News Briefing - Crowdfunding, SME And Alternative Finance

1.UK – P2P

 

P2P Finance News reports on some tinkering at GLI.

 

“GLI FINANCE has said that the growth rates of some of the fintech and peer-to-peer platforms it has backed have been slower than expected but hopes that equity fundraising rounds will boost the portfolio.

The alternative finance firm highlighted the valuations of platforms owned through its investment portfolio subsidiary Fintech Ventures as a high risk.

“Most platforms are still only in the first three or four years of operation,” GLI Finance said in its annual report for 2017.

“Their growth rates have all been slower and more capital intensive than was initially anticipated when the group’s first investments were made.

“There remains a risk that some platforms may not be successful in the longer term, either as a result of lack of loan funding, lack of working capital funding or difficulties in establishing a competitive position in their chosen markets.”

However, the report noted that several of the platforms have produced good year-on-year growth that has helped Fintech Ventures increase its valuations of the businesses, largely due to successful third-party fundraisings.

“Whilst investment risk related to this portfolio will remain an ongoing feature we hope to see an increase in successful third-party equity raises in the foreseeable future with several being considered in 2018,” it added.”

 

2. UK – P2P

 

Global Banking and Finance reports on restructuring at Zopa.

 

“Zopa, the pioneering financial services company, has today announced a governance restructure in advance of launching its next generation bank.

The re-structure will establish separate boards for the Zopa P2P business, proposed bank (subject to banking licence approval) and Group in order to facilitate the increasing scale of the business, ensure good corporate governance and protect the interests of its customers.

The changes come with the appointment of two new board chairs as well as two new independent non-executive directors to the proposed bank. Christine Farnish will be chair of the P2P board and Peter Herbert will be chair of the proposed bank.”

3. UK - FinTech

FT Alphaville runs a blog examining FinTech valuation (specifically referencing Funding Circle).

"No tech subsector has reached stratospheric valuations as consistently as financial technology, or fintech. The heady combination of huge markets, a radical platform shift to mobile, and newly vulnerable incumbent dinosaurs (be they banks, wealth managers, or insurers) has attracted over $30bn of annual investment. After a decade of evolution, 2018 looks set to be the first year we’ll see a herd of fintech firms go public. At least ten have filed or talked about an impending listing this year, including TransferWise, Credit Karma, Adyen and Funding Circle.

But there’s a danger this flurry of IPO activity could be a mixed blessing for the wider fintech industry. In a market buzzing with hyperbole and over-generous funding-round valuations, the reality of IPOs could present a real danger not just to company shareholders but across the wider industry.

Nowhere is this more apparent than at Funding Circle. Bankers and investors are talking up Funding Circle’s valuation at £2bn, despite the company having last raised money at below £1bn. £2bn for a business generating only something around £100m of revenue annually, even if it's growing at its current rate of around 50 per cent, is an awfully big sticker price for any industry. That amounts to over 16x revenue - for perspective, Google and PayPal are both valued at only 7x revenue."

4. UK – Regulation

 

Global broker FXTM gets an FCA licence, reports FX Empire.

 

“Although FXTM already holds licences from both CySEC (Cyprus Securities and Exchange Commission) and South Africa’s FSB (Financial Services Board), earning FCA approval is an important next step for the fast-growing company. FXTM Director Martin Couper explains why: “There were many good reasons to apply for the FCA licence, not least of which was our desire to reassure our clients that they are dealing with a fully-compliant, fully-regulated broker. Financial services companies now operate under the weight of a significant compliance mandate. We are thrilled to have qualified and are looking forward to operating in the UK.”

Holding this licence will allow the company to expand into new markets, something it is already doing at an accelerated rate. FXTM reported a 77% year-on-year increase in its client base in 2017, along with a 64% surge in the number of active users. The company’s commitment to training clients with a comprehensive programme of Ebooks, seminars and educational events, as well as multilingual customer support and localised services, is to thank for its success, says Couper. “We have always believed that an educated client is our best client; therefore, developing materials that will enhance traders’ knowledge of trading and markets is a top priority. We look forward to providing our UK traders with the same standard of services and education as our existing global clients.”

Recognition by the FCA is of particular significance for firms that seek to operate in the UK and, more generally, across the European Union. Ongoing uncertainty caused by Brexit is another time-sensitive motivator for FXTM. Couper elaborates, “We want to make sure that potential new legislation does not interrupt the services we provide to our clients. How international companies will operate post-Brexit is unclear, so we deemed it prudent to ensure there are strategic plans in place that guarantee business-as-usual for our clients, whatever shape the final Brexit agreement takes.”

 

 

5. US – FinTech

 

Crowdfundinsider reports a cryptocurrency-related criminal case . Caveat emptor…

 

“Renwick Haddow, a UK national, was extradited from Morocco to the US for committing fraud that saw over $36 million stolen from investors. The extradition is just part of a long criminal saga by Haddow. Last year, the SEC joinedthe U.S. Attorney’s Office for the Southern District of New York in filing charges against Haddow, an individual with a long history in scams. Haddow was accused of stealing over $180 million over a decade ago in an elaborate Ponzi scheme.

Haddow was said to have misappropriated investor funds and made false and misleading representations to investors in Bitcoin Store, Inc., Bar Works Inc., and related entities he controlled.

Haddow was expected to appear in the United States District Court for the Southern District of New York this past Friday.

According to the allegations in the Complaint, from November 2014 through June 2017, Haddow solicited investments in start-up companies he created, including Bitcoin Store, an alleged online platform for purchasing, selling, and storing the digital currency Bitcoin. Bar Works was described as a company that adapts former restaurants, bar premises, and other locations into co-working spaces.  Haddow supposedly made material misrepresentations about, among other things, the management, operations, and historical performance of those companies.

Haddow solicited investments through agent brokers and through his control of InCrowd Equity Inc., which represented itself as a crowdfunding platform where investors could purchase shares of start-ups supposedly vetted by InCrowd.  Haddow also misappropriated funds purportedly invested in Bitcoin Store and Bar Works for his own use and the use of others.

Haddow has been charged with two counts of wire fraud: one relating to the Bitcoin Store scheme and the other relating to the Bar Works scheme.  Each charge carries a maximum sentence of 20 years in prison.”

6. International – FinTech

 

Finance Magnates reports another move on the path to convergenece between fiat and crypto currencies.

 

“A cryptocurrency lending platform is campaigning to be allowed to also accept fiat money as collateral, according to a company announcement published in Medium.

ETHLend is a decentralised application on the Ethereum blockchain which offers peer to peer lending. Its stated purpose is to remove financial institutions from the process of taking out/giving financial loans, using smart contracts to allow individuals and businesses to “create a loan contract on their terms”.

According to the official website, this system has three main advantages. It removes the need to trust a loan provider because collateral is controlled by the smart contract, it is entirely transparent, and it is accessible to a greater number of people.

 

With a loan executed on this system there only are only two possible outcomes: one, the loan is repaid and the contract fulfilled, or two, the loan is not repaid and the borrower’s collateral is received by the lender.

If ETHLend is successful, users will be able to receive cryptocurrency loans after pledging fiat. According to CEO Stani Kulechov, the company compliance plan is as follows:

“Our next step is to implement KYC identification during the Q2 on the decentralised application by using a third party KYC provider and complying with all the applicable data protection laws. By exchanging our know-your-customer policy, we are de facto able to broaden our services to more institutionalised borrowers and lenders in demand.”

ETHLend raised almost 18 million dollars in its ICO which ended on the 30th of September 2017. The system’s native token is called LEND. According to coinmarketcap.com, it has a market capitalisation of just over 64 million dollars.”

 

7. International – FinTech

 

Crypto Coin Spy reports a hitch in an attempt to create an exchange to “change the face of crypto”.

“With their partnership announcement now just days away, the attention of the cryptocurrency community has again turned to Verge (XVG), this time to explain why significant amounts of XVG have been transferred to cryptocurrency exchange Binance. The XVG was raised in a crowdfunding campaign, apparently needed to secure a partnership so significant it will “change the face of crypto”.

The Verge team have claimed that the transfer is to pay for an integration with hardware wallet Ledger. However Ledger have denied that any arrangement such plan is in place.”

 

8. International – FinTech

 

Crowdfundinsider reports an innovative deal.

 

Billon, a company that uses blockchain to build business solutions for real money and smart data, announced this week it has formed a partnership with Igoria Trade, the company behind IgoriaCard, which allows users to make payments in 150 currencies with low exchange costs and access to a dozen free accounts. Billion reported that its customers will now be able to utilize Igoria’s service and payment processing, in addition to the existing solutions built using its Distributed Ledger Engine.”