Happy Tuesday!
In This Blogpost:
Fintech and the Innovation TrilemmaIndonesia’s
Fintech Lending: Driving Economic Growth Through Financial Inclusion
Value of new P2P lending hits record high but returns are falling
Orca highlights P2P investor opportunities in Germany
Small sum cross-border lending “almost impossible” as non-bank lenders call on EU to revise rulebook
HSBC poised to launch app-only SME bank Kinetic.
Fintech and the Innovation TrilemmaIndonesia’s
Whether in response to robo-advising, artificial intelligence, or cryptocurrencies, regulators around the world have made it a top policy priority to supervise the exponential growth of financial technology (or 'fintech") in the post-crisis era.
However, applying traditional regulatory strategies to new technological ecosystems has proved conceptually difficult. Part of the challenge lies in managing the trade-offs that accompany the regulation of innovations that could, conceivably, both help and hurt consumers as well as market participants.
This article offers a new theoretical framework for understanding and regulating fintech by showing how the supervision of financial innovation is invariably bound by what can be described as a policy trilemma.
Indonesia’s Fintech Lending: Driving Economic Growth Through Financial Inclusion
The report provides six key takeaways from Indonesia’s Fintech lending: Indonesia has a unique Fintech Lending ecosystem due the nature of its market and regulatory approach; expanding the coverage of Indonesia’s “Credit Invisible” may require a tailored approach; an integrated lending database is required to prevent misconduct, especially overleveraged debt behaviour; TKB901 becomes the “health” indicator of the industry; collaboration is the key to ensuring stable financing and sufficient loan portfolio; future growth will be driven by cross-industry collaboration and supportive regulation.
Value of new P2P lending hits record high but returns are falling
Peer-to-Peer lending hit a record high of £3bn in the first half of the year but losses are also increasing, a report warns. The latest Marketplace Lending Index from the Link Group found that marketplace – or P2P – platforms are collectively lending £16m a day. The index estimates that the value of lending could total £6.2bn for the entirety of 2019. Business lending totalled £1.1bn in the first six months of 2019, a rise of 14.5 per cent annually, while new consumer lending was up 9.4 per cent to £990m. Despite an increase in lending, returns have fallen to the lowest on record, according to the research. Investors are receiving 3.8 per cent on average, down from the peak of 6.3 per cent in 2016. This was attributed to rising loss rates, which the report blamed on a move away from contingency funds.
Orca highlights P2P investor opportunities in Germany
Consolidation of mainstream banks in Germany could provide an opportunity for institutional investors to back P2P lending platforms in the country.
Analysis of Germany’s P2P lending sector by Orca found returns are slightly higher than in the UK, at five to seven per cent compared to four to six per cent among Zopa, Funding Circle and RateSetter.
However, P2P makes up a small amount of roughly 0.08 per cent of lending in Germany due to a tougher regulatory environment.
Small sum cross-border lending “almost impossible” as non-bank lenders call on EU to revise rulebook
Over 100 digital lenders from four European countries have written to the European Commission to call for new rules to facilitate small sum, cross-border lending which they argue has become increasingly difficult. They argue that member states implementing existing rules have “varied widely, ranging from carefully crafted, evidence-based measures seeking to optimise the regulatory framework to the introduction of snap regulations driven by immediate political pressures.”
The Commission is currently reviewing the Consumer Credit Directive (CCD), which regulates much of this industry across Europe. Among the letter’s suggestions sent to Jan Panek, Directorate-General for Justice and Consumers, are specific calls for the CCD to be revised to enable cross-border access to credit bureau information for non-resident businesses and to encourage the benefits of cross-border digital lenders.
HSBC poised to launch app-only SME bank Kinetic
High street bank HSBC is preparing to launch its own digital bank called Kinetic to take on NatWest’s Mettle and challenger bank Tide in the SME banking space. Kinetic is said to fully launch to the public in 2020, and has been created by HSBC “based on real-life insights from over 2,400 UK businesses”. Kinetic is already integrated with Xero’s accounting package, and HSBC says it is working with other providers like Quickbooks and Sage to add them to the platform. While the app will be starting with standard digital banking features like automatically categorising transactions, in the future, HSBC says it will be adding advanced cash flow predictions to help sole traders and limited companies understand their financial health.
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