THE ALTERNATIVE LENDING REPORT Volume 1, No

Total Page:16

File Type:pdf, Size:1020Kb

THE ALTERNATIVE LENDING REPORT Volume 1, No SmallBusinessLending.io Finance • Technology • Legal & Regulatory • Strategy THE ALTERNATIVE LENDING REPORT Volume 1, No. 2 May 4, 2017 input/output CAN ALTERNATIVE DATA SOLVE ONLINE LEGAL & REGULATORY LENDERS’ ‘ALGORACISM’ PROBLEM? MCA Funder 3 Leaf Capital Called a Fraud by Partner ........................... 3 By Tim Lloyd STRATEGY A March 2017 letter written by Con- Beyond the prevalence of high costs, Online Commercial Lending: gressman Emanuel Cleaver, II (D-Mo.), double dipping, hidden fees, misaligned How it’s Changing the Landscape ............... 4 to Consumer Financial Protection Bureau sales incentives and stacking, the HBS Live Oak Cuts Risk, Woos Director Richard Cordray raises fresh con- paper opines that new algorithms could Women in Business .................................... 5 cerns about “algoracism” tainting the credit- “create unfair or discriminatory access to FINANCE risk-scoring models used by online lenders. credit.” This problem disproportionately Online Lending Associations Rep. Cleaver’s suspicions draw heav- affects black, Hispanic and women-owned Targeting Fintech and Education ................. 6 ily from a 2016 Harvard Business School businesses, in addition to entities that NEW TECHNOLOGY paper titled the “State of Small Business operate in low-income neighborhoods. & PRODUCT LAUNCHES Lending,” which addresses digital disrup- Biased algorithm design can occur if Platform announcements, new tion’s impact on regulation. Cleaver’s let- engineers code data correlation parameters software and services, and notable ter highlighted five predatory practices with attributes that make inadvertently product releases. ......................................... 7 cited by the HBS paper as pervasive in the discriminatory assumptions, which could INDUSTRY NEWS “Wild West” of online lending and alleges be violating the Equal Credit Opportunity A recap of recent news of that risk-scoring algorithms may be Act. ECOA prohibits creditors from dis- importance to lenders, brokers, designed to discriminate against minority- criminating against borrowers on the basis and service providers. ................................ 8 owned, small business borrowers. of race, color, religion, national origin, sex, LOAN TAPE Minority-owned businesses comprise marital status, age or because they receive Banks & Companies with Exposure roughly 15% of the 28.8 million small income from a public assistance program. to Small Business Loans ............................ 10 businesses in the United States, according But it’s difficult to identify biases in M&A + Partnerships & New Investments ... 11 to a 2016 Small Business Administration fintech credit-scoring models due to regu- Indices/Funds of Interest/SBA Activity ....... 12 report. latory uncertainty about lenders’ obliga- Credit Conditions/Indicators...................... 13 Turn to ‘Algoracism’ on page 14 ALR’S RESEARCH ACTIVITY REPORT April 18-May 2 STATE OF THE MARKETPLACE LENDING SECTOR 184 Daily news items published By Brian O’Connell (Note: This is the first in a two-part series on the future of marketplace lending. 1,200 Part 2 will appear in the next Alternative Lending Report.) Companies researched for the Small The sugar rush may be over for the online lending sector, as 2017 is Business Lending Directory starting to look a lot like 2016, which saw industry angst after layoffs, scan- dals, and financial underperformance. 2,540 OnDeck lost $36 million in the fourth quarter of 2016, and lost $86 mil- People researched for the Small lion for the year. Business Lending Directory Lending Club, reeling from a data-tampering scandal that triggered the ouster of company CEO Renaud Laplanche, saw loan originations fall 23%, 16 to $1.99 billion in the fourth quarter of 2016 and has seen its stock price Datasets researched move sideways ever since. Chicago-based online lender Avant shed workers in 2016, reportedly Turn to ‘Marketplace Lending’ on page 16 Have questions? Call us (516) 876-8006. For use by original recipient only. It is illegal to forward or otherwise distribute without permission. THE ALTERNATIVE LENDING REPORT Commentary EDITORIAL Editor & Publisher Steven Dresner ADDRESSING THE LACK OF TRANSPARENCY Contributing IN SMALL COMPANY LENDING Editor Steve Lord By Steven Dresner Contributing People who take news reporting seri- thresholds to define the scope of the Writers ously consider the “Five W’s” principles to small company lending market. We Steve Evans live by. According to the Five W’s, infor- do not cover consumer lending, except Grant Harvey mation can only be considered complete where we believe information in that Tim Lloyd if you’ve answered the questions of who, segment would be useful to our readers. Brian O’Connell what, when, where, and why. And so I A final note about our coverage: Gary Stern thought it would be fitting to introduce While we publish information about you to The Alternative Lending Report by developments globally, our primary focus Production Editor Gary Newman answering these questions. is on the United States. Who’s the publisher? DealFlow Why are we doing this? There’s very Operations Financial Products (a/k/a “DealFlow”), little transparency in this market. With- Lenny La Sala is the publisher of The Alternative Lend- out government-mandated loan report- ing Report. As a company, we have con- ing, or public aggregation of data, there’s Technology Tarun Gupta siderable experience providing news, simply not enough information for peo- information, and analysis across a variety ple to make good business decisions. of deal markets. Since 2003, our team Our call-to-action at DealFlow has has worked to make capital markets always been to make markets more THE ALTERNATIVE LENDING REPORT more efficient by offering unique insight efficient through information and data. to thousands of clients of our publica- That’s what we’re aiming to do in the DealFlow Financial Products, Inc. P.O. Box 122 tions, events, and database services. small company lending segment. Syosset, NY 11791 If you’re a lender, broker, or service What’s our publishing frequency? T (516) 876-8006 provider, we’re working for you – and Our first product, Small Business Lend- F (516) 876-8010 The Alternative Lending Report is meant ing Daily, is a free electronic newsletter [email protected] to serve as your trade publication. that’s published Monday through Friday www.smallbusinesslending.io What does the report cover? The and delivered to your inbox. We cover a The Alternative Lending Report™ is published on the first and third Thursday of every month, Alternative Lending Report is dedicated broad swath of topics in our Daily email except the second Thursday of August and the second to covering the small business lending such as “traditional” bank lending and Thursday of December. Subscription rate: $995 per year for 22 issues, delivered electronically. ecosystem including alterative investment we aggregate original articles, research All rights reserved. © 2017 DealFlow Financial structures, online and marketplace lend- reports, and news releases. Products, Inc. Photocopy permission is available ing, and non-bank financing structures The Alternative Lending Report is pub- solely through DealFlow Financial Products. Copy- ing, distributing electronically by email, or duplicat- such as factoring, invoice financing, mer- lished in PDF on the first and third Thurs- ing this publication in any manner other than one permitted by agreement with DealFlow Financial chant cash advance, and revenue-based day of each month. As we enhance our Products is prohibited. Such actions may constitute financing. As the flag on the cover of this website, new information will be updated copyright infringement and leave perpetrators sub- ject to liability of up to $150,000 per infringement report suggests, we’re focused on innova- daily on SmallBusinessLending.io. (Title 17, U.S. code). The Alternative Lending Report tions in finance and technology, legal and In the near future, we will also be and The Alternative Lending Conference™ are trademarks of DealFlow Financial Products. regulatory dynamics, and strategy within launching innovative webcasts, live events The Alternative Lending Report is a general-circula- the alternative lending segment. and training programs, and subscription- tion publication. No information herein should be construed to be recommendations to purchase, Regarding the borrowers we’ll cover, based analytics. As these products and retain, or sell securities, or to provide investment we are using criteria based on the size services come online, we’ll notify you and advice of the companies mentioned or advertised. No fees are accepted for publishing any editorial of a loan (approximately $1M credit keep an open channel for your feedback. information. DealFlow Financial Products, Inc., its or below) and/or the size of the com- In the meantime, we hope The Alternative subsidiaries, and its employees may, from time to time, purchase, own, or sell securities or other pany (approximately $20M in revenues Lending Report meets your expectations. investment products of the companies discussed or or below). Academic whitepapers and If you’d like to subscribe to the report, call advertised in this publication. industry experts commonly use these us at (516) 876-8006. SmallBusinessLending.io 2 May 4, 2017 For use by original recipient only. It is illegal to forward or otherwise distribute without permission. THE ALTERNATIVE LENDING REPORT Legal & Regulatory MCA
Recommended publications
  • Crowdlending in Asia: Landscape and Investor Characteristics
    Crowdlending in Asia: Landscape and Investor Characteristics November 2020 2 Table of Contents Overview 3 Methodology Overview 4 Methodology Statement 4 Crowdlending in Asia 5 Text Analytics and Insights 7 Crowdlending Investor Characteristics 15 Survey Analysis and Insights 16 Crowdlending in Asia: Landscape and Investor Characteristics | Findings and Insights | Findings and insights 3 Overview Multiple issues arise with the emergence of crowdlending; these pertain to regulation, risk management and investors’ behaviour. Compared to the non-investment crowdfunding model, crowdlending is the dominant model in the world. As of 2019, crowdlending accounted for more than 95% of the funds raised worldwide, with Asian countries – particularly China – in the lead. In early 2020, China had the largest volume of money-raising transactions from crowdfunding totalling more than 200 billion USD. However, given the industry’s potential growth in Asian countries, multiple issues with crowdfunding practices need to be resolved. Media coverage on crowdlending is increasingly widespread, as seen from how it has become a buzzword within the last few years. Media attention on crowdlending can help us understand media awareness, media framing, and public understanding of the topic. Further, there is a lack of information on distinct characteristics and decision making of crowdfunding investors in the field of investor behaviour. We analysed the news coverage on crowdlending in Asia spanning a ten-year period from 2009 to 2019. We also surveyed crowdlending investors to understand their behaviours when interacting with crowdlending platforms. Our analyses provide insights into the challenges and opportunities of the crowdlending industry in Asia. They also reveal crowdlending investors’ behaviour.
    [Show full text]
  • Pushing Boundaries: the 2015 UK Alternative Finance Industry Report
    PUSHING BOUNDARIES THE 2015 UK ALTERNATIVE FINANCE INDUSTRY REPORT February 2016 Bryan Zhang, Peter Baeck, Tania Ziegler, Jonathan Bone and Kieran Garvey In partnership with with the support of CONTENTS Forewords 04 Introduction 10 About this study 12 The Size and Growth of the UK Online Alternative 13 Finance Market Market Size and Growth by Alternative Financing 14 Models Increasing Share of the Market for Business Funding 19 Market Trends in Alternative Finance 22 Expanding Base of Funders and Fundraisers 23 Market Entrants and Partnership strategies 25 Seeking Growth Through Awareness, Increased 26 Marketing and Forging Partnerships 27 Institutionalisation of the Market Cross-Border Transactions and Internationalisation 30 The Geography and Industries & Sectors of 31 Alternative Finance Industry Perspectives on Regulation, Tax Incentives 33 and Risks Size and Growth of the Different Online 38 Alternative Finance Models Peer-to-Peer Business Lending 39 Peer-to-Peer Business Lending (Real Estate) 40 Peer-to-Peer Consumer Lending 41 Invoice Trading 42 Equity-based Crowdfunding 43 Equity-based Crowdfunding (Real Estate) 44 Reward-based Crowdfunding 45 Community Shares 46 Donation-based Crowdfunding 46 Pension-led Funding 47 Debt-based Securities 47 Conclusion 48 Acknowledgements 50 Endnotes 51 3 ABOUT THE AUTHORS BRYAN ZHANG Bryan Zhang is a Director of the Cambridge Centre for Alternative Finance and a Research Fellow at the Cambridge Judge Business School. He has co-authored !ve industry reports on alternative !nance. PETER BAECK Peter Baeck is a researcher at Nesta, where he focuses on crowdfunding, peer-to-peer lending and the role of digital technologies in public and social innovation.
    [Show full text]
  • 2018 FINTECH100 Leading Global Fintech Innovators 2017 FINTECH100
    2018 FINTECH100 Leading Global Fintech Innovators 2017 FINTECH100 Leadin loba Fintec nnovators 1 1 2016 2017 Fintech100 Report FINTECH100 Leadin loba Fintec nnovators Company #00 1 | Fintech Innovators 2016 1 2015 Fintech100 Report FINTECH 100 Leading Global “ Fintech Innovators Report 2015 Company Description At a Glance Tag Line Located Year Founded Key People Website Specialisation Staff Enabler or Disruptor Key Investors Ownership Size User Engagement $ $ $ $ $ The 100 Leading Fintech Innovators Report 2016 Fintech100 Report The 50 Best Fintech Innovators Report 2014 Fintech100 Report 2 About the List The Fintech100 is a collaborative effort between H2 Ventures and KPMG. In its fifth year, the Fintech100 uncovers and evaluates the most innovative Fintech companies globally. The Fintech100 comprises a ‘Top 50’ and an ‘Emerging 50’ and highlights those companies globally that are taking advantage of technology and driving disruption within the financial services industry. A judging panel comprised of senior partners from H2 Ventures and KPMG has decided the final composition of the Fintech100 list. H2 Ventures H2 Ventures is a global thought leader in fintech venture capital investment. Founded by brothers Ben and Toby Heap, and based in Sydney, Australia, it invests alongside entrepreneurs and other investors in early stage fintech ventures. H2 Ventures is the manager of the H2 Accelerator – Australia’s only dedicated fintech accelerator – and operates out of Sydney’s dynamic Startup Hub. Twitter @H2_Ventures LinkedIn H2 Ventures Facebook H2 Ventures KPMG Global Fintech The financial services industry is transforming with the emergence of innovative, new products, channels and business models. This wave of disruption is primarily driven by evolving customer expectations, digitalisation, as well as continued regulatory and cost pressures.
    [Show full text]
  • Does Fintech Substitute for Banks? Evidence from the Paycheck Protection Program
    NBER WORKING PAPER SERIES DOES FINTECH SUBSTITUTE FOR BANKS? EVIDENCE FROM THE PAYCHECK PROTECTION PROGRAM Isil Erel Jack Liebersohn Working Paper 27659 http://www.nber.org/papers/w27659 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 August 2020, Revised December 2020 We would like to thank Daniel Green, Greg Howard, Victor Lyonnet, Karen Mills, Bernadette Minton, Claudia Robles-Garcia (discussant), René Stulz, Tejaswi Velayudhan, and participants at the Stanford-Princeton Bendheim Center Corporate Finance and the Macroeconomy conference and seminars at Cambridge, Indiana, Northeastern, Penn State, Oklahoma, Ohio State, and Zurich for very helpful comments. Thanks to May Zhu, Jason Lee and David Xu for excellent research assistance. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2020 by Isil Erel and Jack Liebersohn. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program Isil Erel and Jack Liebersohn NBER Working Paper No. 27659 August 2020, Revised December 2020 JEL No. G00,G01,G2,G21,G23,G28,H12,H2,H3 ABSTRACT New technology promises to expand the supply of financial services to small businesses poorly served by the banking system.
    [Show full text]
  • (P2p) Lending Model in Islamic Finance / Shariah-Compliant Form
    CAPCO ISLAMIC FINANCE CAPABILITY APPLICATION OF PEER TO PEER (P2P) LENDING MODEL IN ISLAMIC FINANCE / SHARIAH-COMPLIANT FORM INTRODUCTION Islamic finance is growing in prominence globally owing to strong interest from consumers due to both theological reasons and its strong ethos of ethical investing. In this environment it is imperative that participants in this sector consider avenues that help with growth acceleration and expanding consumer interest. One of the most interesting avenues for potential expansion is within the alternative finance market, specifically in the P2P lending segment. This paper aims to explore the viability of deploying the P2P lending model in a manner that remains true to the framework of Islamic finance principles such as RIBA (prohibition of interest) and Shariah (prohibition of certain product types). WHAT IS P2P LENDING? P2P lending is a form of finance that enables the exchange however there has been a significant uptick in the invoice of capital without the reliance on a conventional financial lending category for the last three years (From ~£310 million institution to oversee and manage the transactions. This format in 2016 to ~£1.1 billion in 2018)2, this is due to the strong enables the borrowers and lenders to interact directly, usually demand for this service from small to medium sized enterprises facilitated through a web application or platform. (SMEs) and is likely to surge due to the impact of to the socio- economic factors of the past year. P2P lending online can trace its origins to the UK with Zopa being the first firm to market this concept, followed by firms UK Overall Volume Growth (£) such as Prosper and Lending Club in the US.
    [Show full text]
  • Peer-To-Peer Lending Annual Report 2019
    PEER-TO-PEER LENDING STATE OF THE MARKET ANNUAL REPORT 2019 | WWW.ALTFI.COM UK MARKETPLACE ONLINE LENDING RETURNS IN THE FINTEX LISTED DIRECT ADVERTISED IMPAIRMENTS LENDING IN EUROPE REALITY WAY LENDING RETURNS AND DEFAULTS We follow the trends so you can stay ahead of them. P2: We are specialist advisers in the AlternativeRSM Finance space. At RSM, we make it our priority to understand your business so youADVERT can make confident decisions about the future. Experience the power of being understood. Experience RSM | rsmuk.com The UK group of companies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm each of which practises in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 50 Cannon Street, London EC4N 6JJ. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. 3 INTRODUCTION PEER-TO-PEER LENDING: STATE OF THE UK MARKET After rapid growth from the ashes of the financial crisis, the alternative finance sector appears to be maturing. However, it faces internal and external challenges that will dictate the industry’s long-term viability and success.
    [Show full text]
  • Lendit-Pitch Deck FINAL
    The World’s Leading Event in Financial Services Innovation April 9-11 * Moscone West * San Francisco Fintech | Blockchain | Digital Banking | Lending Sponsor Prospectus The Big Picture Unparalleled Networking and Business Development Opportunities What’s New? ● 3 Days of Content and Networking ● BlockFin Summit dedicated to content, networking and experts in Blockchain for Financial Services ● Expanded 1:1 Meetings Services to help you schedule and meet everyone on your list. Your Decision Makers in One Location 1,700+ C-Level or Higher 5,000+ Focused on Financial Services Innovation 2000 PE, VC, Institutional Investors, Hedge Funds 1500 1000 Commercial, Digital, Regional 500 AI, Blockchain, 0 CXOs Vice Directors Digital Banking, & Founders Presidents & Managers Cryptocurrency, Payments, Lending, RegTech 2017 LendIt USA Stats Driven by Content Industry Pioneers take the Stage at LendIt “It’s never been more important to understand the enablers 350+ of our global mission and there’s no more important conference than LendIt in terms of understanding the power Speakers of technology and what’s happening in the financial world” Andrea Jung President and CEO Grameen America Ash Gupta Jackie Reses Antony Jenkins Richard Cordray Peter Thiel President, Global Credit Square Capital Lead Founder & Exec Chairman Director Entrepreneur, Investor Risk & Info Management Square Capital 10X Technologies CFPB Co Founder American Express PayPal Our Audience includes Everyone You Need to Meet 800+ 500+ Investors Banks 2017 LendIt USA Stats 5 Spotlight on
    [Show full text]
  • FINTECH Anything but Alternative
    FINTECH Anything but alternative Dealmakers in Technology Important disclosures appear at the back of this report GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority GP Bullhound Inc is a member of FINRA EXECUTIVE SUMMARY CONTENTS 02 Executive Summary 03 THE VIEW: Claudio Alvarez and Carl Wessberg 04 Key Trends 06 Funding for Fintech remains resilient 08 Alternative Finance leading the way 10 China cements position as a leader 16 Alternative Finance 19 EXPERT VIEW: Christian Faes - LendInvest 20 Digital Payments 23 EXPERT VIEW: Jacob de Geer - iZettle 24 EXPERT VIEW: David Fock - Klarna 25 EXPERT VIEW: Oscar Berglund - Trustly 26 Data Software 29 Insurtech 32 Digital Banking 35 EXPERT VIEW: Rishi Kholsa - OakNorth Bank 36 Asset Management 40 Methodology 2 FINTECH: ANYTHING BUT ALTERNATIVE 3 THE VIEW From GP Bullhound Claudio Alvarez Carl Wessberg Director Director Over the past three years, global venture capital investment into Fintech has risen by 4.7x to $13.6 billion in 2016 and these companies are now creating significant shareholder value: there are now 39 Fintech companies valued at over a billion dollars. The reasons for the strong investment appetite are strong growth in e-commerce and a supportive clear: using technology and data, Fintech firms in regulatory environment. However, in Europe, with its developed markets are providing financial services stronger traditional financial services sector, a focus and solutions in more efficient and streamlined on disruption is giving way to collaboration and ways to fill the gap that legacy institutions have left. enablement and a “flight to class” has emerged Meanwhile, in emerging markets, Fintech firms are amongst investors targeting more mature segments, building a world-class, digital-first financial services such as alternative lending and payments.
    [Show full text]
  • Marketplace Lending a Temporary Phenomenon? Foreword 1
    Marketplace lending A temporary phenomenon? Foreword 1 Executive summary 2 1. What is marketplace lending? 4 2. Marketplace lending: a disruptive threat or a sustaining innovation? 8 3. The relative economics of marketplace lenders vs banks 11 4. The user experience of marketplace lenders vs banks 23 5. Marketplace lending as an asset class 24 6. The future of marketplace lending 30 7. How should incumbents respond? 32 Conclusion 35 Appendix 36 Endnotes 37 Contacts 40 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms. Deloitte LLP is the United Kingdom member firm of DTTL. This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication. © 2016 Deloitte LLP. All rights reserved. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom.
    [Show full text]
  • A Case of Regulatory Evolution
    Forum A CASE OF REGULATORY successful integration of sector regulation, alongside continued government support for alternative finance. EVOLUTION – A REVIEW OF While many member states have opted for a “wait and THE UK FINANCIAL CONDUCT see” approach to crowdfunding regulation, the United Kingdom was of the first nations to create bespoke reg- AUTHORITY’S APPROacH TO ulation for crowdfunding activities. As the regulating CROWDFUNDING body that monitors and supervises crowdfunding ac- tivities in the UK is the Financial Conduct Authority (FCA)2, this article will centre on the regulatory regime that it has adopted. ROBERT WarDROP AND 1 The FCA defines crowdfunding as an umbrella term to TANIA ZIEGLER capture various “categories” of activity, some of which are regulated whilst others are not. The general defini- Introduction tion of crowdfunding, according to the FCA is “an inter- net-based business model […] in which people and busi- Across Europe, crowdfunding is quickly moving from a nesses (including start-ups) can try to raise money from fringe funding instrument to becoming a mainstream fi- the public, to support a business, project, campaign or nance channel, connecting “crowds” to fund businesses, individual” (FCA 2016a). This broad term includes four projects and individuals. In its recently published Report sub-categories: on Crowdfunding in the EU Capital Markets Union, the European Commission details the importance of crowd- • Donation-based crowdfunding: people give funding as “an important source of non-bank financing money to enterprises or organisations whose activi- in support of job creation, economic growth and com- ties they want to support. petitiveness” (European Commission 2016).
    [Show full text]
  • Technology Solutions for PPP and Beyond
    Technology Solutions for PPP and Beyond Research Brief JUNE 2020 Small businesses’ struggles to obtain federal Paycheck Protection Program loans over the last two months underscore the substantial obstacles that they face in accessing capital and financial services more generally. Using data and technology to make small business lending faster, less resource intensive, and more accurate is critical to fostering a more rapid and inclusive economic recovery and to building a more resilient small business sector going forward. Small businesses are experiencing severe hardships during the COVID-19 crisis. To help support businesses with fewer than 500 employees, Congress established the Paycheck Protection Program (PPP) in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).1 The PPP is a temporary emergency Small Business Administration (SBA) 7(a) loan program with favorable terms, including a 100% government guarantee and potential forgiveness. However, PPP implementation has high- lighted and in some cases exacerbated longstanding challenges faced by small businesses in accessing credit: » Verification of identity. Many small businesses did not have extensive relationships with participating banks at the start of the Paycheck Protection Program. To onboard new customers, lenders must comply with identity verification and due diligence requirements, which demand a certain level of rigor, time, and resources. No central information repository exists for businesses, and traditionally used data sources may not include certain companies, such as newly formed businesses. » Insufficient information to evaluate loan applications. Small businesses’ financial information is not publicly available, less standardized than larger companies, and often not digitized. Lenders have historically devoted substantial resources to gathering and analyzing documents and data about small businesses.
    [Show full text]
  • Fintech Credit: Market Structure, Business Models and Financial
    22 May 2017 FinTech credit Market structure, business models and financial stability implications Report prepared by a Working Group established by the Committee on the Global Financial System (CGFS) and the Financial Stability Board (FSB) This publication is available on the website of the BIS (www.bis.org) and the FSB (www.fsb.org). To contact the BIS Media and Public Relations team, please e-mail [email protected]. You can sign up for e- mail alerts at http://www.bis.org/emailalerts.htm. To contact the FSB, please e-mail [email protected]. You can sign up for e-mail alerts at www.fsb.org/emailalert or follow the FSB on Twitter: @FinStbBoard. © Bank for International Settlements and Financial Stability Board 2017. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN 978-92-9259-051-2 (online) ii Preface FinTech credit – that is, credit activity facilitated by electronic platforms such as peer-to-peer lenders – has generated significant interest in financial markets, among policymakers and from the broader public. Yet there is significant uncertainty as to how FinTech credit markets will develop and how they will affect the nature of credit provision and the traditional banking sector. Against this background, a group of representatives from the membership of the Committee on the Global Financial System (CGFS) and the Financial Stability Board (FSB) Financial Innovation Network, together with the Secretariats of the CGFS and FSB, undertook this study of FinTech credit. The study draws on public sources and ongoing work in member institutions to analyse the functioning of FinTech credit markets, including the size, growth and nature of activities.
    [Show full text]