Michele Tivey’s Post

Fintech and BNPL - or 'Buy now, pain later". Klarna is the market leader, Monzo is also growing its book. It seems such a pain free, logistically easy product which customers are lapping up. The FCA is not so sure however. Watch out for conduct issues for participants given the potential for exploiting vulnerable borrowers! At the same time Klarna is selling off its exposure to the hedge fund Elliot in a bid to free up capital. Revolut and Monzo have had to battle for their banking licenses and have very high capital ratios compared with Klarna. It is a sector to watch! #fintech #creditrisktraining #financiallines

My understanding of these suggestions, after reading this article is that there will not be any skin in the game for the NBFC in the process while getting the advantage of (financial) leverage at a good price. Which means the NBFC will act merely as a broker, even as one of the stated benefits of co-lending is risk sharing. Bringing MSME as a positive element in the entire process along with greater credit dissemination need to be viewed alongside with depositors' money for which there's a deposit insurance and oftentimes fiscal backing (possible bank bailouts).... could lead to a situation that we have already witnessed in the case of GFC ---housing mortgage brokers originating loans without skin in the game

RBI's guidelines for LSPs to benefit lenders & borrowers, increase compliance: FinTech Leaders While the fintech industry welcomed RBI's draft guidelines on digital lending — transparency in aggregation of loan products from multiple lenders, FinTech Leaders highlighted how this move which might seem as a hurdle now will actually benefit the industry at large and further said that it will increase compliance burden for lenders. Here's what they said: Shilpa Mankar Ahluwalia | Shardul Amarchand Mangaldas & Co Bhavin Patel | LenDenClub Story by Anushka Sengupta #reservebankofindia #fintechs #lsp #lenders #borrowers #loanproducts #compliance https://lnkd.in/gZQgAEkZ

#RBI revises guidelines for #P2P Lenders, forces brakes on the growth! We have 26 licensed NBFC-P2P platforms, with US$9.5 billion AUM (about 79k crore Rs) with a CAGR of 22%. This segment has seen growth through partnerships between P2P platforms and #fintechs such as Cred, BharatPe etc. P2P offers relatively lower cost of capital from the individual lenders (than what is usually available to base layer NBFCs), #fintechs could structure and price products based on the risk of borrowers. These arrangements flourished with #FLDG (or some form of guarantees from the LSP fintechs) and pooling of lenders' monies, as it allowed quicker and more cost-effective #credit delivery. Peer-2-peer lending has been under close review by the RBI because of rampant growth through these partnerships and deposit-esque products being marketed by the #NBFCs (NBFC-P2P) a) No form of #creditrisk to be undertaken by the P2P Platforms - no #FLDG, no credit #guarantee. (it cannot be under any #insurance coverage either) b) All of the credit risk lies with the individual lender - this means that there cannot be any pitches to #lenders for assured return. RBI has also avoided the term "investment" in reference to money being lent by the lenders. c) Platform has to match or map borrowers to lenders, and disclose the information fees, amount, tenure upfront. Platform cannot use money from one lender to replace another lender on a particular transaction and cannot restrict it to a closed group only. Platform to publish actual principal and interest loss, and not just NPA%. It would bring #transparency for lenders, do away with any pooled lending, and reduce #ALM mismatches. d) P2P cannot market products with fixed tenure-fixed returns or any other liquidity options. #CredMint #FMPP by Lenden Club, #13Karat e) Decision around pricing of fees for borrowers or lenders cannot be outsourced P2P platforms have a role to play in #financialinclusion. New-to-credit (#NTC) and borderline #creditscore borrowers (who usually get left out by formal financiers) can expect loans from considerate empathetic individual lenders. The first guidelines issued 7 years back were by themselves quite watchful, given those were released just around the time 300+ p2p players shut down overnight in China. These newer guidelines shall certainly put brakes on the growth rate and put pressure on the platforms to reinvent themselves. One major challenge for P2P players has been to attract investors to park money especially when they have to compete with a soaring capital market. While mapping lender to borrower, putting the cognitive decision burden on the lender shall further thwart away several lenders who prefer convenience offered by #AMCs for #mutualfunds. #P2P perhaps needs a major reboot. #digitallending #peer2peer #RBI

Is this a sign of the Fintech market evolving? 🤔 Allica Bank launched in 2020, and the digital bank have reported their first profitable year - with profits rising from a £1.6m loss in 2022 to a pretax profit of £16.1m in 2023. Their focus on transforming banking for the critical SME market, a surge in deposits and lending growth, as well as a boost from higher interest rates, aligned a strong strategy for the firm to thrive, even in challenging market conditions. 💡 If you are Fintech or Banking professional looking towards new growth as a company or individual, get in touch with Bob Mitchell for a conversation about how you can harness talent potential early to get ahead of the market. 📩 #fintech #banking #growth

Another Friday, and yet another release from RBI shaking up the fintech world. This time it comes in two parts: Part 1: FAQs Issued on Default Loss Guarantee a. Clearly states that DLG arrangement is not permitted for P2P lending, Line of Credit and Credit cards. This would affect several fintechs operating in the MSME- Line of Credit space. b. FLDG portfolio will be defined beforehand, and the amount will be fixed and not dynamic. c. Lastly, DLG amount cannot be reintstated. This was again a grey area - where different fintechs were taking interpretations. Its now made clear that Recovery will reduce the pool outstanding and the FLDG amount cannot be replenished with the same. Part 2: Draft Guidelines for Transparency in Loan Aggregation RBI has release guidelines for the Loan Aggregator LSPs. aimed at ensuring that the borrower is fully aware of the RE granting the loan and is making an informed choice regarding his/her loan. The draft guidelines state that: a. LSPs need to provide a digital view of all the loan offers available to the borrower from all the willing lenders with whom the LSP has arrangements with. This digital view shall include: i. Name(s) of the RE(s) extending the loan offer ii. Loan Amount iii. Tenor of the loan iv. Annual Percentage Rate (APR) v. Any other, key terms and conditions to enable the borrower to make a fair comparison between various offers vi. A link to the KFS shall be provided for each RE b. While the LSP is free to adopt any mechanism to ascertain the willingness of the lenders to offer a loan, a consistent approach needs to be followed and the same must be disclosed on the LSPs website. c. The content displayed should be unbiased and shall not directly/indirectly promote or push a product of a particular RE. The business of loan aggregators will go through a shakeup wherever there are multiple REs for a loan type as loan aggregators will no longer be able to "direct/influence" more traffic towards one RE. On one hand, it might increase transparency for both the customer and the REs from the larger aggregators. On the other hand, smaller aggregators might just choose to go for single partnerships to avoid the additional complexities that this regulation might bring on to them. The RBI has invited comments from relevant stakeholders on the draft framework by 31st May 2024. Would be interesting to see what the lending aggregators have to say on this.... #fintech #regulations #compliance #digitallending

Are high interest rates making non-bank lenders uncompetitive? 🏦 Higher interest rates affect all industries, but none more than lending businesses. This has revealed key questions about the viability of fintech lenders in a higher interest rate environment: 🟢 Is there real differentiation between products? 💸 Will there be a race to the bottom on price? 🏆 Can a competitive advantage be sustained? Read on below…👇

Gone are the days when #Digital Banks were known as cash burners! UK mobile lender Starling Bank has reported its third full year of profitability, with pre-tax profits up 55% to £301.1m and revenue up 51% to £682.2m. Total customer accounts at Starling rose to 4.2m from 3.6m and card spending went from £16.5bn to £19.9bn. Fixed term deposits flew from a standing start to £430.6m, helping total deposits increase by 4.0% to £11.0bn. John Mountain, interim CEO, says: "Although higher base rates undoubtedly provided a strong tailwind, boosting our net interest margin to 4.34% from 2.72%, we grew by attracting more customers in a competitive market because we deliver great experiences, both through our app and our UK-based customer service agents." The bank is expecting to grow profits further through the launch of its Banking-as-a-Service proposition Engine, which has already signed its first two clients in Australia and Romania. Starling investor Chrysalis last month forecast that Engine could generate hundreds of millions of pounds a year for the UK digital bank, propelling it towards a £10 billion valuation. Mountain says: "Looking to the future, I see in Starling a well-capitalised bank that has grown rapidly but that has captured 2.8% of the UK current account market so far, leaving significant headroom for further domestic expansion. In Engine, I see a world-class technology provider that has just begun to crack open a £91bn global addressable market for SaaS." He says that Starling remains committed to a public float in London. While a date had not been set, discussions in board meetings and with shareholders had focused on plans for an IPO. Mountain will step aside in the next few weeks to make way for Raman Bhatia, the chief executive of energy retailer OVO and former HSBC digital banking lead, who will take over the reins following the departure of founder Anne Boden and will lead the firm's IPO planning. https://lnkd.in/dd9unW5A

Is there any scenario under which banks have not disappeared over the next ten years? Bit aggressive prediction I confess but: - On the retail and small business side, Revolut, Wise and others offer the option to put your checking and saving account into the same vehicle: a money market fund. Fully liquid you add and withdraw when you want and at the moment, you get up to 4.75% on your balance (in GBP) plus you have multicurrency accounts plus debit cards, and all that for free and in fact get cash back on spending vs banks giving you zero on your checking/saving, charging you for cards and your account etc etc. The delta is huge! OK you dont have gov guarantee on your money market fund but you can have some stocks and other things (to diversify) and the odd of a loss on a good money market fund is not zero but close to it. Banks have branches... big deal. Who still goes there? The main reason banks are not gone may be mortgages but wait until Revolut, Wise and others offer mortgages... it is not that hard, you dont take the money from your balance sheet anyway, and so Revolut and others can offer mortgages like anyone else they just need the green light of the regulator and boom. - Corporate lending: I guess no need to show that private credit firms are all over the place. Banks retreated to just provide credit lines (but these PC firms are also looking into doing that, not that hard to do) and sourcing some deals (but no need to be a bank for that) and underwriting. I guess only underwriting is a potential activity. But you don't need to be a bank. In fact, you could raise a PE fund that does public debt and public equity underwriting (OMG did I just give away the next trillion dollar idea?) LMK your thoughts

🚀✨ Exciting News in Fintech! 🏦💻 Dive into the future of lending with this transformative article! 📈💡 Why is Fintech reshaping mortgages? Find out the latest insights and trends in the industry! 🌐💰 Don't miss out on the revolution! Read more here: https://lnkd.in/e9qPQbTR #Fintech #Lending #Mortgages #Technology #Innovation #Finance #DigitalTransformation #FutureReady #FintechRevolution #FinancialServices #TechTrends #DigitalLending #Disruption #FinancialInclusion #Investment #HomeOwnership #Empowerment #DigitalEconomy #FinancialFreedom #StayInformed #JoinTheMovement #TRAiNED #GETTRAiNED