 1 Global Capital, Alan Heide, was stacked with bad news on Thursday. The US Attorney’s Office for the Southern District of Florida lodged criminal charges against him at the same time the Securities & Exchange Commission announced a civil suit for defrauding retail investors.
Heide was criminally charged with conspiracy to commit securities fraud.
According to the criminal complaint:
It was a purpose of the conspiracy for the defendant and his conspirators to use false and fraudulent statements to investors concerning the operation and profitability of 1 Global, so that investors would provide funds to 1 Global, and continue to make false statements to investors thereafter so that investors would not seek to withdraw funds from 1 Global, all so that the conspirators could misappropriate investors’ funds for their personal use and enjoyment.
He is facing a maximum of 5 years in prison.
1 Global Capital CEO Carl Ruderman, who recently consented to judgment with the SEC, has not been charged criminally to-date. However, he is mentioned throughout the pleading against Heide as “Individual #1 who acted as the CEO of 1 Global.”
Civil charges were simultaneously lodged by the SEC.
According to the SEC’s complaint:
Although 1 Global promised investors profits from its short-term merchant cash advances to businesses, the company used substantial investor funds for other purposes, including paying operating expenses and funding Ruderman’s lavish lifestyle. The SEC alleges that Heide, a certified public accountant, for nine months regularly signed investors’ monthly account statements that he knew overstated the value of their accounts and falsely represented that 1 Global had an independent auditor that had endorsed the company’s method of calculating investor returns.
According to an SEC statement, Heide agreed to settle the SEC’s charges as to liability, without admitting or denying the allegations, and agreed to be subject to an injunction, with the court to determine the penalty amount at a later date.
1 Global Capital filed for bankruptcy last year after investigations by the SEC and US Attorney’s Office hampered their ability to raise capital. Ruderman’s recent settlement with the SEC put him on the hook for $50 million to repay investors.
LendingPoint Places Seventeenth on Inc. 5000
August 14, 2019
Today Inc. 5000 released is 2019 list of the fastest growing private companies in America, featuring alternative finance company LendingPoint in seventeenth place after it witnessed a three-year revenue growth of 9,265%. LendingPoint offers consumer loans of up $25,000 and provides financing to merchants, service providers, and medical institutions via its LendingPoint Merchant Solutions program.
This is the Atlanta-based business’s debut on the list and it comes after LendingPoint had a strong twelve months, with it being on track to reach $100 million per month in loan originations by the end of 2019 as well as it being the year the company turned profitable. On top of these, LendingPoint also has plans to expand its operations by hiring an additional 100 people, bringing its Atlanta HQ up to nearly 300 staff members.
In a press release, LendingPoint CEO Tom Burnside claimed that “Our platform saw more originations in 2018 than in 2015, 2016 and 2017 combined [sic], and at the same time our credit performance improved allowing us to facilitate more financing for consumers online and at the point of sale.”
Such growth is attributed by Burnside to LendingPoint’s use of technology. “We started by using data and technology to provide access to credit to underserved [sic], expanded to providing financing options at the point of sale to virtually everyone, and are now working on ways to integrate financing and payments with loyalty using blockchain to protect PII and enhance customer experience.” Such technology makes use of over 10,000 alternative data points, while also using FICO as a weighted factor of their analysis, to determine an applicant’s approval.
“We spend a lot of time cross-tabularizing the data points,” said Mark Lorimer, LendingPoint’s Chief Communications and Public Affairs Officer, when asked about the company’s approach to tech. Confronted by vast amounts of data, Lorimer noted how LendingPoint makes use of its technology to determine the value of different variables, “it really is a matter of taking the data and turning it into information.”
On the subject of LendingPoint’s placement on the Inc 5000, Lorimer told deBanked that the company was “not really surprised” by the news. According to him, his colleagues had been keeping an eye on the performance of those companies who previously placed on the list and were aware of what was required to appear on it, while his CEO has a more exuberant take on it: “It has been quite a ride for the last three years, and we’ve only scratched the surface.”
Funding Circle Originated $377M of US Loans in First Two Quarters of 2019
August 8, 2019Funding Circle originated $377M of loans in the US in the first six months of 2019, according to their latest public report. The company said that “growth was proactively controlled” and that they tightened higher risk band lending and increased prices. They’ve now loaned more than $2B cumulatively in the US since inception and their growth is being led by “new borrowers” that are being lured away from traditional lenders.
Funding Circle still lags behind PayPal, OnDeck, Kabbage, Square Capital, and Amazon in the US in loan origination volume, according to the deBanked small business finance rankings. Its closest competitors by volume are BlueVine, National Funding, and Kapitus.
Funding Circle Co-Founder & Managing Director James Meekings to Step Down
August 8, 2019
Funding Circle’s lackluster business performance has led to a casualty. Co-founder James Meekings, who serves as Managing Director of the UK Business (the company’s primary market), will be transitioning to a non-executive role on the UK board in Q3. He will no longer be MD, the company announced.
Lisa Jacobs, Funding Circle’s Chief Strategy Officer, will take over leadership of the UK business, the company subsequently disclosed.
Funding Circle went public less than 1 year ago on the London Stock Exchange. Since then the share price has plummeted by 75%.
The company has been busy trying to correct course through various maneuvers, one of which has been to cut CEO Samir Desai’s annual compensation.
Fox Corp / Credible Deal – What’s Online Lending Got To Do With TV Broadcasting?
August 5, 2019
On Sunday Fox Corp announced it had agreed a deal to buy a majority share of 67% in Credible, a San Francisco-based online lending platform that is publicly traded in Australia.
Credible, which was valued at $397 million by Fox, provides credit checks for mortgages, personal loans, and student loans; gathers the information yielded; and presents prequalified rates and refinancing options to customers, which they can click-through to. In addition to an investment of $265 million for their stake, Fox Corp will allocate an additional $75 million to cover Credible’s operating costs for the next two years.
The news may come as odd to many familiar with some of the media company’s biggest subsidiaries, such as Fox News, 21st Century Fox, and Fox Sports, but it is the second such investment to be made since Fox Corp sold the majority of its television and film assets to Disney for $71 billion in 2017. May saw Fox acquire 4.99% of Stars Group, an online sports betting site, for $236 million.
The move could be viewed as an attempt to enhance how current financial content is delivered through Fox Corp’s channels. With access to a pool of data that covers information relating to large swathes of credit ratings, loan approval speed, and financing priorities, Fox Business Network would be better positioned to deliver analysis. The Wall Street Journal, which shares a parent company with Fox Corp, News Corp, noted that Fox executives will be able to use Credible’s data in the digital avenues of its local television stations.
Lachlan Murdoch, who was made Chairman and CEO of Fox Corp when his father Rupert stood down earlier this year, said in a statement that “The acquisition of Credible underscores Fox Corporation’s innovative digital strategy that emphasizes direct interactions with our consumers to provide services they want and expand their engagement with us across platforms.” While in return, Credible will “benefit from our audience reach and scale, will drive strategic growth, further develop our brand verticals and deepen consumer relationships.”
A fate that Credible founder and CEO Stephen Dash appears to be content with, stating that “Fox Corporation’s record of innovation and focus on audience engagement will further enhance Credible’s position as a leading consumer finance marketplace in the United States, creating opportunities for organic growth and the expansion of the Credible platform. Credible’s industry-leading user experience, combined with FOX, will provide greater impact and scale for consumers.”
But not everyone with a stake in Credible is convinced by the decision, as Bell Potter analyst Damian Williamson has claimed. “Premature is the word to describe how some minority shareholders see the transaction … This company is operating in a very large market and has the potential to do really well.”
Regardless, the deal comes after months of negotiations, which were initially secured in May, only to go through an on-again-off-again phase until recently. While signed off by both Credible and Fox Corp, the sale won’t be confirmed until the Australian Securities Exchange approves the transaction.
Representing the first of its kind in acquisitions, the Fox Corp-Credible deal is an anomaly within the industry, being the pioneer case of a broadcasting company foraying into alternative finance – a field notedly uncovered by vast portions of the media.
Maria Vullo Joins Emigrant Bank
July 31, 2019
Maria Vullo, who served as the Superintendent of New York’s Department of Financial Services (NYDFS) from 2016 to February 2019, has been elected to Emigrant Bank’s Board of Directors. As well as this, Vullo will be joining Emigrant’s holding company, New York Private Bank & Trust (NYPB&T).
The move comes five months after the end of Vullo’s tenure at NYDFS, a role which she was nominated for by Governor Andrew Cuomo. In the period proceeding this, Vullo took up the role of Regulator in Residence at Fintech Innovation Lab’s Partnership Fund for New York City. Here she offered mentorship to enterprise technology companies.
Having been a partner at the international law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP prior to her time with NYDFS, Vullo is versed in civil, regulatory, and criminal issues, as well as securities, banking, insurance, real estate and other financial subjects.
Her tenure as NYDFS Superintendent was noted for its regulations on cybersecurity, transaction monitoring and life insurance. However it was not without hiccups and conflict, as one hearing on online lending saw her display both a distaste for alternative finance and a seeming misunderstanding of how interest rates within the industry are calculated. And upon the Office of the Comptroller of the Currency’s (OCC) proposal to establish a fintech charter that would grant bank-like powers to non-banks, Vullo opposed the rule in a letter, instead favoring state regulation over federal, claiming that such a charter could risk a financial crisis as well as endanger New York state’s sovereignty.
“Her depth of experience in financial services regulation and operations will greatly enhance our ability to provide innovative services to a range of customers in the markets we serve,” said Howard P. Milstein, Chairman, President, and CEO of NYPB&T, “She will be a great addition to our Board.”
