News Briefing - Crowdfunding, SME And Alternative Finance

two small test tubes

1. UK – FinTech 

 

Alternative property lender Zorin Finance has signed an agreement with Avenue Capital Group, a global investment firm, to fund up to £200 million worth of property development and investment loans for the UK SME housebuilding market. AltFi reports. 

Zorin Finance, which launched in 2011 has lent over £650 million and is now funded by two institutional investors, with Avenue being granted exclusivity to fund up to 80 per cent of future deal flow.   

Founder & CEO Luke Townsend and Sir John Beckwith and his family will also continue to personally fund a percentage of every loan the company makes, the firm said in a media statement.  

Avenue Capital a global investment firm, also invested in Dublin-based real estate lender CastleHaven Finance last year. It manages a c.$9.6bn of assets.” 

 

2. UK – FinTech 

Finextra reports: 

“As part of its accelerated innovation mission and open cloud platform strategy, Finastra has set forth a plan to support nine million lives around the world and focus on resolving the SME funding gap, inequality in financial services and financial exclusion. 

While efforts to reduce the number of people who are unbanked or underbanked around the world (1.7 billion) have had gradual success, what is also evident is that the best and most impactful way of reducing poverty is through employment and empowerment. 

In an attempt to bridge the $19 billion SME funding gap in Kenya Finastra has launched Trust Machine, a microfinance initiative that with support from partners such as GreenPoint Financial, University of Leeds, ETH Zurich, Straterix and ConsenSys, provides a loan and balance sheet optimisation solution.” 

 

3. US – FinTech 

 

The Office of the Comptroller of the Currency (OCC), part of the US Department of Treasury, has issued an interpretive letter pertaining to banks and federal savings entities pertaining to “certain stablecoins.” Crowdfundinsider reports: 

 

“Stablecoins are digital currencies that are based on a fiat currency or specific asset that is designed to maintain a 1:1 value tied to the asset. A good example is a dollar-based stablecoin that is tied to the value of a US dollar. 

Today’s letter by the OCC states that stablecoins may be held by federally chartered banks, a meaningful clarification for this sector of Fintech. 

Acting Comptroller of the Currency Brian P. Brooks stated: 

“National banks and federal savings associations currently engage in stablecoin-related related activities involving billions of dollars each day. This opinion provides greater regulatory certainty for banks within the federal banking system to provide those client services in a safe and sound manner.” 

The letter is in response to ongoing questions regarding the emergence of digital assets and in this case addresses a very specific use case. The OCC has concluded that national banks and federal savings associations may hold “reserves” on behalf of customers who issue stablecoins, in situations where the coins are held in hosted wallets. 

The letter addresses the use of stablecoins specifically backed by a single fiat currency on a one-to-one basis where the bank verifies at least daily that reserve account balances meet or exceed the number of the issuer’s outstanding stablecoins.” 

 

 

4. International – FinTech 

 

New Australian fintech on the block Cape is gearing up to launch a “recession-fighting” credit card for SMEs in early 2021. AltFi reports: 

“The card will be powered by open banking and will allow businesses to manage their cash flow through live file management, access buy-now-pay-later finance and make revenue-based repayments.  

Based in Sydney, the fintech is hoping to launch the new account in February 2021 to tap into the 2.1m-strong Australian SME market.  

Ryan Edwards-Pritchard, CEO and co-founder of Cape, said: “We know already from our work in the fintech and digital sectors that businesses are facing hurdles when it comes to accessing credit having been locked out of business lending, equity investments or simply are nervous about external finance in the current climate.”  

  

 

5. International – FinTech 

 

Finch Capital has published a report on Fintech during a challenging time due to COVID-19. The annual State of European Fintech report for 2020 indicates that Fintech is a resilient European Tech growth engine.  For now. Crowdfundinsider reports: 

“Radboud Vlaar, Managing Partner at Finch Capital, says that while 2020 looks pretty good at first glance this is because European governments have provided significant support for Fintech startups. 

“This support offset the decline in institutional funding but this was a one-off initiative,” says Vlaar. “In the next six to 12 months, startups and scale-ups will face a harsher market test for raising additional funding due as the government funding slows and VCs funds get maxed out, consequently focusing remaining fund capacity on their winners.” 

Overall, payments were a beneficiary of the pandemic as lockdowns and shutdowns compelled people to shop online. The Finch research expects that the next 6 to 12 months to be more challenging for raising capital. 

But Vlaar believes that a shakeout in European Fintech is not necessarily bad. 

“In the last five years, Europe has seen 100,000s of new companies raise massive amounts of capital, build and start selling new products to meet a market need. Sometimes hundreds of companies are trying to solve a similar problem in different countries. This creates an opportunity for investors to consolidate and back winners at attractive prices and make profitable companies, these companies than can become acquisition targets for Private Equity firms and large industry incumbents” 

The findings of the report indicate that VC/PE funding of European Fintechs is down by 10% during the first 6 months of the year. But when it is adjusted for government money, it is up by 20%.  That’s pretty significant. The report says this is because the funding databases only record publicly announced equity rounds, while most government funding went in as a convertible debt note and so was not disclosed. Finch predicts a “massive consolidation/ shake out of the number of Fintechs with revenues below € 5 million.”