By Daniel Lanyon on 26th February 2018
The sector saw nearly $9bn invested across 233 deals in 2017.
Equity investments into P2P and marketplace lending platforms rose to a new high in 2017, according to consultancy Fintech Global.
As one of the earlier areas of rapid growth in disruptive finance, P2P and marketplace lending saw a huge amount of money invested into platforms (via equity) between 2010 and 2016 but this slowed as platforms began to scale and in certain cases in the US - such as Lending Club and OnDeck - list on the public stock markets.
Deals in the sector slowed down in 2016 with a year on year decrease of 12.8 per cent, possibly as a result of Lending Club’s annus horribilis. Total amount invested fell from $8.6bn in 2015 to $7.5bn the next year.
2016 proved to be a challenging year for Marketplace Lending mainly in the US where unofficial industry bellwether Lending Club was embroiled in scandal; the company’s lending practices were called into question, and its CEO failed to disclose a financial conflict of interest. As a result, lending companies faced increased scrutiny and difficulties in attracting funding.
However, investment rebounded in 2017 to reach $8.9bn, a year on year increase of 18.6 per cent. The top ten P2P and marketplace Lending deals in 2017 raised half of the total funding for the year, raising a combined total of $4.4bn. The largest deal in 2017 was the previously mentioned $1.2bn Series B round to Lufax, led by COFCO with co-investment from China Minsheng Bank and Guotai Junan Securities.
The next three top deals all raised $500m and went to US-based companies: online loan provider LendingPoint in a debt financing round from Guggenheim Securities; lending and wealth management specialist SoFi in a Series F round led by Silver Lake Partners; and SME lending platform Kabbage in a debt financing round.
Four companies in the top ten are P2P lenders, while a further three offer solutions in each of the Online Loans and SME Finance subsectors.
Despite the growth in funding, deal activity declined from 277 deals in 2016 to just 233 deals in 2017. This resulted in the average deal size jumping from $32.5m to $45.4m over the same period.
The second half of 2017 saw two of the strongest funding quarters to date with Q3 2017 and Q4 2017 were the second and third strongest funding quarters, respectively, for the sector. The strongest quarter was Q3 2015 when $3.1bn was invested in the sector globally.
In 2014, more than half of all marketplace Lending deals were closed in North America. This has gradually decreased every subsequent year to reach a share of 30.1 per cent in 2017. The share of total deals completed in both Europe and Asia increased over the same period to become equal with North America in 2017. Europe had a deal share of 23.2 per cent in 2014, which rose to 30.1 per cent last year, while Asia saw the largest increase from 17 per cent to 30.1 per cent over the same period.
‘Other’ regions including Africa, Australasia and South America maintained a steady share of deals between 2014 and 2016 with a range between 6.5 per cent to 6.7 per cent. This value rose to 9.7 per cent in 2017. The largest deal in this category in 2017 went to Sydney-based consumer lending platform MoneyMe. The company received $91.5m in debt financing from Fortress Investment Group with co-investment from Evans & Partners.
Join AltFi for its third annual Alternative Income Forum, exploring closed-ended funds (investment trusts) specialising in generating an income using alternative assets such as specialist finance, P2P lending, direct lending, asset leasing and more. Hear from the leading investors and fund managers in this rapidly growing market.