My inspiration for this column came when I heard Lufax Chairman Greg Gibb tell the audience at LendIt that 50% of transactions on his platform are enacted from a mobile device, and that by the close of 2016 he expects that number to climb to around 70%.
And indeed that this phenomenon is not confined to Lufax. China Rapid Finance’s mobile lending platform launched just 2 months ago, and is already responsible for the extension of more than 800,000 personal loans.
Greg and his colleague’s from the Chinese frontier waxed lyrical about the advantages of mobile lending and borrowing. The most frequently cited benefit was the so-called “network effect”. It’s an easy and natural extension for a satisfied customer to transition from using an online marketplace from a mobile device, to referring that marketplace to a friend from the same mobile device. Mr. Gibb believes mobile has an important part to play in driving down customer acquisition costs.
I’ve heard Daniel Wu of Tencent TenPay (China’s leading online payment platform) explain how “going mobile” can increase fraud prevention performance. Tencent products have over 800 million users. Those users leave a craterous digital footprint on the payments platform. That data is gold dust to China’s leading online lenders – who cannot rely on the Credit Bureau to cover all prospective borrowers. Tencent can trace the behaviour of a user and make an assessment of that user’s creditworthiness based on mobile activity. A practical example: Tencent can detect whether a mobile device is being used for the first time in order to apply for a loan. Such an occurence sets alarm bells ringing, and helps to curtail any attempt at fraud.
China is a consumer-dominated market – in terms of both investors and borrowers. Mobile devices, due to their speed and ease of use, make a lot of sense for customers that are looking to access generally small amounts of money. Lufax’s typical loan size stands at round $10k. China Rapid Finance’s mobile platform makes loans of up to only 500 RMD ($80) in size. The average loan term in Chinese P2P is about 6.1 months (according to Peter Renton of LendAcademy).
Jimubox – the consumer and SME lender which just closed an $84m Series C funding round – is increasingly mobile-oriented. One of the platform’s recurring backers is Xiaomi – a leading mobile phones provider. According to CFO Barry Freeman, the Beijing-based electronics company’s support has been instrumental in effecting an uptick in mobile activity. Prior to Xiaomi’s involvement, 50% of the traffic flowing into the Jimubox platform came via mobile device. That number now stands at 70%.
You get the picture. Mobile usage in China – which is incidentally the largest of all P2P markets – is not only widespread; it is fundamental to functionality of the industry.
But it’s not in the UK and it’s not in the US… Or is it?
Not yet, perhaps, but the mobile age is coming. A surge of mobile activity is underway in the UK space. I asked leading P2P players Zopa,RateSetter and Funding Circle to provide some illuminative data. What we have below are tables that outline the changes in mobile and tablet usage for Zopa and RateSetter over the past year.
Zopa:
Lender 12 months ago
Lender now
Borrower 12 months ago
Borrower now
Desktop
76.4%
65.3%
49.8%
37.5%
Mobile
11.3%
16.2%
30.6%
45.7%
Tablet
12.3%
18.5%
19.6%
16.7%
RateSetter:
Lender 12 months ago
Lender now
Borrower 12 months ago
Borrower now
Desktop
97.4%
84.4%
95.9%
56.9%
Mobile
1.2%
8.5%
2.2%
27.7%
Tablet
1.4%
7.1%
1.9%
15.3%
As you can see, P2P borrowing and lending via handheld devices is picking up almost across the board. The stat that really leaps off the page is the surge in mobile phone-based borrowing over the past 12 months.
Zopa jumped from 30.6% to 45.7% in terms of borrowers that applied from a mobile phone – and mobile is now the platform’s most lucrative source of borrowers. RateSetter barely registered a pulse in terms of mobile activity 12 months ago. But now more than a quarter of the platform’s borrowers are procured from the mobile phone market.
How do we explain this phenomenon?
Time and time again we hear about how speed of accessing finance is chief among the virtues of the P2P lending space. Mobile and tablet devices serve to further quicken the process of accessing credit. Case in point: a borrower in search of a loan to fund a purchase from a retailer may not even need to return home in order to secure a purchase-loan.
Sharon Kean, Head of Tech Delivery at Zopa, offered her take on the data – as well as on the platform’s decision to create an über mobile-friendly site, rather than asking users to download an app:
“Mobile devices are clearly the preferred way of accessing the web and Zopa’s customers clearly reflect that trend. What this means for us as a platform is to ensure we design our products with mobile devices front of mind. This ensures our customer experience works on any screen size and in any environment. By making the loan application process as frictionless as possible, our customers can get a loan wherever and whenever they want. Mobile apps can add extra friction to the process of getting a loan. Asking someone to download an app before they’ve even got a quote adds a barrier to the user’s experience. Our responsive designed website is optimised for whatever size screen someone is using. It’s the simplest and quickest way to apply for a loan with Zopa. We expect to see an increase in loan applications through mobile devices moving forward as they are now the most common way that our customers apply for a loan with us.”
It makes sense that mobile/tablet usage on the investment side of the P2P equation is experiencing more gradual growth. I suspect people will always be more cautious about distributing money than they will about requesting it. On the other hand, mobile and tablet devices (if furbished appropriately) provide a user-friendly interface for starting up and/or monitoring an account. Both Zopa and RateSetter have seen between a 5% and 8% growth in lending via mobile and tablet devices.
Ian Cruickshank, CMO at RateSetter, is also in favour of a mobile-friendly website approach as opposed to the construction of a mobile app. He commented:
“The figures show that mobile use is increasing across the board, which shouldn’t come as a surprise – we recently updated our site to make it even more accessible for mobile and tablet users, and this has had a dramatic effect. What’s interesting though is that our help team is as busy on the phones as they’ve ever been, which shows you that no matter how good your website is, people will always appreciate the chance to speak to a real person.”
RateSetter’s movements in the mobile world are made all the more intriguing due to its partnership with handset provider giffgaff. The mobile network and P2P platform first tied up back in November 2013 in order to provide funding for handset purchases. A week ago the pair launched Giffgaff Money – a lending service powered and funded by RateSetter – providing loans of between £750 and £7,500 over terms of 1 to 5 years to giffgaff customers.
Recall the 20% increase in mobile traffic that the backing of Xiaomi brought to the Jimubox platform. Might we see a similar situation unravel in the wake of the Giffgaff Money spinoff?
Funding Circle’s mobile strategy is geared around an app. The UK’s leading SME lending marketplace told me that mobile usage for investors has jumped from 9% to 18% in recent times.
A pair of predictions to finish: a year from now, mobile will be the most active medium of borrower activity for Funding Circle and RateSetter (it already is for Zopa), and mobile-based lending will account for at least a quarter of the capital flowing through each of the three platforms.
Data from the US market would likely tell a different story. The big brands (Lending Club,Prosper,SoFi, etc.) are further entrenched in the day-to-day lives of consumers. So I’d expect similarly high volumes of mobile usage for borrowing. But in a market so dominated by institutional investors (banks and hedge funds won’t be buying Lending Club loans from a smart phone…), I don’t see the same potential for growth in mobile lending activity.
I returned from LendIt USA 2015 enthralled by the growth of mobile activity in China. I’m now convinced that a measure of that same growth is present in the UK.
