My Lendit Europe Recap 2017

Lendit Europe time of the year again. My fourth time as a particpant of the London conference. It is now marketed as an ‘Event for Innovation in Financial Services’ and that means a wider scope of topics – and presenting companies – than in earlier years, when it had a single focus on p2p lending / marketplace lending. I truly enjoyed the conference, it had quality sessions and its high level attendants (more than 1100) allow great networking and making interesting contacts.

In writing this recap I find it much harder than in previous years to identify the main trends/topic that were discussed. There has been no single big announcement or issue happening that dominated the talks. So I’ll start with 3 predictions Renaud Laplanche, CEO Upgrade made in his motivating outlook on Online Lending 2.0:

  • Prediction 1: ‘The growth of online lending will accelerate in the next 15 months’
  • Prediction 2: ‘An organized secondary market for online loans will emerge in the next 15 months’
  • Prediction 3: ‘Continued re-bundling will give birth to at least one major consumer product innovation in the next 15 months’

From my viewpoint the first prediction is the one with the highest probability to come true, the second one is mainly important for the US market and it is actually the third one that is most interesting (but also most open).

Laplanche on Rebundling
His slide on rebundling examples

There are connections to another development that goes into the same direction and surfaced in several other sessions: More and more fintechs in this space are cooperating to better serve the customer and integrate multiple products into one user experience.

Furthermore there were several sessions around machine learning, artifical intelligence and automated underwriting with a wide range of opinions to what extend processes will be fully automated or whether human intervention or oversight is stll desireable for some specific decisions.

Looking at the scene from a geograhical perspective, many panelists emphasized that there are still a lot of difference between regions. The Americas, Asia or Europe (or even areas inside Europe) show a lot of differences no matter if the specific panel discussed funding, risk, investor yield, regulation or banking. So while many (especially VCs) would love to see fintech innovations that work globally and (if they are consumer faced) reach billions – that is extremly hard to achieve and therefore probably not going to happen in the near future.

This touches several speakers commenting and speculating whether the big tech giants like Amazon, Facebook, Google or Apple have ambitions and plans to offer financial services as they cater to a global audience, and what impact that would have on banks and fintechs. I found some aspects of this interesting, but mostly those discussions are futile because I feel there is such a lot of speculation involved and no real indicators that any of these companies are making steps in that direction. (sorry if there were any hard facts presented, I might have missed them as I did not see all the sessions).

I enjoyed Pitchit, where 8 startups battled for the vote of the jury and the audience. Swiss Sonect won both by hoping to replace ATMs by a platform approach where merchants can become the point where cash is dispensed (this is actually in collaboration with banks as they want to reduce the costs for maintaing ATM infrastructure and not anti-bank as it might sound on first impression).

All sessions at Lendit were recorded and will be made available over the next days here.

Seems like next year Lendit might come to a different location. The exit survey asked attendees to rate how they would like Frankfurt, Berlin, Barcelona vs London again.

 

Loanbook partners with Sage

Spanish p2p lending marketplace LoanBook announces a new partnership with Sage, provider of cloud accounting, payroll and payments software, to offer Sage’s Spanish customers a direct, in-product channel to alternative finance.

As part of the collaboration, Sage will offer its SME and accountancy customers access to LoanBook’s working capital loans, both in-product and within Sage’s wider ecosystem, stating Sage’s customers will benefit from a dedicated loan request portal enabling LoanBook to access customer data in order to improve the quality and speed of its loan underwriting.

Sage already has partnerships with other p2p lending marketplaces like Funding Circle and Marketinvoice.

James Buckland, CEO of LoanBook, commented: ‘We are excited to go a step further in our collaboration with Sage with a direct in-product integration. This partnership is based on the shared vision and commitment of Sage and LoanBook to support the SME community in Spain in becoming more competitive through improved access to finance and to innovative technology solutions.’

LoanBook has lent 21 million Euro to Spanish SMEs during the last 12 months and says it if providing a net annual return of over 5% for its investors.

International P2P Lending Volumes September 2017

This p2p lending statistic table contains the loan originations of p2p lending companies for last month. Funding Circle leads ahead of Zopa and Ratesetter. The total volume for the reported marketplaces adds up to 404 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending services.

This month I added Raize, a marketplace in Portugal.

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

Want to meet representatives of many of the listed companies? Attend Lendit London in October – use discount code WiseclerkVip to get a 15% rebate on registration.

P2P Lending Statistic 09/2017
Table: P2P Lending Volumes in September 2017. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

My Bondmason Result After Exit – Yield was Mediocre

Last year in September I signed up at UK platform Bondmason in order to test first-hand how an investment of 1,000 GBP would develop. As described in the review article, I wrote when I started, Bondmason is an aggregator that automates the investment across many p2p lending platforms for the investor and takes a fee for that. Bondmason projected a target return of 7% after fees and bad debt.

Allocation of my deposited funds into loans went okay. There was some cash drag, but not as much as other investors have experienced.


Deployment speed of my investment on Bondmason – click for larger image

What was bad, was that it became clear to me, that the interest level in combination with the non-performing loans would make it very unlikely for Bondmason to reach the projected return – at least for my portfolio. Especially with the Invoice Discounting loans there were issues.

In April 2017 Bondmason announced it would require a larger minimum investment amount of 5K (previously 1K) and raise fees for small portfolios to 1.5% (previously 1%). Dang. I was in no way interested to deposit more money. So my portfolio did not even get to celebrate 1st anniversary. In July I gave them notice to liquidate my portfolio/account. Since then I withdrew 1,013.94 GBP – only slightly more than I deposited. My account still exists as there is 20 GBP stuck in two property loans in default and also 1.41 GBP in cash.


My Bondmason result (1) – click for larger image


My Bondmason result (2) – click to enlarge

Regardless of which way I look at it, the result is clearly bad. Obviously Bondmason by far missed the targeted return of 7% in my case.
If I take an optimistic view and just assume, my 2 defaulted loans would recover today and the outstanding amount is paid to me, then my self-calculated yield (XIRR function) would be 4.3%. If I need to write off the 2 loans in default then my self-calculated yield is 1.9%. And that is before tax – as a German resident I cannot offset bad debt against interest earned for tax purposes. And on top of that the pound has been detoriating against the Euro value in the past 12 months (not Bondmason’s fault).

So to sum up: I liked the idea of an aggregator and the Bondmason setup allows passive investing in a diversified mix of p2p loans. But my returns are among the worst I ever experienced on p2p lending platforms and I am certainly happy I conducted this test with 1,000 GBP only and did not risk more.

If you want more details about the development of my portfolio throughout the past year there are more snapshots with screenshots over time in this thread.

 

Fellow Finance Now Offers Loans to German Borrowers

Peer-to-peer lending platform Fellow Finance is now open for borrowers in Germany. Wirecard Bank supports the Finnish FinTech company Fellow Finance to enter and provide a digital infrastructure for the German financial market. Wirecard Bank will place their German full banking license at the Fellow Finance’s disposal and in addition enabling a completely digital credit process.

Under German regulation (KWG) only banks are all allowed to make loans, meaning all p2p lending platforms need to partner with a transaction bank.

It is not a full p2p lending offering as investors cannot invest into the German loans on the platform. And Fellow Finance states in their TOC that they do not advise borrowers regarding the loans. So it looks to be an attempt to capitalize on the reach of the brand. The website for the German market is running on the national domain Fellowfinance.de.
Update: While the German website explicitly states that retail investors cannot invest, the wording might be misleading and actually might mean only that investors need to go through the Finnish site in order to invest. On the Finnish site the ability to filter for German consumer loans and to set up allocators (autoinvest) for German loans is present.

Jouni Hintikka, CEO at Fellow Finance, says: “We are looking forward to working with advanced Wirecard Bank as a co-operation partner in the future. We are proud of the entry into the German market after having already proven our business model in Finland and Poland. This is again one step of making Fellow Finance the biggest consumer and business lending platform in Europe and proves the scalability and flexibility of our platform.”

Thorsten Holten, Executive Vice President Sales Financial Institution and FinTech Europe, adds: “Gaining Fellow Finance as a customer means that we can expand on our collaboration in the area of alternative lending with the aid of an international partner. With our expertise in the areas of banking and regulations, we help FinTech companies such as Fellow Finance to enter the market in the best way possible as well as to quickly and easily internationalise their business.”

In future, Wirecard Bank will support Fellow Finance in the scoring of potential borrowers and carrying out payment transactions. This means that end consumers in Germany will be able to quickly apply and raise a loan in competitive interest rate.

The German market is very competitive and so far p2p lending marketplaces have found out it is not easy to compete with the banks. In Germany Auxmoney is the largest p2p lending marketplace offering consumer loans.

International P2P Lending Volumes August 2017

The table lists the loan originations of p2p lending marketplaces for last month. Funding Circle leads ahead of Zopa and Ratesetter. The total volume for the reported platforms adds up to 391 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms.

Milestones reached this month are:

  • Bondora reaches 100 million Euro in financed loans since launch

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

Want to meet representatives of many of the listed companies? Attend Lendit London in October -use discount code WiseclerkVip to get a 15% rebate on registration.

P2P Lending Statistic August 2017
Table: P2P Lending Volumes in August 2017. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

My Housers Experience – Quick Gains by Flipping Investments on Spanish Property Platform

Today I gained another 1,7% after selling an investment that I did held only a few days. I started using the Spanish property platform Housers in the beginning of August. On Housers investments into property in Spain and Italy are listed. Mostly the offered structure is that investors will benefit from rent income from the property and also capital gains achieved, if the property is sold at a higher price at the end of the investment period. The concept will sound familiar to those that are using the British platfrom Property Partner. But there are other offer types too, including fixed interest investments. The minimum investment is 50 Euro and terms range from 12 months to 5 years and longer.

There is a lot of information and statistical data about the properties and the property market in that town and neighborhood. The platform is easy to use. After signup, the investor needs to upload scans to verify identity and to connect a bank account. Deposits can be by bank transfer or credit card. I made a small withdrawal of 0.50 Euro via SEPA transfer to test withdrawal and the money arrived after 2 days in my bank account.

Current bonus: Sign up via this link and get 50 Euro bonus when you invest 50 Euro. Ends today (August 31st)! The bonus can only be invested, not withdrawn.
Additional cashback of 1% on all credit card investments (you see that after you select a property to invest into. Ends today (August 31st).

Housers has a secondary market. Only properties in the “Saving” category can be traded – with the “MP” logo style mark. Sellers can set a premium (or) a discount. When I started in the beginning of August I had 50 Euro invested in the Monec property (pictured right) and wanted to try out selling. So I listed that at 1.74% premium and was astonished that it sold quickly. I had exited that investment only 8 days after making the bid. Granted the absolute profit was not spectacular: 78 Cents (50.87 Euro sales price minus 0.09 Euro sales fee – Housers charges 10% of profits), but it was 1.56% profit in 8 days. Mathematically that is an (X)IRR of 102%, but of course one can not calculate it that way as a reinvestment without breaks will not be possible and not every time a buyer will snap the part that quickly.

Nevertheless I got curious, if I could scale that somewhat and employ a strategy of flipping, that is investing and then selling fast at a premium. I invested in more parts of an Italian property opportunity (“Breda” in Milan). Yesterday the secondary market for this opportunity opened, and today I sold the first 100 Euro part for a 1.89% premium. I have listed the next 100 Euro part for 1.99% premium now.

There are three main factors for selling in my view:

  • Premium (typically buyer will buy the part currently listed at the lowest premium)
  • Part size: only full parts can be bought. I would expect it to get harder the larger the part is (but the seller can list part of his total holding, as long as it is at least the 50 Euro minimum)
  • availability of other offers, especially on the primary market

I have yet to experience a time where there are no offers on the Housers primary market. It will be interesting to see how that effects demand on the secondary market.

The majority of investors is from Spain, but Housers says there is large demand from investors from Latin America, too. I like the platform interface, it is easy to use. The UI is available in Spanish, English and Italian language.

Another property investment platform in the Eurozone offering a bonus is Estateguru. If you register via this link, you get 0.5% cashback on all investments in the first 90 days. Investments on Estateguru are into secured loans, not equity.


One of the property investments listed on Housers in the past

Funding Circle Stops to Offer Manual Investment in Self Selected Loans

Funding Cirlce LogoUK p2p lending Marketplace Funding Circle announced today that from September 18th, there will be an important change to how investors can invest on the marketplace. From that date Funding Circle will withdraw the option to manually choose which businesses to lend to and which loan parts to sell. Instead Funding Circle says it will launch a significantly improved and upgraded version of existing Autobid and Autosell lending tools.

Investors will be able to choose one of two new lending options based on their personal preference. Both options will be available as a Funding Circle ISA, which Funding Circle intends to launch later this tax year.

  • Balanced: you will automatically lend to the full range of creditworthy businesses (A+ to E), aiming to achieve an attractive, stable return. This will allow you to build a balanced portfolio similar to the makeup of small businesses in the UK today. The projected return is estimated to be 7.5% per year after fees and bad debt.
  • Conservative: you will focus on lending to businesses that have been assessed as lower risk (initially A+/A) but with a lower projected return. The projected return is estimated to be 4.8% per year after fees and bad debt.

Funding Circle gives the following reasons for stopping manual lending:

We launched Funding Circle in 2010 with the option for investors to either manually choose which businesses to lend to, or use our Autobid tool to build a portfolio based on their lending preferences. While many investors have enjoyed manually choosing loans, there are some drawbacks to it:

  • Many investors do not currently benefit from lending to all types of businesses: currently some investors can find it difficult to access D and E loans, which are some of the most popular. We want to ensure investors lending through Funding Circle have an equal chance of accessing all loans, and earn the best possible return.
  • It can mean your lending is not spread evenly across lots of businesses: currently many investors who manually choose loans are not fully diversified and are at risk of having a negative lending experience. We want to ensure investors spread their lending across lots of different businesses as this is the best way to earn a stable return.
  • It can be confusing for investors: many investors tell us they prefer a simpler, easy-to-use lending experience: 73% of new investors who join Funding Circle choose Autobid, and 80% of Funding Circle investors* say simplicity of lending is important to them.

* Independently surveyed by Cambridge University

Funding Circle will also make changes to the interest rates effective August 30th. Funding Circle says ‘When reviewing rates we take a number of factors into account, including macroeconomic trends, the expected mix of risk bands of borrowers, expected bad debt rates and wider competition in the market, which continues to be increasingly competitive for lower risk businesses. The new rates will allow you to continue to lend to established, creditworthy small businesses while earning an attractive, stable return.’.

Furthermore Funding Circle has removes sales fees for selling loans, effective today. There will be no more premiums and discounts possible on the secondary market.

Several p2p lending services have made similar moves discontinuing self-selection of loans to invest into and asking investors to use autoinvest options instead usually citing simplicity and ease of use. While this may be true for part of investors it certainly is not true for all of the investors. Especially among most active and vocal investors there are some that like to select loans manually and dislike if that choice is removed (Funding Circle says 73% of new investors use autobid).

Possible as a result of sentiments like that Bondora reintroduced more selection options with their Portfoloio Pro feature, after removing them earlier.

 

Interview with Terry Fisher, Founder at Huddle Capital

What is Huddle Capital about?

Huddle Capital is a P2P lender specialising in high quality, high yielding business loans. In an already crowded space, Huddle is differentiating itself by it high quality origination and a focus on educating its lenders to help them make better decisions. Unlike many other Huddle Capital is backed by a parent company that has been lending its own money for a long time, which they will continue to lend though the Huddle platform – really putting our money where our mouth is!

The parent company underwrites each deal, which means that all borrowers will 100% get funded through our platform.  In addition, we offer investors instant returns – in other words, investors start earning as soon as they make a commitment to invest in a loan, regardless of how long it takes for a loan and get fully funded.

What are the three main advantages for investors?

The main advantage for lenders on Huddle is that we are owned and managed by Access Commercial Finance which is an FCA regulated, balance sheet lender. Our belief is that most fintech businesses in the marketplace are too much ‘tech’ and not enough ‘fin’ so we are looking to correct that balance on Huddle. There is no point having a fancy website & tech if the underlying loans are of poor quality and the collection process has holes in it. We are an existing finance business that has all the processes and knowledge in place already – we are simply bolting on the p2p tech to allow investors the opportunity to invest alongside us.

Investors benefit in 3 ways:

  1. We aim to provide higher returns compared with average returns in P2P market, by leveraging our loan management expertise. Naturally investors must balance risk versus reward.
  2. We provide instant returns to investors, as explained above; and
  3. We believe in empowering investors to make educated investment decisions, especially in this new asset class. We educate and provide a platform for investors to network with each other.

What are the three main advantages for borrowers?

The main advantage to borrowers is getting speedy access to funding for strong business cases that have been unable to achieve satisfactory funding elsewhere. This could be due to slow processing timescales by more mainstream lenders, or the fact that the borrower can’t find a lender who like their particular case / asset class etc.

At Huddle we share many of the same management team of Access Finance and therefore have a wealth of commercial business experience as owners as well as lenders, allowing us to understand borrowers needs better and quicker than most other lenders.

What ROI can investors expect?

As always, reward increases with perceived risk so individual lenders are free to choose the loans and risk profile that suits them. Currently we have loans that pay lenders from 8% to 16% per annum, depending on their risk appetite.

Naturally, ROI increases with the ability of the platform to manage bad debts.  Our parent, Access Commercial Finance, has only ever had minor default since they started lending.  We deploy the same credit management team who is proactive in chasing down late payments.

Why did Access Commercial Finance decide to start Huddle Capital?

At Access we have been originating a stream of good quality loans for many years and have had great success funding them from our own balance sheet. But we don’t have unlimited funds and often come across loans which we would like to be involved with but they need pricing more competitively than we are able to. So with Huddle we are looking to open up our origination channel to P2P investors, allowing us to write more business and not have to pass up great opportunities just because our own funding capabilities don’t allow it.

Terry FisherHuddle Capital is using technology supplied by Ablrate. What factors led to the choice of this solution and how satisfied are you with the software?

At Access we have had a fantastic working relationship with Ablrate for the last couple of years. We have originated a lot of high quality loans that Ablrate have funded through their investor base. We actually looked at a lot of software providers in the market and were not 100% happy with any of them. Then we thought ‘hang on a minute! Why aren’t we working with Ablrate on this?!’. 10 weeks later we were live! David at Ablrate is a very good operator and very commercial to work with, so the process was a breeze.

The Ablrate platform is proven – having gone through a stringent review by the FCA as part of the approval process.  We leverage their practical experience to ensure that we avoid mistakes made by the pioneering P2P industry.

Huddle Capital Limited is an Appointed Representative of Rebuildingsociety. What does that mean and why did you choose that structure?

In simple terms this mean Rebuildingsociety provide us our regulatory permissions whilst we await our own from the FCA. Getting directly authorised from the FCA is a long and laborious process. Becoming an Appointed Representative allows us to get up and running in a matter of weeks as opposed to potentially well over a year. It makes no differences to our lenders or borrowers, we are still governed by the same rules as everyone else for their protection. We will look to get our own permissions in the fullness of time, but right now we are concentrating on building the business.

What were the main challenges launching your platform in a competitive (crowded?) market?

Once your tech works there are only 2 real challenges in this business – attracting lenders and finding borrowers. Fortunately we have got plenty of borrowers both existing and in the pipeline – so our challenge is getting out there in front of more lenders so they can learn about our platform and the benefits of lending through Huddle. Hopefully this interview will help with that!

We had support from a progressive consultancy, Vedanvi, who helped us develop the strategy, build the business, operate it and then transfer it to our own internal team.  They have significant experience in this market space and we leveraged their expertise to ensure a smooth and successful launch.

Is Huddle Capital open to international investors?

International investors are welcome to invest through Huddle Capital.  As required by law, they have to undergo additional anti money laundering checks before they are allowed to invest on our platform.  Investors need to realise though that their loan contracts and their contract with us are governed by UK law.

Which marketing channels do you use to attract investors and borrowers?

Currently all our borrowers are generated via Access, our parent company. We have no shortage of quality businesses looking to borrow money!

We are marketing to investors through the usual channels of PPC & SEO, but the primary channel we use is content led marketing, providing educational led content, empowering potential lenders to understand the lending business better and be in a position to make informed lending decision.

Do you plan an IFISA product offer?

Yes we certainly do but realistically it will be a few months down the line. We have lots of additions to the platform & the technology over the coming months and it is a matter of getting our priorities in order. We have launched, we have tech that works and now we are starting to get a flow of strong and high yielding loans. We are currently concentrating on brining on new investors so we can ensure strong liquidity in both the primary and secondary markets. Then we will move on to getting the IFISA launched. It’s keeping us busy!

Where do you see Huddle Capital in 3 years?

Hopefully as a highly recognised brand name in the P2P space. We should have a large base of happy lenders who come to us time and again to deploy their money in to high yielding, secure opportunities. Just doing more of what we do now, and listening to our lenders and borrowers to keep improving!

P2P-Banking.com thanks Terry Fischer for the interview.

Dutch Insurance Aegon Will Fund 160M GBP Loans on Funding Circle UK

Today Aegon and Funding Circle announced a strategic long term partnership. Aegon will invest in loans to UK small businesses originated through p2p lending marketplace Funding Circle.

The partnership will see Aegon fund 160 million GBP of loans in the first 12 months under a framework agreement, with the intention to extend this step-by-step into a four year funding program. In the first year the investment will help approximately 2,600 UK businesses to access finance.

Aegon joins a wide range of investors lending directly to small businesses through Funding Circle, including 65,000 individuals, local councils, the government-owned British Business Bank, the European Investment Bank and other financial institutions. Funding Circle states, investors in the UK have earned an average 6.6% per year and 135 million GBP  of net interest over the last seven years.

The Economic Secretary to the Treasury, Stephen Barclay, said: ‘Small businesses are the lifeblood of our economy and it’s fantastic news that Aegon are investing through Funding Circle to help them thrive and grow. This partnership with one of the UK’s largest FinTech firms is further proof that the UK remains the global leader in FinTech. Aegon’s venture also shows that there is significant appetite for inward investment into the UK and we hope to see more deals of this scale in the future.’

Mike de Boer, CFO Aegon Bank NV said: ‘Funding Circle allows small businesses to access much needed funding. The strategic partnership we have signed with Funding Circle is another important step in the strategy of Aegon to cooperate with Fintech partners in the direct lending landscape. This partnership gives Aegon access to attractive small business loans over the next four years, which helps to further diversify our investment portfolio. High savings inflow of our successful Fintech Knab banking operation is used to invest in the Funding Circle loans.’

‘This agreement follows an extensive due diligence on the loan origination, compliance and risk-returns of the Funding Circle loans. Funding Circle has shown that their robust process, technology and financial innovation capabilities have a positive impact on the UK economy and small businesses in particular. Funding Circle provides quick and transparent funding to small businesses.’ Continue reading