Tag: loans

The Growth of ‘Niche’ Peer-to-Peer Lending

Author
Tom Mitchell
Date

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The advent of the peer-to-peer model has brought fundamental change to the lending industry; change which has seen platforms such as ArchOver move with the zeitgeist and embrace the internet as a medium through which to fund loans to businesses and individuals. But as the peer-to-peer space has begun to mature and take root, much change has begun to occur within the sector itself, with many platforms emerging with their own specific applications for the peer-to-peer model.

One interesting entrant which certainly captures the ‘forward-looking’ character of the sector is Abundance Generation, a platform which provides funding to eco-friendly projects throughout the UK. Investors buy debentures in the projects listed on the platform, which have included wind farms and solar energy initiatives, with different projects carrying different rates of return. The platform seems to have successfully tapped into modern sensitivities surrounding global warming and the viability of fossil-fuel use in the longer term, with investors having pledged just over £8m on the platform at the time of writing.

Another entrant whose focus is equally timely is Bitbond. This German platform, mentioned by James in his recent blog, is a peer-to-peer business lender that solely uses the digital currency Bitcoin. The platform takes the concept of ‘disintermediation’ and the diminishing role of the banks in finance a stage further than most, for even a bank account is not required to lend and borrow on the platform. Indeed, Bitbond’s website carries the tagline “banking is necessary, banks are not,” which neatly illustrates the ethos driving their unusual platform and its use of a digital cryptocurrency.

Bitbond’s belief in the potential of digital technology is mirrored in the offering of Pollen vc, a platform with offices in both the UK and US. Pollen seeks to address the financing problems faced by developers creating apps for Google Play and Apple’s App Store. These developers not only face fierce competition for the attention of consumers, but also a long delay between making sales in the marketplaces and receiving payment. Pollen aims to alleviate the cash flow problems that this can cause by monitoring sales data and advancing a percentage of their clients’ earned revenue to allow them to continue developing their apps. To complement this service, Pollen’s management also aim to consult with them to offer advice on exactly how they should move forward with their products.

Taken together, these three platforms serve as an excellent illustration of the growing diversity found within the peer-to-peer space. And in the author’s opinion, this can only bode well for the sector at large.

Why Banks want in on P2P Lending

Author
Ian Anderson
Date

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As the P2P industry has matured, a new class of investor arrived aggressively in 2013 and included the very institutions that P2P was meant to bypass, the Banks. In the US big financial firms, not small investors, are now dominating lending on the two biggest leading platforms, Prosper and Lending Club.

At Prosper, which has been aggressively courting institutional lenders over the past year, more than 80 percent of the loans went to those firms in the last quarter. Lending Club and Prosper now set aside a randomly selected pool of loans for institutions which prefer to swallow up whole loans rather than finance a piece of them, meaning 100s or millions of dollars and pounds have now been lent from banks.

But why do they want in?

Ageing and creaking Bank technology with outdated risk models has significantly held back banks in recent years. Their ability to widen their offering and effectively manage the decision making process is further bottlenecked at branch level with inexperienced staff.

Banks recognise that the technology of P2P platforms and their innovative risk analysis, often using ‘big data’, gives them a fast way to lend without the investment in their own technology or increasing their overheads. P2P is also transparent, investors are matched to risk appetite and all risks are known up front with no hidden fees – quite frankly it’s surprising to this author that it has taken them so long to get involved.

One thing is for sure, Banks will come to dominate the future of P2P lending and it’s just one reason why in the US the sector now refers to itself as Marketplace Lending to better reflect this seismic shift in investor.