Weekly peer to peer lending news round up - 8th August, 2014
It's been a super busy few weeks at Harmoney - the new website is looking great, we're getting ever-closer to launch and we're keeping ourselves very busy making sure it's epic by all proportions. That doesn't mean we aren't keeping an eye on the rest of the world though - if anything, we're back with a vengeance! Here's our selection of the best headlines from the last week.
International peer to peer lending & finance news.
Allister Heath wrote in the U.K. Telegraph this week with a critical view of the proposed legislation forcing banks to forward declined loan applications on to challenger brands - including peer to peer lenders - calling the idea a "gimmick", while also arguing that it had potential to be dangerous. "Under the scheme," Heath writes, "The big existing banks will have the first pick of who they lend to, and will thus grab the safest customers. They will pass on perceived higher risk borrowers to the alternative lenders. In some cases, of course, the banks will have made the wrong call, and starved a deserving small firm of credit – and the start-ups and challengers will be able to come to the rescue in a profitable manner. But there is also a danger that they end up lending disproportionately to sub-prime borrowers, which would bode ill for the future."
It's an interesting argument, though perhaps one to be taken with a grain of salt. Yes - it is highly likely that under this scheme the applicants passed along to competitors would be relatively high risk customers - but being passed along to these competitors doesn't guarantee that the application will be approved, not by any stretch of the imagination. This is not to say it is a point without merit. But, while cautious and thorough assessment of any applicant is crucial to the success of peer to peer lending, it's not about only choosing low risk borrowers (a tactic arguably better left to the banks). If we know that 30% of those who meet the criteria to fall within group X will default on their loan, it's not about accepting all applicants from group X and hoping for the best, but knowing what factors make an applicant from group X more likely to be in the 70% that don't default - and picking that 70%.
I don't expect that the U.K. peer to peer lending market should see this danger eventuate in any way that is particularly damaging. It's the home of some of the most solidly performing platforms and greatest innovation in the industry, and it's also now a market that is regulated. With regulation in place and the support of the UK Peer to Peer Finance Association (which enforces strict rules and standards of operation upon its members, including Zopa, Funding Circle and Ratesetter), and some fairly outspoken support from the government, the U.K. market is looking very promising.
Regardless, Heath's finishing statement is a wholly fair one:
The best thing the Coalition should do if it really wants to encourage a thriving fintech industry is to get out of the way. It needs to make sure that the overall environment is right, improve the tax system, especially when it comes to individual taxation, and ensure that there are enough talented and skilled people available for firms to hire. It needs to make sure that official procedures and the rulebook aren’t biased against innovative, disruptive new entrants. But there is no need to micro-manage, or attempt to pick winners: the market, left to its own devices, will do just fine.
Continuing with news on the U.K. peer to peer lending market, Ratesetter had a massively successful July, becoming the first U.K. based peer to peer lending platform to surpass £25 million lent in one month, with £71 million in the last three months. Ratesetter is now just over £250k shy of having "matched" a total of £300 million - a milestone I'm sure they'll reach very soon. It's a massive achievement for the company, solidifying their position as the U.K.'s leading peer to peer platform. Crowdfund Insider has good coverage of the news, with comments from the company and some of its customers.
The success in the U.K. doesn't stop with Ratesetter - the industry as a whole has doubled its volume in the first six months of the year, lending over £500 million, putting the market well on the way to surpassing £1 billion over the course of the year. The announcement was made by the P2PFA, and you can read their full report on 2nd quarter performance here. The Financial Times has a good article on the milestone, also covering a few other pieces of industry news.
LendInvest also announced recently that a £4.1 billion loan - thought to be the largest loan in peer to peer lending history - has been successfully repaid. The loan funded the purchase of a building in Croydon (South East London) which will soon house 120 apartments.Crowdfund Insider covers the announcement here.
Meanwhile, PayPal (which Ebay bought in 2002) has had a successful invite-only run of their business lending service, having now lent over $150 million (US) to 20,000 companies, and now plans to expand the service to the U.K. and Australia. You can read more about PayPal's move from technology to financial services on MarketWatch.
Also in the U.S., TruSight Technology announced it had passed the significant milestone of 18 consecutive quarters of positive performance results. The Artificial Intelligence system analyses records from peer to peer lending platforms, identifying criteria which correlates with high returns on investment, and selects loans for investment based on those criteria. You can read the press release at Digital Journal, and find out more about how the system works in this Lend Academy article from September of last year.
Lend Academy, always one of our favourite sources of industry news, had a great podcast this week with Tracy Alloway, a journalist who covers the banking industry at the Financial Times. It's a little different to their usual podcasts, but gives some great insight into the finance industry as it relates to peer to peer lending. It's well worth listening to, but you can also read a transcript of the interview.
Lend Academy also announced that registration for the first LendIt Europe conference has opened. The conference will be held in London on November 17th, and will include keynote addresses from the CEOs of Zopa, Ratesetter and Funding Circle. Earlybird pricing is available until the end of the month - and Lend Academy has a discount code so head over to the website if you're planning to attend!
Cognizant, a U.S. based company published a fantastic whitepaper on the current state of U.S. peer to peer marketplace lending. The paper covers the results of an online survey of 11,000 U.S. consumers, 701 of whom were marketplace lenders or borrowers, looking at the needs and priorities of individuals, giving recommendations for where marketplace lending platforms should focus for future growth. Have a look at the whitepaper below!
New Zealand peer to peer news
You may have heard that we announced our full board of directors late last week. We're very fortunate to have brought together an outstanding group who we believe bring an invaluable breadth and depth of knowledge and experience to Harmoney. Joining Rob Campbell, who was previously announced as our Chairman, are Tracy Jones, Christina Domecq, David Flacks, and our CEO, Neil Roberts. You can read more about each of them on our Board of Directors page.
The announcement was picked up by quite a few sources - interest.co.nz broke the news with this piece, while Yahoo, Voxy, and Scoop also published the announcement. Crowdfund Insider also published a piece on the news.
Yahoo NZ published an article about us after interviewing our CEO Neil Roberts. The piece is a great explanation of what we do and how we've built Harmoney - and what our plans are for the future (hint: think global!). Read the full article: Harmoney comes to Auckland.
The FMA also announced that it had approved the first two crowdfunding licences in New Zealand, to PledgeMe and Snowball Effect. The New Zealand Herald covered the announcement, and social media was all a-flutter. We'd like to offer our congratulations to the two platforms. The licensing process requires a lot of hard work from the whole team, it's a major achievement for both PledgeMe and Snowball Effect - and for the country.
That's it for this week! It's certainly been an eventful one. We'll be back next week with another round.