- Brexit gave a 500% boost to CrowdLending’s volumes. I would have expected it will give a boost to the lending capital interest, but it boosted the borrower interest, perhaps because borrowers believe that the Bank of England rate reduction was passed through to them and it made borrowing cheaper. I would love to see actual survey data of the borrower’s reasons for the increase in interest.
- In the US the P2P spring is in full bloom: Prosper and Lending Club are in promising talks to put in place financing for $10bil in loans. Glad the winter is over.
- Prosper in talks with large funds to sell $ 5 bil worth of loans. The structure which will include warrants is normal and expected. If the deal closes the company’s credibility will grow in the process. However, I find strange that the lessons from the last crisis weren’t learned: the moment the wind turns these large funds will stop buying loans again, regardless of what the agreements say. In my opinion, this is a good short-term air source but for long term focusing on retail and deposit-like capital is the way to go.
- And at the same time, Lending Club is also close to similar size and type of deal with Western Asset. The source doesn’t disclose if any warrants are being discussed, I expect they are.
- Interesting predictions on Lending Club’s Q2 earnings we learn that retail investors are back at 90% of historic levels. A smart article that looks credible and worth a read. Great data too. Perhaps LC will start a stock buy back if it feels comfortable that they do not need to use their existing cash for origination anymore.
- ACH will become a same-day money transfer process. Lets take advantage of that.
- Bank of America spends $1bil per year handling cash. As cash usage diminishes I wonder what these resources will be used for.
- Another article talking about the slowdown in the Fintech boom. The author is pessimistic on robo-advisors because they have no way to defend their business from the incumbents. What can we learn from robo-advisers in lending ?
- Kickfurther named 4th fastest growing company in Boulder, CO.
- Money360 hits $100 mil in origination in real estate loans.
- P2P volumes’ dip in Q2 is of course blamed on Brexit. But Brexit happened 2/3 through the quarter. I doubt it is the main cause. See below.
- In fact, CrowdLending , a p2p in Scotland, saw an increase of 500% in volume post Brexit. But this is not the answer neither : it saw an increase in borrowers, probably because borrowers want to take advantage of Post-Brexit rate reductions assuming the p2p platforms will pass that rate reduction through to the borrowers.
- Good news: Funding Circle portfolio is on track for returns in 8-9%. Note that US returns are 8% and the UK 7%. Why ? Perhaps because of the central bank rates are different and the cost of capital is different in the different regions.
- Zopa relocates to London Bridge.
- The FCA answers Mr. Tyrie’s letter. In a nutshell, the answer is “yes we know, yes we agree, and yes, we are watching”.
- As Bank of England cuts rates, p2p industry leaders stay to gain as their product becomes even more interesting to investors. On the other side, their products become less interesting to borrowers.
- In a well-thought move, RateSetter is calling HM Treasury to support including p2p investments in Sipps which will have same returns for P2P investors but will be more protective of the investors through the Sipp framework. A great direction, we hope HM Treasury will consider it.
- News Comments
- United States
- Online Lender Prosper in Talks on $5 Billion Loan-Buying Deal, (Wall Street Journal), Rated: AAA
- LendingClub Said in Talks With Western Asset on Loan Buying, (Bloomberg), Rated: AAA
- Lending Club’s Q2 Earnings: A Preview, (Seeking Alpha), Rated: A
- Fintech Companies Prepare for Same-Day ACH, (Bank Innovation), Rated: A
- BofA Sees Digital Payments Cutting $1 Billion Cash-Handling Cost, (Think Advisor), Rated: AAA
- FinTech Boom Slows, But Not Over, (Financial Advisors), Rated: AAA
- Kickfurther in Showcase for Start Up Day Across America, (Press Release), Rated: B
- Money360 Hits $ 100 M in Closed Commercial Real Estate Loans, (Crowdfund Insider), Rated: A
- United Kingdom
- P2P lending dip blamed on economic uncertainty and authorisation process, ( Bridging and Commercial), Rated: AAA
- Crowd lending venture records surge in interest following Brexit vote, (Herald Scotland), Rated: AAA
- Funding Circle portfolio on track, (Stock Market Wire), Rated: A
- Zopa Relocates: Moves Into New London Bridge Digs, (Crowdfund Insider), Rated: B
- Tyrie raises concerns about gov’t P2P tax incentives, (FT Adviser), Rated: AAA
- Bank of England Cuts Rates: Alternative Finance Leaders Respond, (Crowdfund Insider), Rated: A
- Treasury urged to clarify law to allow P2P in Sipps, (FT Adviser), Rated: AAA
- Peer-to-Peer Lending Platform i2ifunding Announces protection fund, (India Today), Rated: A
- Reckon Shares Details On Its Aussie Alt-Lending Entrance, (PYMNTS), Rated: A
- Silver Bullion reports first-year results for gold & silver secured P2P loans, (Press Release), Rated: A
Online Lender Prosper in Talks on Billion Loan-Buying Deal, (Wall Street Journal), Rated: AAA
Online lender Prosper Marketplace Inc. is in advanced talks with a group of investment firms to sell them roughly $5 billion worth of loans over the next two years, people familiar with the matter said.
The buyers in the talks include Fortress Investment Group LLC or an affiliate, Soros Fund Management LLC and Third Point LLC, along with investment bank Jefferies LLC, the people said.
The loans would be bought at face value, but the firms are also in discussions to receive equity warrants in Prosper as they make the purchases, the people added. The potential buyers are also talking to banks about borrowing money to support their loan purchases, and a deal could wrap up in the coming weeks, they said.
In addition to the deal with the four investment firms, Prosper has also started selling loans to BBVA Compass, the U.S. regional-banking unit of Spanish lender Banco Bilbao Vizcaya Argentaria, according to a bank spokeswoman. BBVA’s venture-capital arm took an equity stake in Prosper last year.
Now, Prosper’s deal to sell loans at face value would provide a measure of validation of investors’ confidence in its underwriting ability. It also may give it a leg up on bigger rival LendingClub.
LendingClub had previously held talks for billions in loan-buying commitments with some of the same funds, including Soros and Third Point, but didn’t finalize a deal, the Journal earlier reported.
Prosper and LendingClub have raised rates they charge to new borrowers over the past few months. Loans sold in June by Prosper were expected to yield 7.4% on an annualized basis and taking into account expected losses, according to the company. That is short of 8.5% on such loan portfolios in 2013, but is still chunky when compared with U.S. Treasurys and other fixed-income asset yields at or near record lows.
Although new buyers would be a sign of confidence in Prosper, the equity warrants being discussed may lead to dilution of existing investors, including those who bought in the fundraising round valuing Prosper at $1.9 billion last year. Prosper hasn’t raised money since, while shares of publicly traded LendingClub have fallen 76% in that time.
Prosper lending in the second quarter is expected to dip sharply again from $972 million in the first quarter, which was down from $1.1 billion in the fourth quarter of 2015, according to people familiar with the company. Earlier this year Prosper cut back on marketing to new borrowers, as did other platforms, the Journal reported.
LendingClub Said in Talks With Western Asset on Loan Buying, (Bloomberg), Rated: AAA
LendingClub Corp., looking to bolster demand for the consumer debts it arranges online, is in talks with Western Asset Management Co. to set up a fund that would purchase as much as $1.5 billion of loans over time, people with knowledge of the matter said. Western, a subsidiary of money manager Legg Mason Inc., would commit to purchasing a certain amount of the lending platform’s loans each month, said one person, who asked not to be identified because the information is private. A deal may be announced in coming weeks, the person said. The agreement isn’t final, so the terms could change and talks may not result in a transaction.
“The real question is, what does Lending Club have to give up in exchange for that firm commitment?”
Western, which specializes in fixed-income assets, had about $460 billion of assets under management as of June 30, according to its website.
Lending Club’s Q2 Earnings: A Preview, (Seeking Alpha), Rated: A
Comment: This article is trying to predict what the earnings will look like and mean.
Lending Club will break $20B in originations.
Total operating revenue is likely to be between $110M-$125M, a decrease of $27-$42M from the first quarter 2016.
The company is likely to report a second quarter loss of between $90-$120 million, or $0.23-$0.31 per share.
Data suggests that retail investors are returning to the platform.
What is impressive is that within two months, Lending Club reacted by reducing headcount by 179 positions (11.5% of its workforce), tightening underwriting policies, and increasing oversight.
Despite these quick changes, the company has made no secret that this quarter’s results will be drastically lower than previous quarters. Total operating revenue is likely to be between $110M-$125M, a decrease of $27-$42M from the first quarter 2016.
This decrease in revenue, combined with several large one-time write-downs, means that the company is likely to report a second quarter loss of between $90-$120 million, or $0.23-$0.31 per share.
The company’s cash will be decreased by a further $40 million, as the company was obliged to fund approximately 2% of loan originations from its balance sheet. From a historical perspective, this will represent the largest percentage of loans funded from Lending Club’s balance sheet since December 2011. To add perspective, in Q1’16 the company funded just under $1M from its balance sheet, or 0.05% of originations.
Though diminished, the company’s cash should remain significant at approximately $420M. This cash reserve allows the company some flexibility moving forward.
Lending Club’s credit policy has evolved since its founding in 2007. Since December 2010, most of the evolution has been in the form of loosening credit restrictions for high-risk borrowers. Loosening restrictions widened Lending Club’s target borrower market and fueled faster growth.
Investor appetite for notes is returning
While Lending Club has not yet released data files pertaining to loans released in Q2’16, a look at the retail loan inventory on their website offers an insight on investor sentiment.
Since July 10th note releases have returned to 90% of their former levels and inventory levels have returned to historical levels, both of which suggest that retail note investors are returning to the platform.
Stock buy-back imminent?
As a reminder, in February 2016, the board authorized $150 million to repurchase shares in the open market.
Fintech Companies Prepare for Same-Day ACH, (Bank Innovation), Rated: A
On Sept. 23 a major milestone in the journey toward faster payments will be reached: New rules will go into effect that will enable the same-day processing of ACH payments. Vendors are working to make sure banks are ready to take advantage. Adam Anderson, CTO of Q2, a provider of cloud-based banking software, said that his company will have same-day ACH capability ready to go as soon as the new functionality is turned on. The most common uses of ACH for Q2 users are payroll, person-to-person and billpay transactions, Anderson said.
“Standard ACH comes with no web hooks, no API wrapper, no KYC-AML,” said Jordan Lampe, director of communication and policy affairs for Dwolla. Standard ACH has no procedures for handling rejects and no way to help users keep their compliance updated, for example. “But it is affordable and reliable. We’re extending that business value to other areas of the company.”
“The bulk of demand for ACH is from SMBs, commercial uses, as a replacement for wire uses”
BofA Sees Digital Payments Cutting Billion Cash-Handling Cost, (Think Advisor), Rated: AAA
Bank of America Corp., which spends about $1 billion a year handling cash, will save money and require fewer employees as more customers make payments electronically, Chief Executive Officer Brian Moynihan said.
FinTech Boom Slows, But Not Over, (Financial Advisors), Rated: AAA
“Funding is down year over year, too, but there are pockets of growth and an incredible amount of innovation going on,” says Aaron Schwartz, DeNovo head of research. “When we bifurcate fintech into subsectors or trends, we see some areas that are slowing down in the later stages in the investment spectrum, and other areas that are in the early stages that show very healthy growth.”
A significant portion of Americans underserved by the financial industry are young adults, says Schwartz.
Robo-advisors might not be the wave of the future, says Schwartz.
“Robos have attracted a lot of money, but now the incumbents are stepping into the market,” Schwartz says. “We’re starting to see more activities around different types of enabling technology.”
Kickfurther in Showcase for Start Up Day Across America, (Press Release), Rated: B
Mattermark rankings recently placed Kickfurther as the 4th fastest growing company in Boulder. The Kickfurther marketplace enables consumer product companies seeking capital to grow by sharing retail opportunities with individuals interested in entrepreneurship and consumer products.
Kickfurther is a leading inventory crowdfunding marketplace that connects companies with individuals. Since its 2015 launch, Kickfurther has funded $9.6 million of inventory in 325 Consignment Opportunities by more than 270 companies. Kickfurther users have earned, on average, more than 2% consignment profit per month on completed Co-Ops.
Money360 Hits $ 100 M in Closed Commercial Real Estate Loans, (Crowdfund Insider), Rated: A
Money360, a commercial real estate online marketplace lending platform, announced on Thursday it has officially surpassed the $100 million in closed commercial real estate loans with the completion of $15.25 million in recently closed loans.
The company also reported it has seen a 100% increase in borrower applications being rejected by banks and CMBS institutions due to the increased regulations.
The online marketplace’s recent transactions does include a bridge loan for the acquisition of a multifamily property in Tucson, Arizona; a bridge loan for the renovation of a full-service boutique hotel in Aurora, Ohio; cash-out permanent financing for a single-tenant retail building in Dayton, Ohio; and a bridge loan for the refinance of an anchored shopping center containing 206,257 square feet of rentable area in Jacksonville, Illinois.
P2P lending dip blamed on economic uncertainty and authorisation process, ( Bridging and Commercial), Rated: AAA
The Peer to Peer Finance Association (P2PFA) revealed that new lending fell to £658m in Q2 compared to £715m.
New lending to businesses fell to £406m from £445m, while new lending to individuals dropped to £252m from £270m.
Rhydian Lewis, CEO and co-founder at RateSetter, put the dip down to the authorisation process adding: “In recent months there’s been a levelling off in general borrower demand as people defer large purchases, perhaps reflecting economic uncertainty.
“The main story behind these latest figures on peer-to-peer lending is the continued expansion in the number of investors and borrowers – with more than 150,376 lenders and 332,107 borrowers currently using P2PFA platforms.
Landbay recorded a £5m increase in lending compared to Q1 and John Goodall, CEO and co-founder of Landbay, felt the P2PFA’s figures showed that peer-to-peer lending was still becoming an increasingly attractive option to investors and borrowers.
Crowd lending venture records surge in interest following Brexit vote, (Herald Scotland), Rated: AAA
THE LendingCrowd funding operation has enjoyed a surge in business following the Brexit vote, which it said reflected expectations the Bank of England would cut interest rates to boost the economy.
The company said applications for loans increased by over 500 per cent in July, compared with the same month last year although many fear the June vote in favour of the UK leaving the European Union will result in a sharp slowdown in growth in the UK economy. LendingCrowd said the total value of applications rose by over 600 per cent annually in July.
The increase in activity at LendingCrowd contrasts with reports that the Brexit vote has prompted some firms to put mergers and acquisitions activity on hold until the outlook is clearer. Founded by Mr Lunn with serial technology entrepreneur Bill Dobbie, LendingCrowd made 34 loans worth a total of £1.75 million in its first year of operations, to 30 September. It signed up 1100 investors.
Funding Circle portfolio on track, (Stock Market Wire), Rated: A
Funding Circle SME Income Fund’s board notes recent market commentary on Funding Circle loan performance and reiterates guidance that the company’s portfolio of credit assets, randomly allocated to it through each of the Funding Circle marketplaces, continues to perform in line with expectations.
The company’s US credit assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.
The company’s UK credit assets are projected to return in excess of 7% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle UK marketplace.
The company is on track to deliver its dividend target of 6-7 pence per share per annum and total NAV return target of 8-9% per annum once fully deployed and levered.
Zopa Relocates: Moves Into New London Bridge Digs, (Crowdfund Insider), Rated: B
Last week, the team at Zopa announced they have officially moved from their Chancery Lane office to the peer-to-peer lending platform’s new location in London Bridge.
Zopa recently announced the appointment of its new Chief Technology Officer (CTO), Ronen Benchetrit.
Tyrie raises concerns about gov’t P2P tax incentives, (FT Adviser), Rated: AAA
On 1 June, Andrew Tyrie wrote to the Financial Conduct Authority calling for closer scrutiny of the peer-to-peer lending and crowdfunding market.
Answering Mr Tyrie’s questions in a letter published today (4 August), Ms McDermott said the regulator has been watching the crowdfunding sector closely and acknowledged the sector poses risks to consumer protection.
She made it clear that crowdfunding investors are not protected if they lose their money simply because the underlying investment fails, but that Financial Services Compensation Scheme protection will apply if the P2P platform fails to meet its obligations.
Ms McDermott said the FCA considers crowdfunding a high-risk investment activity, pointing to rules which mean this type of investment cannot be promoted to investors who have not received financial advice.
The regulator has been assessing both P2P and investment-based crowdfunding firms on whether they are making the risks clear to consumers, with Ms McDermott stating that since 2014, nine out of 10 crowdfunding promotions were withdrawn or amended.
By comparison, 12 out of 27 P2P promotions have been amended or withdrawn over the same period.
She also said the financial watchdog “remains cautious” about the risks posed to consumers by P2P firms and said the sector will continue to be supervised – particularly when it comes to promotions – as it moves further into the mainstream.
Bank of England Cuts Rates: Alternative Finance Leaders Respond, (Crowdfund Insider), Rated: A
Gonçalo de Vasconcelos, CEO and co-founder of SyndicateRoom, stated investors would seek out alternative investments.
Kevin Caley, founder and Chairman of P2P lenderThinCats reflected on the interest rate announcement saying it would help business.
Angus Dent, CEO of business “crowdlender” ArchOver, called the move an act of “no confidence”.
Peter Behrens, Chief Commercial Officer and co-founder at P2P lending platform RateSetter, called the act almost inconceivable:
“Only a few months ago, a further cut to the base rate was almost inconceivable, but here we are. This cut will further reduce returns on savings accounts which already pay very close to zero. Given this, it’s not surprising that peer to peer lending is increasing in popularity, as investors look for better returns in exchange for taking on some risk: we’ve had a hundred thousand new visits to our website in July alone.”
Frazer Fearnhead, CEO of The House Crowd, added his voice that P2P lenders stand to gain from the rate cut.
Treasury urged to clarify law to allow P2P in Sipps, (FT Adviser), Rated: AAA
Peer-to-peer lending platform RateSetter is calling on HM Treasury to clarify the law to allow such investments within a self-invested personal pension.
The Financial Conduct Authority recently expressed concern that letting savers use their pension money to invest in peer-to-peer might shift the customer base towards investors who are less experienced or knowledgeable and might not fully appreciate the risks involved.
Speaking to FTAdviser, P2P platform RateSetter’s head of investor operations Ceri Williams questioned why P2P is not available through a mainstream Sipp wrapper, when it has already been approved for Isas.
RateSetter is working with four Sipp trustees who Mr Williams said recognised this collusion issue was not a problem. It already has 50 active Sipps open on the platform, amounting to around £3m in assets, all of which have been set up over the past year.
So far it has been smaller Sipp schemes that are comfortable with the concept, with Mr Williams adding larger schemes are nervous about the “remote possibility of collusion coming to light”.
“Within a standard Sipp wrapper, many of the assets are earning next-to-nothing.
Peer-to-Peer Lending Platform i2ifunding Announces protection fund, (India Today), Rated: A
i2ifunding.com investors will now have protection against loan defaults by borrowers in a first-of-its-kind [Comment: many other platforms have protection funds, it is unclear what makes this fund unique at this time] investor protection fund, which will allow its investors to enjoy up to 100% protection against loan defaults.
The participation in the Principal Protection Fund is available by default to all investors who lend through the platform. There are no extra charges for the same. i2ifunding.com will set aside 5% of the disbursed loans towards the Principal Protection Fund. The company has already created an initial corpus to set up the Investor Protection Fund.
Reckon Shares Details On Its Aussie Alt-Lending Entrance, (PYMNTS), Rated: A
One of the latest entrants into Australia’s alt-fin sector is Reckon. Primarily, Reckon provides small and medium-sized enterprises with cloud accounting solutions, but now, it’s utilizing the data it has about small businesses to its advantage by partnering with alternative lending company Prospa to underwrite loans to its SME users.
Reckon’s ability to use its small businesses’ financial data to underwrite loans issued via Prospa provides lenders with a potentially more robust way of being protected. That’s because bank underwriting processes are outdated, Rabie said.
According to MarketInvoice — another alternative lender based in the U.K. — Australian businesses wait an average of 26.4 days past-due to get paid, worse than any other market analyzed. The data, researchers pointed out, corresponds with research recently released by Dun & Bradstreetthat found that $19 billion is stuck in outstanding bills to businesses in Australia every year thanks to companies taking longer than the traditional 30 days to settle their invoices.
Silver Bullion reports first-year results for gold & silver secured P2P loans, (Press Release), Rated: A
Launched on 5th August 2015, Silver Bullion’s P2P loan platform is unique in two key ways. Firstly, it is a P2P loan platform that allows borrowers to obtain a loan using physical gold and silver bullion as collateral. This gives lenders, seeking a good rate of return, confidence that their investments are safe. Secondly, it is the only secured P2P loan platform to allow its customers to set the rate of return which they lend or borrow.
It is a secure lending platform since the loans have physical bullion as collateral. Borrowers can only borrow up to 50% of the value of the bullion they store with us. Should a borrower is unable to pay back the loan, the collaterized bullion would be liquidated and the lender receives the full principle plus interest.
Today is the first anniversary of our P2P loan platform and we are releasing the results today. We are delighted to have seen good borrowing activity this past year.
More importantly, there were zero borrower defaults and lenders received the funds due to them on time. We aim to continue making the platform secure for our lenders. This is unique and important because the most common caution against investing on a P2P lending platform is the risk of default.
Due to the safety that Silver Bullion’s loan platform gives to lenders, 72% of the matched loans were initiated by borrowers. The company has seen more than 30 loans matched consistently each month since March 2016 – a rate of more than 1 matched loan per day. Interest rates across all loan tenures currently hovers between 2.5% and 4.5% per annum. Unlike unsecured P2P lending platforms, loans matched by Silver Bullion’s lending platform are fully backed by physical gold and silver. Loans with tenures longer than 6 months begin with a collateral-to-loan value of 200%. The exceptions are loans with the 1 month tenure which have a lower collateral-to-loan value of 160%.