Marcus has originated more than $3bn of loans since inception, recently it has become know that more than 10 percent of the loans were sub prime; they have said this is a natural evolution of the loan business and they are being very selective in approving of applications. Source.
BBVA Compass says there is plenty of room in the market for the bank to wade into online unsecured consumer loans; Shayan Khwaja, BBVA Compass' executive director of consumer lending, told American Banker, “We’ve seen the asset class grow, and fintech has shined a light on how we can take this value proposition to the consumers. The general population is fairly savvy with digital products. They’re not just used to it, but they’re demanding it.”; the move follows Barclays and PNC who have recently launched into the same market; analysts are not as bullish on the moving citing fraud concerns and the recent spike in personal loan losses.
Last year’s batch of Chinese IPOs did not perform well and ended up losing almost $1bn worth of shareholder money; there is an expectation that the number of Chinese IPOs will jump 30 percent in 2018; Qudian, one of the biggest from a year ago, has seen their stock plummet by more than 50 percent; expectations and the Chinese government crackdown on online lending has really hurt the prospects of some companies looking to list. Source.
UK based Zopa has warned investors that defaults on high risk loans are rising; Zopa increased originations to high risk borrowers in 2016 and introduced their Zopa Core and Zopa Plus Products; the company originally expected default rates for 2016 at 4.14 percent but have revised that number to 4.93 percent; they also raised their estimates for 2017 loans to these borrowers to be 4.86 percent from 4.52 percent. Source.
The Chinese government has stepped up their monitoring on payments, halted IPO approvals, issued new rules for online lenders and continued their crackdown on cryptocurrencies; China has been seen as an innovation leader, in particular in mobile, but the recent crackdown could set the country back as a leading fintech innovator; as the nation matures in certain fintech areas its regulators need to better handle how they react to the market; Michelle Evans, global head of digital consumer research at Euromonitor International, tells TearSheet, “The next stage of its development will require Chinese regulators to find the right balance that will be provide for consumer protection and fair operations while still enabling fintech the room to innovate.” Source.
Over half of China’s online lenders have run into trouble by failing to comply with data privacy rules; Renmin University and Nandu Personal Data Protection Research Centre conducted a survey of over 200 finance apps and found more than 110 to be in low compliance; the issues include collecting phone numbers from users’ contact lists which can be used to harass and shame borrowers who fall behind; most apps also lacked a privacy agreement when signup occurs, which doesn’t allows users protection from the company. Source.
One of China’s largest online lenders has shelved their IPO because of the regulatory crackdown on online lending; the FT reports that Lufax is waiting until the China Banking Regulatory Commission (CBRC) required online lenders to apply for a license; the current thinking is the government will approve licenses in April, though the time frame could be a bit longer; Lufax wants to ensure they get it right instead of rushing to be first. Source.
Online lending has been maturing the last few years with more companies reaching scale and some beginning to be profitable; banks have diversified their partnerships with online lenders and in some cases have launched their own online brands; one of the big shifts in the last few years is that banks and fintech companies are not seeing each other as enemies anymore, they can and do exist together through a number of different means. Source.
Online lenders in China have started to self inspect how they run their companies as the government has been a lot more proactive in oversight than in year’s past; the government fears that borrowers are becoming over indebted and are borrowing to pay back other lenders; some of the top lenders fear the government crackdown could cause other panic and trigger outcomes that would be even worse than a few online lenders shutting down; right now it seems as if lenders are in limbo wondering what the future will hold. Source.
SoFi’s lending goal in 2017 was to lend more than they had in the previous 5 years combined; the online lender fell 26 percent short of the goal and instead lent out $12.9bn in 2017; the company had seen their share of issues in the last year with sexual misconduct claims and their CEO being forced out; SoFi spokesman Jim Prosser said the true goal for 2017 was closer to $13bn and the higher amount was a stretch goal. Source.