July P2P Lending News
Last month's news round up on the impact of Brexit was so well received that we're extending it into this month! In addition to a collection of some of our favourite articles from home and abroad, we're taking a closer look at the U.K. and European P2P market.
From home shores...
- We were featured in BizEdge this month, with a look at our groundbreaking product Payment Protect.
- NZ Herald published a great piece by The Icehouse's Andy Hamilton, who looked at Harmoney as an example of an innovative NZ start-up - well worth the read!
- We're always big fans of Lend Academy, and their latest podcast is definitely worth listening to, featuring Jon Barlow, founder of Eaglewood Capital - and member of our advisory board.
- Earlier this month Lendico and PostFinance announced a Joint Venture in Switzerland to facilitate loans to SMEs. PostFinance is one of the 5 largest retail banking institutions in Switzerland and Lendico is a P2P lender. The JV is called Lendico Schweiz AG. PostFinance is a subsidiary of postal carrier Schweizerische Post and has around 3 million customers. You can read about it over on Crowdfund Insider.
- Globally there is a major disconnect between the income return expectations of investors and actual investment returns. The Schroders Global Investor Study 2016, which surveyed 20,000 end investors in 28 countries, has highlighted unrealistic expectations amongst global investors, which is exaggerated in millennials (those aged 18-35 years). The historical returns from investing in the Harmoney platform (11.85% as of 27/07/16) exceeds the returns expectations of circa 85% of global investors. You can read about the study over on Bloomberg, and the Schroders website.
Looking to Europe...
The UK is one of the most advanced P2P markets globally and is 72% larger on a per capita basis than the USA (Business Insider). But why? It's widely attributed to a number of factors including low confidence in banks, a high degree of comfort with online platforms, and a positive UK regulatory environment. This month we thought readers would be interested in some observations on global trends and risk & return.
In February 2015, PricewaterhouseCoopers estimated the P2P market in the USA alone could represent US$150 billion of loans by 2025. Morgan Stanley is even more bullish, and forecasts that global P2P loan originations could reach US$290 billion by 2020.
But what is it about P2P that makes it resonate with consumers, and grow with such pace? Crunch Network believes the strength of the P2P lending proposition includes:
- Installment loans are a much better product than credit cards for long-term, higher balance lending (up to 70% of origination volume for some P2P platforms is to refinance or pay off credit card debt);
- The online convenience for borrowers;
- A single P2P marketplace can serve more customers due to the wider range of risk tolerances among investors (relative to a single bank investor);
- It can grow more quickly as it is less capital-intensive.
In addition, most western countries interest rates are extremely low. More than US$7 trillion or around a third of all developed-country government debt is now trading at negative yields according to Citi. This means investors are effectively paying governments to lend to them. At its most extreme the yield on Switzerland’s 50-year government bond recently fell below zero i.e. proving a negative return each year for investors for 50 years.
It's an interesting time for the P2P market around the globe - and we look forward to seeing what the rest of the year has to bring.