News Briefing - Crowdfunding, SME And Alternative Finance

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The essentials are here and will be regularly updated. If you want to be well-informed about the investment crowdfunding scene, and you're short of time, this is the place to visit.

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1.UK – P2P


 

UK Peer-to-peer lending platform RateSetter has topped the milestone of returning £100 million in pre-tax interest payments to its investors, according to Crowdfundinisder.

“RateSetter reports accomplishing this without any individual investor losing a penny.

Launched in October 2010, RateSetter now claims over 500,000 customers. From the investing side, more than 60,000 registered users have lent approximately £2.5 billion to both businesses and individuals across the UK. The online lender says that the average annual rate of return stands at 4.4%.

The introduction of the RateSetter Innovative Finance ISA( IFISA) in February 2018 helped to propel the platform as in just a few months more than 10,000 investors have moved £80 million into the savings vehicle.”

2. UK – SMEs

Campden FB runs an opinion piece on funding.

“The funding attitudes and practices of family businesses in North America, Europe and Asia-Pacific are changing in the wake of the global financial crisis a decade ago. Daniel Bardsley examines the latest research by Campden Wealth in partnership with KKR and asks what these new trends mean for family business growth.”


3. US – FinTech

 

Global Banking & Finance carries an opinion piece on the technical architecture of open banking, and the emergence of more reliable transactional norms.

“Open Banking has been one of the biggest shake-ups of the financial services sector in recent history. The changes aim to put customers back in control of their data and reset how consumers and businesses engage with their finances. The new legislation ‘opens up’ the sector for third parties to transform the way they connect with larger financial service providers, acting as a catalyst for change across the financial services sector and stimulating competition.

The utilisation of data will provide huge opportunities for innovation while also giving businesses the chance to play a more central role in the relationship between a customer and their finances. To fully realise the potential of Open Banking, businesses need to be agile and responsive and also understand the knock-on implications for legal services. Understanding the role and secure nature of the data at its heart is key.

Open Banking is promoting the adoption of stricter and more modern systems architecture across the financial services sector. PSD2 creates a new category of regulated provider – the third party provider (TPP) of which there are two types. The first is Payment Initiation Service Provider (PISP) i.e. a company that will be able to initiate payments, while the second is an Account Information Services Provider (AISP). The latter uses access to the data to facilitate other services. Both require authorisation by the Financial Conduct Authority (FCA) in the UK and explicit consent from the customer to make the payment or use the data. It is also possible for one company to be both a PISP and an AISP. Existing banks, e-money issuers, payment institutions, referred to as Account Servicing Payment Providers (ASPSPs), may decide to also become TPPs.

Under the new regulations, AISPs will have their data and security controls assessed by the FCA and only those deemed competent will receive authorisation. But as it stands today, only 22 firms will have successfully gone through the process and received AISP approval from the FCA by the deadline given to the CMA9, the big nine UK banks, to open up their APIs. Moneyhub is one of this exclusive group.”

 

4. US – FinTech

Tech StartUps runs what appears to be a company press release for a new token issuance platform. The explanation of the taxonomy of equity, security and utility tokens lacks clarity, but the business is interesting.

 “Blockchain SaaS platform startup TokenSoft launches the first security token issuance platform for crypto assets

We’ve all heard about initial public offering (ICO), a fundraising mechanism used by startups to raise funding and sell their underlying crypto tokens, in the form of crowdsales, in exchange for bitcoin and ether. It’s somewhat similar to an Initial Public Offering (IPO) in which investors purchase shares of a company. However, not all ICOs are created equal. There are in fact at least three types of tokens issued through these crowdsales: equity tokens, security tokens, and utility tokens. New investors and beginners often struggle to understand the difference between them.

Equity tokens are stocks offered startups where individual investors or companies are given part ownership of the Blockchain and voting rights over the Blockchain.An utility token might be best compared to a gift card. An utility token on the other hand, is not designed to be an investment. The major difference between security and utility tokens is that security token holders are entitled to ownership rights, whereas utility tokens function as coupons and give holders no rights or stake in a company’s platform or assets. Unlike a utility token which represents future access to a company’s product or service, a security token is one that has been backed by external, tradable assets. The good thing about security tokens is that they grant companies with the ability to issue tokens that represent shares of company stock. Security tokens are also subject to federal securities regulations.

So there are risks for new investors who may not be familiar with how the entire process works, especially when it comes to the compliance of ICOs with government regulations. That’s where one startup comes in. TokenSoft is a new startup aiming to do all the heavy lifting and reduce all the risks involved by providing a white label token sale platform with the tools necessary to run a stable, compliant, and secure token sale.

Co-founded in 2017 by Mason Borda (CEO) and James Poole (CTO), TokenSoft helps users navigate the intersection of blockchain and compliance safely and securely. TokenSoft provides an enterprise-grade, security token issuance platform enabling companies and funds to raise capital while complying with US and International regulations. TokenSoft provides best in class security, compliance and scalability token issuance services to financial, emerging-growth and enterprise companies in over 50 countries.

The startup currently supports Regulation D, Regulation S, and Regulation A+ offerings. Following the successful launch of its token-issuance compliance platform to emerging-growth and enterprise clients, TokenSoft, Inc. (“TokenSoft”) is excited to offer the first security token issuance platform to fund managers. From hedge-funds to fund-of-funds, TokenSoft provides services to a broad range of financial vehicles.

“After successfully launching two crypto-asset funds, a fund-of-funds and late-stage venture fund, we are excited to expand our services to fund managers by merging traditional finance with blockchain technology,” said Mason Borda, TokenSoft’s Founder and CEO.

TokenSoft’s enterprise grade token issuance and compliance platform provides the unique set of features financial investment funds require to raise funds globally. From consumers to institutional investors, we enable investor on-boarding and payments through our token issuance and compliance engine supporting over 50 countries.”



 

5. International – FinTech

 

Blokt.com reports that Bitbond, the online German bank, uses cryptocurrencies like Bitcoin to lend money at a fast and low rate compared to the existing SWIFT International transfer system.

“Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days,” said Radoslav Albrecht, founder of BitBond, as he spoke to Reuters TV. “With Bitbond, payments work independently or where customers are. Via internet it is very, very quick and the fees are low.

Bitbond currently uses cryptocurrencies as a medium of international transfer. Clients hold the loans in the form of cryptocurrencies like Bitcoin for seconds or minutes to avoid the fluctuating exchange rates. The cryptocurrencies are exchanged to the fiat currency of the country the client wishes to receive the funds. Cryptocurrencies, therefore, enable Bitbond to bypass the slow and expensive SWIFT system."


6. International – FinTech

Crowdfundinisder carries a fine exposition of blockchain and its relevance (or, frequently, not) to business development.

“Thousands of tech firms have raised impressive money doing ICOs (Initial Coin Offerings) proposing projects that claim they will scale or speed up blockchains, enable direct peer-to-peer services, or “incentivize” or motivate participants by getting them involved with loyalty tokens similar to Airmiles, tokens that might one day appreciate wildly on exchanges.

If blockchains are going everywhere, we are told, we will need these tokens to participate in the new world.

I was one of the people hoping blockchains would penetrate and streamline every bureaucracy in society. I drank the coolaid. Parroting many things I’d read and heard at countless meet ups and conferences, I even told a skeptical official from the Canadian Government at a meeting last March that blockchain would pervade many, many systems.

I believe I was wrong...

… But the acute issue that Bitcoin maximalists keep sounding the alarm on regarding institutional blockchain is that institutions may be wasting money trying to fit a square peg blockchain into a round institutional hole, an encrypted, decentralized blockchain into an organization with a top down structure.

Wherever you have a boss with absolute authority, that boss can ignore, override or overwrite information in the blockchain if they want. According to Bitcoin maximalists, The presence of boss negates the usefulness of blockchain 

You do need better data security and more efficiency. You might need some kind of encrypted database, but you may not need a blockchain. Be careful how much R&D you devote to it.

Bitcoin is so far a very basic and simple system of send and receive because complex systems cry out for bosses. Imagine an orchestra with no conductor. That is why, say the Bitcoin maximalists, Ethereum and Ripple and all the other coins with a central team presiding are not really blockchains and are not really decentralized. They “printed money” for private and not really public systems.”

 

7. International – FinTech

 

Coin Central runs a piece on Libra Credit, whose business model seems somewhat similar to the Bitcoin Cash model – but uses Bitcoin and Ethereum in lieu of fiat currencies/dollars as a reserve.

 

 

Libra Credit is offering a decentralized lending Ethereum-based ecosystem that helps users get open access to credit anywhere and anytime.

As long as a user has digital assets, they will be able to borrow money from Libra Credit by using those digital assets as collateral. Additionally, these users will be able to build an international credit history – a concept that Libra Credit and its partners plan to push to be recognized globally.

During his time at moKredit, Lu Hua found that it was exceptionally difficult to build an international credit history because of the myriad of credit reporting systems by each country.

Co-founder Dan Schatt also served a variety of leadership and managerial roles.   During Schatt’s tenure as the GM of Financial Innovations at PayPal, he was able to build productive partnerships with a variety of financial institutions.

In 2017, Hua and Schatt jumped into blockchain and founded Libra Credit to help evolve the current limited methods of building credit internationally.

“It’s the first time in human history that there are some universally acceptable digital assets like Bitcoin and Ethereum,” Hua commented. “We believe blockchain is the way to go.”

Libra Credit, a platform that enables anyone to borrow money from Libra Credit provided they have digital assets, rests its business model on the rapidly growing population of cryptocurrency holders.

We are passionate about financial inclusion. You shouldn’t have to pay more money because of where you were born. This is a global issue that blockchain can address. Digital assets can be purchased by anyone, anywhere, as long as you have access to the Internet. That’s really the power.” Dan Schatt commented.”

  

8. International – FinTech

 

Institutional Asset manager carries a report of the launch of a new FinTech fund.

 

“Investec Emerging Companies, part of Investec Corporate and Institutional Bank, is launching a fund, INVC, to invest in UK scale-up companies in the fintech and enterprise software sectors.

The fund has a target size of up to USD100 million, and will fill a gap that currently exists between seed and Series A funding rounds. Investec will be the cornerstone investor, accounting for approximately 15 per cent of the fund, with the majority provided by institutional investors and remainder by a small number of private investors.
 
Three investments already held by Investec Emerging Companies – fintech companies Monese, Curve and Bud – will be rolled into the fund at their entry valuations, providing an immediate uplift for investors.
 
The fund has made its first formal investment: Monese, the pan-European challenger bank that is providing instant-open accounts for the modern and global workforce via its own proprietary KYC technology. The company has raised a total of USD26 million to date. Alongside the INVC fund, other backers include Anthemis, Korea Investment Partners and Seedcamp.”