Category Archives: Marketplace Lending/P2P, Online Lending

Beyond cryptocurrency: There are new blockchain opportunities for SMBs

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FinancialPost | By John Lorinc | Sept. 19, 2017

When the Bank of Canada and payments giant Moneris last spring threw cold water on a blockchain trial as a potential clearance system, Canadian startups could have been forgiven for feeling deflated.

But Canadian blockchain entrepreneurs might have cause for renewed optimism with the emergence of potential applications in a range of industries – beyond such cryptocurrencies as Bitcoin — as well as new investment vehicles.

In late August, blockchain guru Alex Tapscott told Bloomberg that NextBlock Global Ltd., a blockchain-directed venture capital fund, plans to raise $50 million in an IPO on the Toronto Stock Exchange later this fall. Meanwhile, four Canadian blockchain industry groups in June applied to the federal government for funding to establish a “supercluster” that would finance new R&D and attract startups.

See: Blockchain Will Disrupt Every Industry

While Bitcoin is almost a decade old, there’s been a surge this year in the issuance of new cryptocurrencies, including one in August by Montreal-based Impak Finance, according to Coin Market Cap data, which estimates there are over 800 in circulation now. Much of this activity depends heavily on the maturation of blockchain technology and platforms, such as Switzerland-based Ethereum, and has fuelled this sector’s wild west reputation as a haven for speculators.

Blockchain systems are digital “ledgers” that store encrypted transaction information in networks of specially designed servers. While the technology originally emerged to support Bitcoin, a growing number of startups are looking to adapt blockchain for use in such sectors as fintech, securities, insurance, natural gas, and supply chain applications. The technology is designed to create distributed databases of information that can expedite a wide range of transactions with greater speed and security than more centralized processing systems can offer.

“Within a few years, we’re going to be seeing practical applications for blockchain beyond cryptocurrency,” predicts Jeff Hindle, managing director of finance and commerce for MaRS, adding that these uses are more suitable for corporate customers. “That’s a different prediction than even a year ago.”

There’s lots of interest in Canadian blockchain firms, Hindle says. He points to Toronto startup Nuco.io, which this spring established a partnership with the TMX’s natural gas exchange to test a blockchain algorithm that expedites the verification of service agreements between suppliers and consumers. Nuco’s founders, he says, “understand the practical advantages and limitations of blockchain, which has allowed them to advise on the types of experiments that are suitable for the technology.”

See also: Don Tapscott Announces International Blockchain Research Institute

Another startup, Bluzelle, is looking to develop data-storage services based on blockchain techniques and expects to eventually raise capital through ICOs, according to founder Pavel Bains. The idea is to allow far-flung networks of specially configured servers to provide storage as a less expensive alternative to centralized cloud-based systems, which, the company says, are prone to downtime and vulnerable to data theft.

“A lot of these ventures are already interesting to investors from an R&D perspective,” says Hindle.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both investment and social crowdfunding, blockchain ICO, alternative finance, fintech, P2P and online investing stakeholders across the country.  NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a vibrant and innovative online financing industry in Canada.  Learn more About Us or visit www.ncfacanada.org.

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China’s fintech firms eye overseas IPOs to fund growth as regulations tighten at home

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South China Morning Post | Sep 6, 2017

A new wave of initial public offerings (IPOs) by mainland Chinese financial technology (fintech) companies is taking shape as dozens of unprofitable technology start-ups rush to raise funds overseas amid tightened regulations at home.

The A-share market, due to its profitability requirements, remains off-limits to most Chinese fintech firms, particularly peer-to-peer (P2P) lending platforms that were once regarded as an important part of the mainland’s reform of the banking system.

See:  China’s ICO Ban: A Full Translation of Regulator Remarks

Depositors’ dwindling interest in chasing returns from P2P operators following a raft of scandals over the past two years point to hard times ahead for many of the companies despite their ambitions of serving the country’s cash-hungry small businesses and individuals.

The increasing demand for financing has prompted a clutch of fintech firms to kick off their overseas IPO processes, most of which plan to complete fundraising in the next 12 months.

“An increasing number of fintech IPOs in Hong Kong and the United States are expected to take place,” said Gao Jianbin, a PwC partner. “They mainly aim to list in the US, though Hong Kong is also an option.”

Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, is seeking to raise as much as US$1.5 billion via a Hong Kong IPO.

The online insurer, funded by mainland internet giants Alibaba and Tencent, claims to be the largest insurance firm on the mainland in terms of the number of customers served and policies sold.

After five years in business, Zhong An has developed a customer base of about 500 million people.

Alibaba, owner of the South China Morning Post, holds 16 per cent of the online insurer though its affiliate Ant Financial.

Other big mainland-based fintech businesses, including Lujiazui International Financial Asset Exchange (Lufax) and Ant Financial, are planning IPOs outside the mainland, rather than on the A-share market.

See:  China Issues Online Lending Rules: Panic Ensues

The China Securities Regulatory Commission (CSRC) originally planned to set up a board for emerging industries at the Shanghai Stock Exchange, creating a listing venue for tech firms such as Ant Financial, Zhong An and other US-listed technology businesses which sought to relist on the mainland.

But the regulator scrapped the plan in March 2015 in an effort to avoid a fresh equity influx into the beleaguered market at the time.

Ant Financial and Lufax have yet to unveil detailed time frames for their IPOs.

“For many small fintech firms, an IPO in the near future is necessary to bolster their businesses, hone their image, replenish their capital and attract talent,” said Gao Hongxia, an analyst at fund consultancy Zero2IPO. “An IPO lays a foundation for their long-term healthy development.”

Analysts said P2P companies, in particular, are hungry for fresh capital to reinforce their business growth.

Only two mainland-based P2P operators – Yirendai and China Rapid Finance – are currently traded in New York, but last month Sorghum Investment announced a back-door listing through a reverse merger with Nasdaq-listed China Commercial Credit, which would make it the third.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Blockchain Is Set To Disrupt Industry Infrastructures

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Forbes | By Alexandro Pando | September 1, 2017

Three decades ago, the personal computer catalyzed the shift from an analogue-based system of things to a digital one. Today, in a similar manner, blockchain is becoming one of the most prevailing disruptive technologies, leading the frontier for change from a centralized server-based internet system to a cryptographic transparent network.

A Decentralized System Of Handling Resources

In its simplest form, blockchain is a digital ledger system shared and publicly hosted by a verified network of peers, each with a synchronized and identical transcript of the information accommodated in a digital ledger. Blockchain technology does not follow predominant central server architecture; information is instead hosted on multiple peer-to-peer computers to form a massive network. This framework represents the crux of blockchain tech. It fosters transparency, drastically cutting information processing (transaction) costs and provisions a practical firewall against hacks and intrusion.

Eliminating The Need For Third-Party Moderation

Blockchain technology operates what is known as a distributed network consensus. This mechanism enables the blockchain system to auto-moderate all transactions by cross-referencing newly initiated activity with existent and verified information sets. Once the entire system confirms the validity of such a transaction, it is implemented, encrypted and embedded into the blockchain network as a tamper-proof information set.

This tech has the potential to transform the financial industry’s infrastructure, where banks, fiat transfer services and other intermediaries continue to charge exorbitant premiums for providing and mediating financial remittances. Secure encryption and public access to unforgeable records mean that transactions orchestrated on the blockchain system are not only transparent but are more invulnerable to hacks and intrusion. With Bitcoin transactions pulling in an average of $200,000 daily, peer-to-peer transactions via blockchain tech are already a reality. Industry experts believe that when this is implemented on a more global scale, it could facilitate cuts in transaction costs by up to $6 billion yearly.

See:

  • From Ipo To Ico: Blockchain’s Finance Revolution
  • Icos: New Model Of Blockchain Capitalism

Blockchain As An Asset For Industries

When blockchain debuted in 2008, it was intended to be the framework of which Bitcoin existed. The massive success of the digital currency, which has a current worth that exceeds $4000 per coin, is an attestation of Blockchain's far-reaching capabilities. Today, backed by an increased level of stakeholder participation, blockchain tech has continued to permeate into applications that extend past the financial sector into several other industries.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Australian SMEs are turning to alternative sources of funding

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Finder.com.au | By Elizabeth Barry | August 30, 2017

New research shows Aussie businesses are embracing online lending and P2P, but many are still not getting the loan they want.

Australian businesses are turning to crowdfunding, peer-to-peer (P2P) lending and online loans for finance, according to new research from Businessloans.com.au. The Small Business Credit Survey, conducted by ACA Research, found that the most sought-after alternative funding source was equity finance (34%), followed closely by online lenders (30%) and P2P business loans (21%).

CEO of GetCapital Jamie Osborn says that the alternative lending sector is at an important inflection point in Australia.

"The sector has moved through the early adopter phase and is now beginning to gain more mainstream attention," says CEO of GetCapital Jamie Osborn.

"At the same time, the leading lenders across the alternative lending space are continuing to innovate and offer businesses better products and customer experiences – as long as that continues, you will see the market further embrace the alternative lenders."

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Alternative funding sources by application

  • 30% Online Lender
  • 34% Equity Finance
  • 18% Crowdfunding
  • 21% Peer-to-Peer
  • 12% Friends & Family
  • 2% Other

However, while small- to medium-sized enterprises (SMEs) are embracing alternative sources of capital, not all of them are receiving the loans they hope for. The survey revealed that while 84.1% of businesses were successful in their applications, less than half of those (38.9%) of those were approved for all of the credit they applied for.

It is interesting to note that the number of businesses which were declined a loan is only 1.6% of respondents. The remaining 14.3% of the "unsuccessful applicant" group was approved for less than half of the loan they had asked for. Over one-third of this group (35%) had applied for more than or equal to $250,000.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Canadian regulators say most cryptocurrency offerings need oversight

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Reuters | Alastair Sharp | August 25, 2017

Bitcoin

TORONTO (Reuters) - Canadian securities regulators on Thursday said many Canadian crypto currency offerings they have studied involve the sale of securities and should abide by tough existing rules unless otherwise granted exemptions.

Crypto currencies such as Bitcoin and a growing stream of alternatives allow anonymous peer-to-peer transactions without the need for banks or central banks. They are also used by companies seeking to raise capital, in the form of initial coin offerings (ICOs) or initial token offerings (ITOs).

The currencies exist in a legal gray area, however, with regulators scrambling to come up with rules that will not stifle innovative funding models while also protecting investors.

The Canadian Securities Administers, an umbrella group of provincial watch-dogs, said any coin or token whose value is tied to the future profits or success of a business will likely be considered a security, while those providing access to a specific good, such as the ability to play a video game, may not.

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“With the offerings that we have reviewed to date, we have in many instances found that the coins/tokens in question constitute securities for the purposes of securities laws, including because they are investment contracts,”

Executives and advisers to the country’s growing fintech industry criticized the statement for not offering enough clarity.

“There still is a lot of gray area in terms of the guidance on when a crypto currency or token would be a security,” said Daniel Fuke, a partner in the securities and M&A group at Fasken Martineau who is advising companies, including CoinSquare, a crypto currency marketplace.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Feds to consider expanded services from banks, fintechs

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Investment Executive | By Rudy Mezzetta |

The Department of Finance Canada has committed to reviewing banking legislation to make it easier for both banks and financial technology (fintech) firms to offer clients expanded technology services while maintaining consumer protections and the prohibition against banks engaging in commercial activities unrelated to financial services.

"Clarifying the fintech business powers of financial institutions and removing obstacles to collaboration between fintechs and financial institutions can help to accelerate innovation, potentially making the sector more accessible and affordable to Canadians," Finance Canada indicated in its second consultation paper released last week as part of its review of the federal financial services sector framework.

The review is part of the updating, which occurs every five years, of the Bank Act, the Insurance Companies Act, and the other statutes that govern federal financial services institutions. The sunset date on the current legislation is March 2019. The first consultation paper was published last year, and the deadline for comments on this second and final consultation paper is Sept. 29.

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In the near term, Finance Canada will review ways it might:

> Update the rules around fintech activities banks are allowed to do. For example, current statutes use terms such as "portal" or "platform" to describe additional information processing activities a bank may do in-house with approval. These terms may be difficult to apply to emerging business models, Finance Canada says.

> help banks and fintech to collaborate in order to encourage the "cross-pollination" of ideas and to foster growth and innovation. Finance is asking for comments on whether to provide banks with additional flexibility to make non-controlling investments in fintechs and the corresponding authority to make referrals, subject to consumer protection, prudential, and commercial activities limitation.

Streamline the "entry and exit framework" for fintechs. This refers to the process by which a fintech firm can enter the financial services sector to serve an underserved market, or exit the sector if business plans change. Finance Canada is considering refinements to the current framework, including allowing the Office of the Superintendent of Financial Institutions (OSFI) to extend the period to issue an order to commence and carry on a business in certain circumstances.

 

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Why Blockchain Is The Future Of The Sharing Economy

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Forbes | By Omri Barzilay | August 14, 2017

Everyone’s talking about blockchain, but you’re still not entirely sure what it is, don’t worry, you’re not alone. It’s something that Jack Dorsey, the CEO and chairman of Square and CEO of Twitter, described this week as the “next big unlock,” and something that, according to Dorsey, is normally applied to accounting terms but has the potential to “be applied to so much more.”

Enter the sharing economy. The sharing economy burst into our lives as a big promise during the 2008 recession with an initial wave of investor enthusiasm and a number of “sharing” startups such as Uber and Airbnb. However, many others failed to ride the trend.

These days, the sharing economy feels a bit past its prime. “The ‘Sharing Economy’ is Dead,” Fast Company declared two years ago, summarizing a general sense of fatigue with what now feels like a wildly overhyped idea. But, according to many, the fusion of blockchain and the sharing economy may create a revolution that will transform our economy and share the wealth beyond certain companies and individuals.

Smart contracts help to unbundle ownership

Blockchain can help energize and unlock the sharing economy by making it cheaper to create and operate an online platform. For example, transactions could be coordinated by self-executing smart contracts or performed at lower cost by other small competing providers. The next phase of the sharing economy can emphasize today’s inequalities or ease them, depending on the purpose of the technology itself.

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Basically, blockchain is a different way of keeping track of a normative set of information, instead of storing the information in one central location – the county records office, say, or Airbnb’s database – blockchain makes multiple copies and distributes them across all the nodes of a network. These nodes don’t have to be people, they can be things. This is what makes blockchain a potentially powerful accelerant of the sharing economy as it gives a property the ability to know who its owner is.

Anything with an internet connection can hook up to a blockchain, which means anything with an internet connection can have a perfect record of who owns what. So let’s say I rent out my house like I would on Airbnb. By utilizing blockchain technology, I could program my front door to open only when a person reserved it, and automatically pay me, and lock the door, once he leaves the property.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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