PeerIQ Monthly Update: June 2015

By Vy Phan

June 30, 2015

June’s close brought with it a host of headlines on volatile macro events across Greece and China. P2P has not been immune either, where there much talk about slumping stock prices, increased competition (including the Goldman’s Sachs entry into P2P), and implications for the industry.

But ticker-tape performance is a rather myopic view of the industry. The proliferation of platforms, the attention of big banks, new strategic partnerships were all presaged, and in our view, part and parcel of a maturing industry. The sector is showing the growth we anticipated, strong gains here in the US and abroad.

Indeed, June brought a host of other headlines and milestones worth recalling for a more-balanced picture:

Lending Club is on pace to exceed $10Bn in total issuance this quarter; Prosper recorded nearly a $1Bn in Q2 alone, with a cumulative total touching $4B; Best Egg/Marlette will clear $1Bn by end of year; and Avant, announcing it passed $1B in total originations in May, recently launched its institutional marketplace and boasts plans to reach 1,000 employees.
Beyond consumer, SoFi surpassed $3Bn in lending (and notched a $411Mn rated securitization); CAN Capital small business lending reached $5Bn in May.

Abroad we see a similar story:

UK’s Zopa will pass $1.5Bn (1B GBP) in total loans in July; Funding Circle just passed $1Bn (700Mn GBP), and in general, the UK market is poised to jump further with the introduction tax-free retirement accounts for P2P in April 2016 (which the government confirmed last week).

Meanwhile, China Rapid Finance has made over 1.5 million small consumer loans since launching its partnership with Tencent (and its QQ social network) in February.

All tallied, Bloomberg pins cumulative global P2P market at $77B by year’s end. Now, this growth—15x in the last 3 years—is, by itself, not an elixir for the industry. The usual-cited risks to the sector remain and getting to scale brings its own slate of challenges: finding new, large funding sources; ensuring they are sticky; reducing cost of capital to stay ahead of competition; scaling with quality—all things we are working to support.

But getting to scale, at the very least, means that it can no longer be ignored. Most of us in the sector have been told (a one point or another) to come back when the market hits $50B. Well, interestingly enough, it has. Sooner than any of us imagined.

Sector Update

Normal Banks Are Helping Shadow Banks Grow a Lot (Bloomberg, 6/30/15) U.S Bank loans to shadow banks have jumped more than 230 percent over the past three years.

Nonbanks Rethink the Lending Marketplace (Institutional Investor, 7/2/15) Interesting article from the investor perspective about the evolution of marketplace lending.

Amazon to Offer Loans to Sellers in China, 7 Other Countries (Reuters, 6/29/15) Short piece on the expansion of Amazon Lending.

Prêt d’Union Raises 31M EUR (P2P Banking, 7/2/15) New funding raises their total to €50 million and accelerates their international launch.

P2P Platform LendInvest Receives Credit Rating (Finextra, 6/24/15) LendInvest receives the highest rating from ARC Ratings.

Buy-side Facing Up to the Derivatives Challenge (The Trade, 6/29/15) Increased regulations puts further concerns on buy side communities ability to hedge via uncleared OTC swap market.

A New Tariff on ‘Interest-Rate Exports?’ (WSJ, 6/30/15) The marketplace lending industry could be largely impacted by new federal appeals court ruling.