Greetings,
US GDP growth for the 4th quarter was revised upwards from 2.5% to 2.9%, capping an impressive 2017. Consumer spending has driven the bulk of GDP growth and it will be relevant to see if this trend continues given the weak retail sales in Q1 and softening in some leading economic indicators. Core PCE, the Fed’s preferred inflation indicator rose 1.8% YoY in February. Personal spending rose 0.2% while incomes rose 0.4% MoM suggesting that Americans are saving more – a long-term positive for growth – although a short-term pressure on retail sales and consumer spending.
Before we get into the industry news, we wanted to share a peek into PeerIQ’s credit facility management suite.
PeerIQ’s Credit Facility Management Suite
PeerIQ streamlines credit facility management for borrowers and lenders with easy-to-use and cost-effective solutions. The Credit Facility Management Suite has an enhanced self-service reporting functionality with automated report generation and an export to excel functionality.
The Credit Facility Management Suite provides:
- Dashboard overview of multiple facilities across various asset classes
- Daily Covenant Calculation and Monitoring
- Time Series Visualization and Projections
- Automated Borrowing Base Report Generation
- Collateral Cashflow Projections
- Scenario Analysis
Visit our booth at LendIt, or reach out to learn more!
FinTech News & Regulatory Updates
Prosper announced 2017 results that showed a net loss of $115 Mn, and a YoY increase in loan originations by 31% and transaction fee revenue by 37%. Prosper has now originated over $11 Bn in personal loans since inception. Prosper also updated investors on loan performance showing that delinquencies had peaked on the 2017 Q2 vintage..
In other fintech news, Bloomberg’s Julie Verhage has a profile piece on SoFi and discusses the opportunities and challenges facing SoFi’s new CEO Anthony Noto including upselling the company’s high-earning clientele and fending off GS’s Marcus.
FinTech financing continue. Avant founder John Sun has raised $15 Mn for a startup that may transform how consumers and credit bureaus manage and deliver consumer credit data.
In regulatory news, Arizona has become the first state in the U.S. to adopt a “regulatory sandbox” that will allow fintech firms to test their products for up to two years and serve as many as 10,000 customers before needing to apply for a formal license. We have been arguing for the need of a regulatory path to be provided to fintech firms to drive innovation in this space, and this is a step in the right direction.
The Philly Fed found that LendingClub’s lending has penetrated areas that may be underserved by traditional banks and areas where the local economy is not performing well, providing further ammunition that the FinTech sector is is promoting financial inclusion.
Growth of Digital Banking – Citi enters the ring to compete with GS Marcus
Citibank announced that it is going “light bricks, heavy clicks” as it launches a mobile app that will offer a full suite of banking, credit-card, lending, and investment tools to all users, including holders of the bank’s over 120 Mn U.S. credit card accounts. Citi had been shrinking its retail branch footprint to focus on affluent customers in major cities but will now gain a nationwide footprint with its digital bank.
Banks are aggressively rolling out digital services, and as we noted in a prior newsletter, banks are either partnering with fintechs or developing these capabilities in house. Banks without a digital footprint risk losing long-term customer relevance to “Big Tech” firms (e.g., Amazon, Intuit, Apple, Paypal, Square, etc.) with captive customer channels.
So far, Goldman Sach’s Marcus has been the most talked-about entrant in the digital banking space. Goldman launched Marcus exclusively to be a digital bank and recently consolidated its deposit base under the Marcus umbrella. Citi will offer digital and physical banking under the Citi brand, and also launch a roboadvisor through the app later this year. The digital banking is warming up with offerings including BBVA’s Compass and JP Morgan on the way.
Continuing the theme of bank-fintech partnerships, JPM has integrated Amazon’s Alexa to provide investment research and market quotes to its institutional clients. The news indicates a deeper partnership between the two companies as both firms are also exploring offering a co-branded checking account, are teaming up on a healthcare initiative, and already offer a co-branded credit card. See our analysis of Amazon’s financial sector ambitions here.
PeerIQ’s Lending Earnings Insights
Do check out our latest Lending Earnings Insights tracker. On a quarterly basis, following earnings announcements, we analyze lender performance with a focus on credit performance trends and forward-looking commentary. Some of the main themes that we explore in this tracker are where we are we in the credit cycle, credit normalization across lenders, how rising interest rates are affecting lenders and ongoing bank-fintech partnerships.
Conferences
CEO Ram Ahluwalia will be speaking at LendIt 2018 on the 9th of April on “Why are Personal Loan Losses Rising?”
PeerIQ Mentions
- PeerIQ Q1 Online Lending Report: A Specter is Haunting Financial Services – the Specter of Amazon (CrowdFund Insider, 3/28/18)
- Raters Lower Loss Estimates on Online-Lending ABS: PeerIQ’s Dole (Bloomberg First Word, 3/21/18)
Industry Update:
- S. Economic Growth Revised Higher on Spending, Inventories (Bloomberg, 3/28/18) 4Q GDP growth was revised upwards to 2.9% driven by an uptick in consumer spending.
- S. Incomes Rose More Than Consumer Spending in February (WSJ, 3/29/18) The Fed’s preferred inflation indicator rose 1.8% YoY. Personal spending rose 0.2% while incomes rose 0.4% MoM, suggesting that Americans are saving more.
- Lower-Income Americans Drive Consumer Sentiment to 14-Year High (WSJ, 3/29/18) US consumer confidence was revised slightly lower to 101.4 for March, still at a 14-year high, driven by the tax reform bill and optimism around rising wages.
- Citigroup to Again Be a Nationwide Bank, but in Digital Form (WSJ, 3/25/18) Citi is rolling out features on its mobile apps to offer a digital banking experience to new and existing customers intensifying competition in the digital banking space.
- JPMorgan Brings Amazon’s Alexa to Wall Street Trading Floors (Bloomberg, 3/26/18) In another example of collaboration, JPM’s institutional research is being delivered through Alexa.
- Prosper Reports Full Year Results; Posts Positive Operating Cash Flow and 31% Increase in Loan Originations Year-Over-Year (BusinessWire, 3/26/18) Prosper had a net loss of $115 Mn, and a YoY increase in loan originations by 31% and transaction fee revenue by 37%.
- Prosper Performance Update: February 2018 (Prosper Blog, 3/28/18) Prosper has lowered the risk profile on 2017 Q4 and 2018 Q1 vintages to tackle high delinquencies in the first 3 quarters of 2017.
- He Can Fix Your Student Debt, but Can He Sell You a Mortgage? (Bloomberg BusinessWeek, 3/29/18) Julie Verhage talks about the opportunities and challenges facing SoFi, including upselling the company’s high-earning clientele and fending off Marcus.
- Larry Summers to step down from LendingClub’s board (American Banker, 3/28/18) Larry Summers has resigned from LC’s board while Susan Athey, an economist from Stanford, is joining the board.
- Avant Founders Raise $15 Million for Blockchain Firm, Token Sale (Bloomberg, 3/27/18) Avant’s founders have raised $15 Mn for a startup that will allow utility companies, social-media companies and asset managers direct access to consumer information.
- Do Fintech Lenders Penetrate Areas That Are Underserved by Traditional Banks? (FRB Philadelphia, March 2018) The FRB finds that LC’s lending has penetrated areas that may be underserved by traditional banks and areas where the local economy is not performing well, providing a shot in the arm for LC.
- Arizona Becomes First U.S. State To Launch Regulatory Sandbox For Fintech (Forbes, 3/23/18) Arizona is fostering financial innovation by allowing fintech firms to test their products for up to two years and serve up to 10,000 customers before needing to apply for a formal license.
- Community bank launches digital account targeting the unbanked (American Banker, 3/22/18) AxiomGo is a mobile app that provides digital banking services for the underbanked, in another example of banks using technology to broaden their customer base.
- Petal, WebBank to launch card for ‘credit invisibles’ (American Banker, 3/28/18) Petal and WebBank are launching a credit card for the roughly 90 Mn borrowers who have little to no credit history, using cashflow underwriting methods.
- Equifax Names Warburg Pincus Executive Its New CEO (PYMNTS, 3/28/18) Equifax’s CEO search has concluded and the board has named Mark Begor from Warburg Pincus as its new CEO.
Lighter Fare:
- Sweetgreen’s Tech-Driven Menu Shakes Up the Fast-Casual Food War (Bloomberg, 3/29/18) Millenials’ favorite bowl shop uses blockchain technology to get customer feedback on menu changes.