January P2P Lending News
January was a busy month in the media for the peer-to-peer lending industry! Here are some of our highlights from the last few weeks.
Last weekend, we (and one of our Lenders) were covered in a Sunday Star Times article, looking at the competitive landscape of P2P lending in New Zealand. It's an interesting article that's certainly worth a read - you can find it here.
We've been featured in a fair few media articles over the course of January - you can find those articles over on our media page.
P2P Best Practices
Ryan Litchenwald from the Lend Academy has released a fantastic investor's guide already this year, titled P2P Lending Best Practices 2016. Here’s a quick summary of what you need to know (although we highly suggest you read it yourself - it's not terribly long, only about a 5 minute read):
- Diversification - Litchenwald suggests that Investors should start an account by investing in at least 100 notes ($25 x 100 notes) and preferably more. The reason is simply that the more notes you invest in, the less impact one individual loan default will have on your portfolio.
- Understand the P2P Lending Risks - As with any investment, you should understand the risks that are associated with investing.
- Research - One of the most incredible things about the marketplace lending industry is the amount of transparency the companies provide. There is a wealth of information from the platforms and third party websites to help you make the best decision for you situation. If you’re interested in reading up on the space, we recommend that you check out Orchard, Crowdfund Insider and Seeking Alpha.
- Automate Your Investment - Although you may initially hand select notes on a platform, you’ll eventually find that this is a time-consuming endeavor, especially if you have a large account. Harmoney does not have a automated investment option quite yet, although we how important it is to you all, so we are going to be working hard to deliver a solution later this year.
- Keep Fund Invested - It’s important to continue to keep your investment working for you by reinvesting the payments to compound your interest.
Retail Banks Wake Up to Digital Lending
An interesting study by Bain & Company and SAP, entitled Retail Banks Wake Up to Digital Lending, found that the majority of traditional banks have only digitised a small portion of their lending process. This lack of digitisation is putting as much as one-third of retail banking revenues at risk. The research study found several capabilities that fell short, which also happen to be competitive advantages for P2P lenders like Harmoney.
- Delivering simple, easy, and convenient experiences for customers
- Gathering a holistic view of the customer by using big data
- Automated processing of loan applications
- Engaging with customers through digital marketing
How P2P May Affect the Banks
The Sydney Morning Herald put out an article this month discussing the popular idea that the biggest impact to P2P lending globally could be an increase in interest rates by the key central banks. The theory is that P2P lenders have benefited tremendously from rock-bottom interest rates; and once interest rates go up, investors will flee for higher yields elsewhere while borrowers head straight back to their bank.
From an investor standpoint, the P2P lending industry has been constrained by a supply of loans rather than a lack of investor demand, as most of the market share is still held with the banks and traditional finance companies. Consumer credit is a new asset class that has awarded investors attractive yields and diversification, solidifying its place in the asset allocation mix. From a borrower standpoint, the reality is that there’s a structural inefficiency within the existing banking model that has allowed the net interest spread (the gap between deposits rates and lending rates) to remain so wide. When interest rates go up, the banks profits will be under pressure due to their high operating costs, causing them to raise their borrowing rates as well. In this case, there would be no change to P2P lenders ability to offer a more competitive offering than traditional lenders.
We are pleased to announce that the inaugural AltFi Australasian Summit 2016 is coming up on Monday 29th February 2016 at Jones Bay Wharf in Sydney, Australia. Our General Manager of Australia, Ben Taylor, will be speaking at the event. P2P and Marketplace Lenders are taking on the banks in Europe, US, and now Australia and New Zealand. Morgan Stanley forecasts P2P lending will jump from $NZD 77 billion in 2015 to $NZD 755 billion by 2020. This conference will provide an opportunity to take a deep dive into what is transforming the manner in which money is invested and borrowed, providing a bold new asset class for investors in the process. Click here if you’re interested in attending the event.