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GlobeSt published an article exploring the broad based acceptance of marketplace lending in the borrowing community. One industry insider remarked, “Once a novelty, they are now an established capital source and are compared favorably against crowdfunding platforms and traditional lenders.” Marketplace lending is becoming more niche as well. Some newer entrants to the industry specialize in commercial real estate loans.
National Mortgage News wrote about the “era of self-service online mortgages.” The author makes an interesting point “that humans may be more biased than algorithms.” Additionally, the cost structure of a traditional bank makes smaller customers less attractive. This segment of the market is where marketplace lending can deliver solutions.
Crowdfund Insider discussed the changes to the marketplace lending industry in 2016. Marketplace lending insider Ram Ahluwalia remarked ,”year over year originations are still up across the industry.” The future of P2P lending will likely include greater institutional business to supplement the retail segment.
Value Walk identified the problem of diminishing dividend returns and low bond yields. The author posits that marketplace lending may serve to “earn 7% returns in a 2.5% world.” The future is promising as evidenced by the fact that “In 2016, P2P investors earned net annualized returns north of 7%.”
Forbes discussed how growing college tuition is pushing the marketplace lending industry higher. “Morgan Stanley estimated that P2P student loan issuance will grow at a 20% compounded annual rate through 2020 and account for 14% of this market,” shared the author. As tuition costs continue to rise it’s likely that lending needs in this sphere will help sustain and grow originations.
Fonds Online published a guest post from our CFO Rein Ojavere. In the article Rein discusses why so many successful FinTechs come from the Baltic countries – and what Germany can learn from it.
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Forbes published an article examining what a possible Dodd-Frank rollback could mean for marketplace lenders. The author makes an interesting argument in favor of building a stronger regulatory framework around P2P lending. He believes such measures would actually strengthen the industry by legitimizing the relatively new practice of peer-to-peer lending.
Fortune posted an interesting article about consulting firm Accenture that developed a software to help secure blockchains for businesses. Accenture debuted a system that integrates the technology, also called distributed ledger tech, with hardware security modules (HSMs), that corporate IT teams use to keep data safe. The appliances handle digital key management, a fundamental aspect of cybersecurity that controls who has access to what information on a network. While the software is still patent pending, it would be a step forward for allowing businesses to start adopting blockchain technologies into their IT systems.
Business Insider discussed an interesting venture called MarketInvoice. The firm is similar to traditional marketplace lenders. However, the loans are issued to businesses which secure the agreements with unpaid invoices. The model appears to be sustainable for the time being with a projected 2 billion in lending by the end of 2017.
Crowdfund Insider released a piece titled, “The Potential of ‘Crowdlending.’” The author discusses the need for traditional banks to stay competitive as many analysts and experts agree that lending is continuing to move online. This migration away from brick and mortar businesses is unlikely to slow. Software providers are responding by creating software that retrofits older bank models into faster, ecommerce firms.
Fast Company wrote an article exploring the practice of ignoring FICO scores when issuing loans. Many marketplace lenders are using their own proprietary underwriting score in lieu of the more traditional FICO number. Many of these firms believe they can create a more accurate credit profile of a borrower with other analytics like 2 years of transaction information.
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Forbes published an article examining recent moves by US-based investment advisor Third Point to capitalize on the world of marketplace lending. Billionaire Dan Loeb remarked, “As the origination and securitization of assets have become more difficult for larger financial institutions, smaller technology‐driven platforms have filled the void.” His firm expects this arena to soar amid the pro-business spirit of the Trump administration.
FinancialBuzz shared findings which show a rise in marketplace lending activity in the fourth quarter of 2016. The author writes that the “Quarterly Consumer Credit Demand Index” reported an approximate 12.4% increase in personal loan applications for the period relative to the same time in 2015.
Digital Journal released a piece discussing how technological innovation has driven the spread of global P2P interfaces. The author cites a report from Transparency Market Research which acknowledges that “the opportunity in the global P2P lending market was worth US$26.16 bn in 2015. Analysts predict that the market valuation will reach US$897.85 bn by 2024.” In addition to technology, emerging economies are likely to be key drivers of this growth in the coming decade.
Bloomberg released an article reviewing the long-term plans of financial software company Misys to enter the peer-to-peer lending world. The author indicated that the CEO believes traditional banks have fallen behind FinTech startups that offer better lending solutions for those seeking personal loans.
Satellite PR News released information from a Peer-to-Peer Lending Market report projecting an industry compound annual growth rate of 53.06% by 2020. The report also explores the competitive landscape among vendors, consumer spending patterns and emerging challenges to growth.
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Reuters published an article reviewing recent actions from The American Bankers Association (ABA). The group is seeking their own marketplace lending platform in an effort to compete with the growing peer-to-peer industry. In particular, small banks, with fewer resources are struggling to compete with the speed and low costs of alternative lending.
Altficredit discussed a new FinTech business called LendingRobot. The technology helps individuals create a portfolio of investments across a variety of marketplace lenders. The approach is similar to a robo-advisor only in this case the selection of investments is limited to P2P business.
YahooFinance discussed the rapid rise of China Rapid Finance Limited, China’s largest consumer lending marketplace. Much of their ascent is credited to innovative technology and the use of “Predictive Selection Technology to acquire customers on a massive scale at low cost.” By the end of 2016 the company funded a total of over 10 million loans.
Fox Business discussed Citigroup’s aspirations to enter the marketplace lending business. In this case the company is focused on small business lending. Citigroup is offering loans up to $1 million. This group is considered an underserved segment of the lending market.
The Jakarta Post Focused on the Indonesian marketplace Lending world in their review of the data needed to succeed in P2P lending. The author stresses the importance of connecting more data points to better understand the credit profile of a borrower. Accordingly, the author suggests that “more services like electricity bill payment need to be consolidated and structured for an effective credit rating mechanism.”
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Finance Magnates published an article forecasting that marketplace lending will drive business growth in 2017. Alternative lending is valuable not only for personal loans but for businesses seeking financing alternatives. As the author explains, “P2P loans are unsecured, so you don’t have to tie up precious collateral, the funding process is faster than a bank and requires less paperwork.”
Reuters explained new moves by traditional banks aiming to evolve into the P2P marketplace. “Financial technology vendor Misys is launching software to enable banks to provide peer-to-peer lending to their customers as competition from young companies in the sector heats up,” explains the author. This comes amid growing interest in marketplace lending as an alternative to slower, conventional methods.
Equities.com reminded investors to consider marketplace lending as a poart of their protfolio in 2017. Their research illustrates that “Even taking the very conservative approach of investing in the highest-quality loans, you can still earn almost five times the 1.16% rate now available with the average one-year bank CD.” This is certainly true at Bondora where 89% of investors have earned over 10% annually.
ValueWalk provided a brief overview of how investors can manage marketplace lending. The author explains how diversification and analytic tools are the best ways to succeed. In this case diversification means holding many loans. Using tools means opting for new third-party programs which are available to investors who want to analyze P2P returns across firms.
Bloomberg explained the intersection of FinTech and RegTech. FinTech (Financial Technology) describes any kind of technology designed to facilitate transactions and investments. RedTech describes digitized solutions for firms (like P2P businesses) facing complex regulation standards. In an effort to handle regulations “these internet-based marketplaces have teamed up with big banks to underwrite loans for them.”
Bondora got a mention from a German Aktien-Blog article which examines the reasons why borrowers and small businesses are turning to P2P and other online lending platforms for credit instead getting it from banks.
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Yahoo Finance released an article explaining that The Marketplace Lending Association now has eleven new members. These companies will expand the legitimacy of the organization in Washington. The group was originally established to create a visible foundation for the capabilities and transparency of P2P lenders.
Crowdfund Insider In their ongoing effort to create a resource for P2P analytics the firm DV01 has announced a collaboration with credit reporting firm Experian. The end goal is to empower potential marketplace lending customers with actionable insights and data. This information will give users more confidence when choosing the right firm.
Forbes published an article outlining best practices for marketplace lending customers. The author cites some of the advantages of P2P lending explaining “loans have less volatility, a low correlation, and yield much higher returns compared to other fixed-yield investments. Median adjusted returns average 7% on a 36-month loan.” The author also reminds users that getting started is fast and inexpensive.
Forbes posted another article titled, “Why You Should Invest in Peer-To-Peer Loans in 2017.” The author underscores the fact that a P2P investment has a relatively low correlation with the stock market. This characteristic creates a nice hedge in a well-rounded portfolio.
Business Insider shared news of some changes at UK Bank Barclays designed to meet the needs of customers increasingly flocking to the marketplace lending world. The bank is attempting to accelerate the loan approval process as more users are interested in the speed available in the P2P world.
Our Estonian audience can read an article from Postimees about the government research on sharing economy in Estonia. According to the research, Bondora is the largest P2P platform operating in Estonia, followed by Airbnb and Booking.com.
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Recently ValueWalk looked at how the marketplace lending world might develop in 2017. The author described how data-driven analytic firms like PeerIQ and DV01 will become more prominent as potential lenders and borrowers seek more information on their range of choices.
Forbes discussed three tech trends that will influence small business lending. These factors include A.I. which can more efficiently calculate the credit risk of a borrower, the merging of traditional banks and online lenders, and the accessing of underserved markets. Many believe these changes will accelerate under a Trump administration.
Crowdfund Insider discussed the Securities Exchange Commission and their annual report on “nationally recognized statistical rating organizations (NSROs).” The SEC acknowledged online lending in their review of agencies that publish credit ratings on certain securities and institutions. The move indicates the growing field and recognition of P2P lending.
RegBlog reviewed a recent announcement from The Office of the Comptroller of the Currency regarding marketplace lending. According to the author, “The OCC will seek to regulate financial technology (FinTech) companies under a single national standard that provides a different set of rules than those that currently govern the growing industry.”
Business Insider published a piece on Indonesia’s Financial Services Authority and their newly drafted regulations for the marketplace lending industry in the country. The organization is attempting to strike a balance between oversight and encouragement of an industry that provides a valuable service to many.
TechBullion cited Bondora in their article, “10 Popular FinTech Companies in Estonia” As number one on the list the author shared that “With over 9,000 investors from 37 countries, the platform has funded 35 million euro in loans and received more than 4 million euro in interest payments.”
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On Wednesday of last week PYMNTS covered recent comments from Biz2Credit CEO Rohit Arora. While he signaled changes ahead for marketplace lenders he also remarked that “More of the borrowers are seeking faster responses and are applying for funding online and digitally.” P2P lenders continue to leverage the advantages of a digital solution as banks seek ways to remain competitive.
Political news site The Hill forecasted changes in marketplace lending and other financial technologies. The author explains “Trump’s campaign promise to severely cut back regulation, as well as congressional Republicans’ general aversion to the increased regulatory presence in financial services, means significant changes are likely forthcoming.” The new administration may have an impact on the recent best practices recommendations from the Department of the Treasury.
At the end of the month Equities.com posted an article on partnerships developing between marketplace lenders and traditional banks. The author explains the genesis for these unions citing that “In recent years, small businesses have been underserved by the banks. Marketplace lenders saw the opportunity and rose to meet the demand for small business funding. This led to banks maneuvering to get a piece of that pie.”
Forbes discussed recent data which portends a favorable environment for small businesses in 2017 noting that “Institutional lenders, which have emerged as major players in the marketplace lending industry are approving an all-time Index high 63.3% of funding requests from entrepreneurs after an increase of two-tenths of a percent in a month-by-month comparison.”
Banking Exchange published a piece on the value of marketplace lenders who own every aspect of the P2P ecosystem. One such example, U.S. located Cross River Bank has explained, “We’re looking at the marketplace lending industry very holistically,” The Ceo continued “As an end-to-end solution, from origination to funding and even post-funding with liquidity channels, we want to own that part of the equation.”
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National Real Estate Investor published an article about the growing trend of investors engaging in marketplace lending. This trend comes at a time when investors are seeking to boost their returns. The author explains that the “search for higher yield has led to great growth in the marketplace lending arena. In fact, according to a recent report by American Banker, the industry grew by nearly 700 percent over the past four years.
Crowdfund Insider discussed the changes to expect in 2017 for the P2P industry. Credibility and transparency will be major initiative areas in the coming months. The regulatory landscape will continue to develop as more robust standards boost the industry. Looking ahead to 2017 the changing U.S. tax code may encourage more investment in the P2P space.
Business Insider attempted to look ahead to 2017 and P2P changes on the horizon. Competition will likely continue to grow as more of the population becomes comfortable with the model and more aggressive returns. FCA regulations will certainly have an impact on the future of the model as more players adjust to comply.
Moody’s discussed the potential growth of mobile phone and wireless tower ABS transactions as marketplace lending becomes more popular. Additionally, the credit quality of marketplace lending loans will remain largely stable throughout 2017 according to the agency.
Forbes India published an article on the company DV01 which “offers analytics and reporting software for the burgeoning peer-to-peer market, giving investors the ability to track the performance of thousands of loans in a few clicks.” The founder hopes the tool will further empower P2P customers by providing great risk analytics and a more complete understanding of the functionality of a marketplace lender.
Crowdfund Insider gave a brief breakdown of the Q1 and Q3 2016 performance in the P2P arena while mentioning Bondora.
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On Wednesday CrowdFund Insider published an article on comments from Fitch Ratings regarding the recent decisions from the Office of the Comptroller of the Currency (OCC). Fitch noted that any FinTech company choosing to pursue a charter would experience increased regulation and capital requirements. These responsibilities, in turn, may impact earnings.
In a podcast from the Federal Reserve Bank of San Francisco the former Chief Innovation Officer for Standard Chartered Bank discussed how marketplace lending emerged because “Banks were not willing or able to step in and support the SMEs.” He continues, “if you looked at the data since the global financial crisis, year on year, the overall credit to SMEs was declining.”
Business Insider reported on the £85 million of taxpayer money the UK has invested in P2P lending. One P2P lender remarked on the actions of the British Business Bank’s actions stating “The British Business Bank continues to play an important role in promoting competition in the small business lending market by lending directly through platforms.”
The Tech Portal reported on recent actions from the Australian Securities and Investments Commission (ASIC). The organization took steps to remove barriers to FinTech startups in the country by offering “licensing exemptions.” The author explains “This exemption will allow the startups to start testing without having to go through the application process for a license. They only need to notify the regulator that they plan to start testing a service and meet certain criteria.”
Tech Bullion shared P2P statistics from the UK citing that “cumulative lending reaching about £3.7 billion October last 2015” in the country. Some analysts expect the market to reach £5 billion in 2018 as growth accelerates due to customers seeking easy, affordable loan solutions without the burdensome process of working with traditional banks.
P2PGuide shared our post on managing risk with the Bondora Portfolio Manager.