Tuesday 7 November 2017
On the eve of PSD2 (and Open Banking in the UK), the AltFi Global Summit brought together Europe's best-known online lenders and digital banking disruptors for a forensic examination of what the future of these fintech niches will look like. Hot topics included cross-selling strategies, practical use cases of PSD2 data, the appetite of robo-advisors and traditional fixed income investors for online loans, and, of course, Brexit.
Funding Circle’s Broekema said the firm is still seeing strong growth as it continues to solve ‘the funding gap’. He says the firm will likely move to new countries in the coming years, with Estonia looking particularly interesting as a new destination.
Broekema says fintech lending is swelling fast with 20 per cent of new mortgage lending done by non-bank lending in Netherlands.
Van Engelen says ABN AMRO, New10’s parent company, is looking to digitise its businesses and says partnerships are essential to the “new norm’. She said that while this could potentially ‘ be eating away at our SME lending business…if [they] don’t someone else will.
She says one key feature is to aim to let the customer know within 15 mins whether they can get a loan.
Rego said it will be “very hard” for EU contender cities to replicate London’s fintech ecosystem success. “No city can take all of its qualities very easily,” he said.
Lockhart says the firm has already seen a slowdown in job applications from EU nationals.
Turfboer adds that an emphasis on regional hubs in the UK could help drive London forward as a global tech hub.
Pinto Coelho said Banco BNI Europa wants to diversify across private debt both in terms of different types of lending as well as geographies.
Stafler said lending platforms tend to be very good at one thing and so his firm is sceptical about them going after several different types of lending or different geographies.
AltFi Data’s Rupert Taylor says returns in alternative lending are still very compelling for institutional investors as well as access improving.
NNIP’s Head of Alternative Credit Gabriella Kindert says the alternative lending landscape has become increasingly more interesting to investors in recent years due to banking market ‘dislocations’.
“If you want to get exposure to the real economy you have to invest in private markets. I have observed a huge fight for assets in markets,” she said.
Additionally, she said, ESG demand has grown in the alternative credit investor community.
Bueninck said ‘behavioural’ data is becoming more important for Klarna and the firm has 80 per cent of the Swedish market in its data sets.
Kreditech’s Boerner says defaults and risk is lower in the online world as firms and lenders have additional data points not available in the retail world.
Billie’s CEO Knecht said his firm even assesses whether people spell their name correctly or whether they capitalise their name.
Haslingden urged the audience to reconsider credit bureaus as part of ‘the establishment’. He says Experian will launch a new platform to garner new data and has already partnered with a number of fintechs.
Stakeholders, he says, will have to motivate customers to share new data by proving them with value. He also warned an ‘arms race’ is emerging for analytics owing to the emergence of AI and machine learning.
Yolt’s CEO Frank Jan Risseeuw says it is important to show the customer that it adds value and that he believes “very much in supporting the broader ecosystem.
Revolut’s Rishi Stocker says digital banks can find a wide range of partners and if the customer trusts the digital bank, it will be able to find the best match for them through third-party products.
Ruddock said 4finance was using open APIs as he believes: “Our job is to unlock credit for the underserved but we realise that they are also underserved by the broader financial marketplace.”
The panellists agreed that robo-advisors are likely to invest in marketplace loans within the next 2-5 years. Toms Niparts, who runs Viventor, very much welcomed the interest, emphasising the need for diversifying capital bases.
IG is actively looking at how it might offer exposure to the asset class for its wealth clients, but for now it is a question of how to structure such an offering.
Even at an early stage, Fountain Money's Nishil Parekh likes the idea of investing via online lenders, stressing the benefits of fintech partnerships more broadly as a means of maximising customer value.
CMIS Group's Sean Daly is focused on helping originators sharpen their processes, readying them for institutional investment - and possibly for robo-investment - while also helping investors reach a level of comfort with what remains a nascent asset class.
Patrick de Nonneville believes European retail investors are used to higher risk than institutions, which should bode well for continued adoption of the asset class, at least among retail investors, but that institutions are more conservative.
He argues, however, that being successful in France means its success can be replicated across other markets but pricing is more attractive in some areas such as Spain, less so in the Netherlands.
Ivanov said online lending in Europe is still at the stage of "early adopter".
Thorsten Seeger from Funding Circle said he expects in 7-10 years that the playing fields will level in p2p lending with new countries taking back market share from the UK.
Bondora’s Clannachan says he believes an ‘open lending’ regulatory framework across Europe could add signifanct traction to the p2p lending landscape.
Dr. Daniel Bartsch, MD of creditshelf said there is currently no secondary market but a pan-European trading platform could add value for institutional investors.
Anne Hakvoort, Partner, FG Lawyers, believes the real problem for online platforms is that every EU member state has different rules which is hugely expensive. “It needs to be aligned… A secondary market is just a matter of time,” she said.
Orchard Platform’s Rochkind says American firms servicing European clients will have to get used to GDPR or be prepared to lose 4 per cent in fines.
Kabbage’s Taussig meanwhile says US funds are increasingly looking to buy marketplace loans, including closed end portfolios and Business Development Companies (BDCs).