On Monday 25th April 2016 I gave a presentation to the attendees of the Cyber Security Exchange FS.

Click here for the slides. 

Any comments or feedback to hello@fintechireland.com

We are speaking at many events in Ireland and overseas. And we are contributing to numerous articles on the topics of fintech, regtech, banking, payments, insurance, investment management innovation, marketplaces, e-commerce and regulation.  If you would like to discuss us contributing, please contact us at hello@fintechireland.com.

Octopus Investments recently announced they’re going to be launching a peer-to-peer platform as an additional arm to their £5.5bn UK asset-management company. Upon launch of the P2P platform, to be called ‘Octopus Choice’, investors will have the opportunity to invest in a discretionary portfolio of asset-backed loans. AltFi spoke to Simon Rogerson, the CEO of Octopus, who had this to say:

“The growth of peer-to-peer lending shows no sign of stopping, and the sector presents a powerful opportunity for financial advisers to add value to their clients. But it’s currently being overlooked – and we want to change this.”

The wealth management sphere has been divided when it comes to peer-to-peer lending. The majority of advisory platforms and IFAs have scrutinized the “new-wave” asset class. Jason Hollands of Tilney Bestinvest was forthright that his firm will not be offering an Innovative Finance ISA, and insists their client base would not be interested in a peer-to-peer investment:

“The industry is still very young, with the world’s first P2P platform only launched to the public in 2005.”

However, direct to consumer giant Hargreaves Lansdown has been vocal in its assurance that it will be providing its clients with a peer-to-peer lending option in Autumn 2016. This, alongside Octopus Investments’ recent revelation surely cements the notion that P2P lending as has now become a mainstream product now? With £2.722bn invested in 2015 according to Liberum Altfi Volume Index (UK), and over 50 active platforms on the market catering to approximately 250,000 retail investors, it is no surprise that this exponential growth in the market has attracted the likes of Octopus and Hargreaves - let’s not forget RateSetter’s partnership with FNZ in Autumn 2015 either.

Another thing, in 2015 36.4% of investment in Funding Circle, RateSetter and Zopa came from institutional deployment, according to AltFi Data. Whole loans (exclusive to institutional investors) were being funded through platforms like Funding Circle, whilst Zopa and RateSetter similarly sought institutional funding for loans (Zopa partnered with Metro Bank). P2P Global Investments (MW Eaglewood – Manager) bundle P2P loans from U.S marketplace lenders as well as the “big three” in the U.K and a wider rang of UK platforms.

There are arguably two critical tipping points that have stimulated the financial advisory community to take notice of marketplace lending:

1. Innovative Finance ISA

April 6th saw the introduction of the Innovative Finance ISA, or “peer-to-peer ISA” as it’s affectionately termed. This is expected to bring in a wave of savers disgruntled with the excruciating rates on offer by via traditional savings products, and now prepared for an alternative investment. The FT predicted over 400,000 new investors will surge onto the P2P market. This will probably not be the case. Only a handful of ISA Plan Managers can offer the IFISA presently, excluding the “big three” P2P lenders: Zopa, RateSetter and Funding Circle, amongst several most other major P2P platforms. This is due to a backlog in the FCA’s regulations authorization process: P2P platforms must have full authorization from the FCA – many platforms operating on interim permissions only at present – and have ISA permissions from the HMRC. Crowdstacker is one of few platforms that can offer the IFISA currently.

2. FCA regulated advising on P2P agreements

On the same date, 6th April, the FCA announced that it’ll be regulating P2P advice. IFAs that who personally recommend a peer-to-peer investment opportunity to a client must be “assessed as competent” according to the FCA. Any P2P opportunity advised by an IFA will also “have recourse with the FSCS”. Advisors will be held liable, basically.

So, there are two potential catalysts to encourage the wealth management community to follow leaders, Octopus and Hargreaves. Will the temptation of a new ISA product, greater regulation (good or bad for advisors?) for investors and some momentum from big industry players be enough to tip the sector over to the…dark side…? Sophisticated investors require deeper, more granular, data analysis to make a decision when it comes to peer-to-peer lending. The attraction of rates 5% +, liquidity on the P2P platform and a “provision fund” doesn’t cut it. Data-analytics tools and a portfolio management service would encourage affluent, possibly even high-net-worth investors to invest, should their advisors be willing to advise.

Jordan is a FinTech enthusiast and co-founder of UK’s no.1 peer-to-peer lending comparison service, where the everyday person can research, compare and feel empowered to invest and earn more money on their money. Jordan@orcamoney.com, @orca_money, www.orcamoney.com 

Peter Oakes of Fintech Ireland. a leading fintech and regtech expert, looks at the recent work of Irish regtech startup Corlytics

A few weeks ago The Financial Times reported that failures in customer reporting have cost the world’s top investment banks $43bn in fines over the past seven years.  This was the single most expensive compliance issue, according to research undertaken by Irish regtech start-up Corlytics.  Corlytics research also found that the main types of failure and wrongdoing resulted in fines totalling $150bn for 10 US and European banks between 2009 and 2015.  Corlytics is, as the name suggests, an analytics firm. 

In addition to the customer reporting compliance failures, other issue that caused significant financial and regulatory issues for large banks included rigging foreign exchange rates, money laundering to product mis-selling to name just a few.

"The seven years of fines have taken a heavy toll on the banks, wiping out the equivalent of a staggering 14 per cent of their equity capital."

The pool of banks covered by Corlytics’ work are Barclays, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and UBS. The seven years of fines have taken a heavy toll on the banks, wiping out the equivalent of a staggering 14 per cent of their equity capital.  

John Byrne, chief executive of Corlytics, said client reporting failures were the source of substantial fines for banks in a wide variety of cases, including misleading customers about investments and not communicating clearly enough with borrowers. “It can involve any aspect of client disadvantage or loss due to inaccurate or misleading reports or communication,”.

Corlytics’ work shows poor disclosure to clients was a factor in the $25bn of fines paid by US banks in a 2012 settlement for abusive foreclosure practices. The second most expensive issue for the 10 banks was failures in how they sold residential mortgage securities, which resulted in a penalties total of $27.7bn.  The banks meanwhile paid $20.2bn in fines in relation to securitisation failures. “Rate setting” fines came to $14.6bn, partly stemming from banks’ manipulation of foreign exchange and interest rates.

Mr Byrne said that while many banks have “experienced serious issues with regulators, some have not”.
“The data seems to indicate that the less diversified a bank, the lower the regulatory risk,” he added. “This may be because with fewer business lines, [internal] controls can be better understood and implemented.”
The high point for penalties was 2014, when banks paid $56.2bn in fines for compliance issues ranging from foreign exchange and interest rate rigging to flaws in selling mortgage securities. Banks paid fines of $40.2bn in 2013, and $38.2bn in 2012.

Banks’ penalties came to just under $10bn in 2015. However, European banks are braced for substantial fines this year when they find out how much they will pay for mis-selling mortgage bonds.

The fines do not cover most of the £30bn that UK banks paid for mis-selling payment protection insurance. This is because Barclays and HSBC are the only two British companies that rank among the world’s top 10 investment banks, and therefore are included in Corlytics’ work.

Corlytics has assembled a database about banks’ penalties based on disclosures by authorities with powers to levy fines.

The Dublin-based company sells the database to banks looking to pinpoint areas of weakness, and regulators which want to know how their penalties compare to others.

€50k funding now available for international entrepreneurs

Early-stage companies in manufacturing and the internationally-traded services sector from around the globe are being invited to consider doing business in Ireland. Enterprise Ireland has launched a competitive fund aimed at supporting worldwide start-ups and entrepreneurs who are willing to relocate to Ireland.

Under the terms of the Competitive Start Fund (CSF), successful candidates will receive €50,000 in cash to support their business development. Interested applicants have until 3pm, GMT, Wednesday 6 April to express their interest and submit an application.

Shortlisted projects will be invited to travel to Ireland to pitch to the evaluation panel on Wednesday 1 June. Travel costs, up to a maximum of €1,000 per applicant, will be covered by Enterprise Ireland. Candidates successfully awarded the funding will be required to move to Ireland, however Enterprise Ireland will also offer assistance to entrepreneurs who need a visa to live and work here.

Qualifying sectors include: manufacturing and internationally-traded services, such as the following subsectors: Internet, Games, Apps, Mobile, SaaS, Cloud Computing, Enterprise Software, Lifesciences, Fintech, Food, Cleantech and Industrial Products.

The maximum support available is €50,000 for a 10% ordinary equity stake in the start-up company. This investment shall be released in two equal tranches, the first of which will be released to successful applicants only when they provide confirmation of additional new cash investment for equity of €5,000. This new investment in equity of €5,000 by the successful applicant is to occur after the relevant call close date.
 
If you what to know more get in touch with us at hello@fintechireland.com before close of business on 4th April if you wish us to assist with your application. Please put "€50k funding now available for international entrepreneurs" into the header of your email.  Alternatively you can approach Enterprise Ireland direct at www.enterprise-ireland.com before the closing date.

In a wide ranging speech made today by my former co-director Gareth Murphy, Director of Markets at the Central Bank of Ireland, Mr Murphy addressed a number of important issues, especially in the areas of financial innovation, digital currencies, fintech and regtech as he laid out his thoughts on 1) Culture and personal accountability, 2) Technology, 3) IT & Cyber Risk, 4) Disclosure of Investment Fund Fees, 5) Stress Testing of Investment Funds, 5) Data and data-driven supervision and 6) the Current Workload of ESMA's Investment Management Standing Committee (which Mr Murphy Chairs)

Rather than taking up space in this section by repeating the post on LinkedIN, I have included a link to my post here.  Note that my post doesn't intend to look at all points addressed by the Central Bank. Rather, I read through the speech to look for and extract novel and unique remarks on areas dealing with culture, technology and technology led supervision.

https://www.linkedin.com/pulse/supervision-ever-evolving-craft-hard-data-technical-peter-oakes