April P2P Lending News

Posted 28 April 2016. Categories: Lender Newsletters.

As per usual, April saw some interesting reading in local media outlets. Here's our selection of the best from the month.

Local News

Banks dealing with "carnivores & herbivores"

This NZ Herald article in conjuction with KPMG discusses how fintechs are being classified into carnivores and herbivores. Some are looking for pools of profitable business in which to feed while others are enablers with whom the banks would be well advised to collaborate.

Why New Zealand is punching above its weight in start-ups

In this Sydney Morning Herald article, Harmoney is compared alongside Kiwi heavyweight Xero due to the significant amount of venture capital pouring in New Zealand relative to the country’s size.

International News

Takeaways From The Founder of LendIt

Peter Renton, Co-Founder of LendIt, the world’s largest online lending conference, recently published his top ten takeaways from this year’s event. Lendit USA 2016 was an exciting event with over 3,500 people from 49 different countries in attendance. We highly recommend watching the keynote speeches from Renaud Laplanche, Peter Thiel, and Ron Suber. All of the videos of the presentations can be viewed here.

  1. We need to be remain realistic about the state of the industry. There will be headwinds.
  2. A diversity of funding channels is essential to long term sustainability.
  3. Regulators are cautious of protecting consumers but supportive of innovation.
  4. The fast growth days are over in some parts in the world; but not everywhere.
  5. Only solid companies with a defensible niche will continue to attract VC funding.
  6. Banks are no longer being seen as competitors. They’re becoming partners instead.
  7. The public markets have been fickle for the platforms that have IPO’d.
  8. Strong credit underwriting is more important than ever.
  9. Getting to cash flow positive needs to be a top priority for originators.
  10. The global opportunity is still enormous.

For those of you looking for even more research to dive into, the most thorough study on the US marketplace lending industry was released at LendIt only a couple weeks ago. Click here to download it.

Lessons from Orchard’s Partner Forum

Last month, Orchard hosted their first Partner Forum that featured a panel executives from companies that are shaping the future of alternative finance.The inaugural event focused on the opportunities that marketplace lending presents for lenders, borrowers, investors, the challenges facing the industry, and the requirements for building a stable and successful future. Below is a brief summary of the key points covered throughout the day.

  • Transparency and the standardization of data will allow for continued growth and access to an abundant supply capital from investors.
  • A lack of liquidity in the space with no secondary market leaves investors with little flexibility and limits rate of capital deployment.
  • Despite the concerns around increasing delinquencies and where we stand in the credit cycle, the leading platforms in the space are built to withstand downturns and consumer credit as an asset class has proven durable in times of economic stress.
  • Less than favorable economic conditions will likely lead to ecosystem consolidation.

Are Banks The Next Dinosaurs?

Jalak Jobanputra, a Founding Partner of FuturePerfect Ventures, an early stage venture capital fund in New York City, wrote a compelling piece for the Economist about the potential fate of the banks. She believes that over the next twenty years we will continue to see rapid disintermediation of the banks, and millennials (the most populous generation entering the workforce) will no longer recognize the banking system as we know it today. Instead they will receive financial services from a variety of new startups in the technology sector, which is inevitable as the banking sector has failed to address the evolving needs of this generation.

As banks continue to increase their fees to offset declining revenue from other parts of their business, millennials are being hit with these high costs to maintain their accounts. According to a study by Viacom Media, 71% of millennials said they would rather visit the dentist than hear what banks have to say and 73% would rather that Google, Amazon, Apple, PayPal or Square handle their financial services than their own bank. Over 30% have used mobile banking in the past month, a mode of banking that is currently more efficient in parts of Africa than it is in some of the most developed countries around the world.

That's it for this month! We'll be keeping track of developments over the course of May, and be back again soon with more great articles.