By Yvan De Munck on Thursday 1 May 2014
With geopolitics all over the place and markets wobbly, the last couple of weeks may have been somewhat too volatile for comfort for some.
Not so in P2P and Online Direct Lending land. The first quarter of the year saw some of the most exciting news flow in the industry, and from what I can see, hear and experience hands on, it’s only accelerating.
Following a recent in-house update from senior management at some of the leading platforms (Lending Club, Prosper, Funding Circle), it became all but clear that things are going more than well, at many levels. We had confirmation that the balance between borrowers and lenders/investors has dramatically shifted indeed. Less than 18 months ago (around the time a first levered fund investing in consumer P2P loans launched), borrowers were in the lead, with too few lenders stepping up to the plate. Today, the problem is the exact opposite: too much investment capital wanting to get involved, with a number of these platforms having to severely restrict access so as the keep a balance. Over that period, Lending Club and Prosper went from $88M and $12M of respective monthly loan volume (November 2012) to $272M and $77M (March 2014). As this growth rate continues to increase, focus is now shifting to finding more creditworthy borrowers. I therefore fully expect some very interesting announcements and partnership deals to help make this happen.
Some other highlights during that period would include:
I’ll stop here, as you get the picture.
And while most people still have to discover the exciting new opportunities in P2P and Online Lending, other, more novel models and platforms are being developed as we speak.
So while I continue to watch the space carefully and get involved in a number of these situations, I cannot help but be positively impressed by the imagination of all these entrepreneurs that make it all happen.
And get this. The other day, in his first interview (on Bloomberg TV) after leaving Pimco, Mohamed El-Erian admitting going all tech and being very surprised and excited by what he’s been missing. Also, in an accompanying write-up, he says: … “More promising examples, albeit less well-known, may be found in Internet-driven lending and borrowing clubs or, more generally, the peer-to-peer initiatives in consumer financial services. By seeking to compress net interest margins, including through lower expenses and more efficient data assessments and aggregation, and by targeting an enhanced consumer experience, such empowerment schemes could serve to reduce the cost of financial intermediation while providing for fairer risk-pooling outcomes and better credit underwriting. Likewise, so-called digital wallets and mobile transfers are efforts to improve payments and settlement in a retail financial sector that gets a lot less attention than its institutional peers.” (http://bit.ly/1i92FBD)
So who is he going to get involved with next?
“I skate to where the puck is going to be, not where is has been” (Wayne Gretzky)
“Pedestrian, it is not” (Master Yoda – paraphrasing)