… Creditease.cn in China. Founded in 2006, Creditease has grown strongly and now has 2,200 employees in 20 cities. The new loan volume originated each month is about 25 million US$.
Only the lender offer is available online. The borrower application is mainly an offline process, with all borrowers subject to a 30 minute personal interview. After background checks about 20% of applications succeed. According to the company, the historical default rate is at a low default rate of 1%.
The maximum loan amount is 60,000 RMB (approx 9,100 US$). Figures on the fee for borrowers differ but most secondary source quote 1 to 10% of the loan amount.
Lenders don’t choose individual borrowers but rather select a term length between 3 and 12 month. Based on this selection they get interest rates between 7 and 10% p.a. Minimum investment is 100 RMB (about 15 US$). Returns are automatically reinvested. Lending is fee-free and lenders do not bear the default risk, as these are covered by Creditease’s Risk Fund.
Additionally Crediteasy has a p2p microfinance offer, where it partners with local MFIs to loan to woman in rural area. On these p2p microfinance loans lenders have the option to get 2% interest.
Founder Tang Ning, a graduate of Peking University, said in mid 2010 that he sees CreditEase in the second phase of a 3 phase development and currently the focus is to build a larger customer base. In 5 years he aims for CreditEase to be a brand name as well established as EBay.
German p2p lending Smava completed another financing round. The new capital raised comes from the VCs that already invested in earlier rounds.
Earlybird increased their investment from previously 39% of shares to now 56% and Neuhaus Partners increased their part from 12.5% of share to now 17%.
Speculation is that the high customer acquisition costs (especially for borrowers) led to the need for another financing round. Estimates put the cost for borrower acquisition as high as 500 Euro. In certain customer acquisition partnerships, Smava pays the partner up to 1.3% of the loan amount (equals 650 Euro for a borrower with the maximum loan amount of 50,000 Euro). While Smava is growing, the growth rate has in the past months stopped to accelerate and is about 2 million Euro funded loan volume per month (chart).
Chonchol Gupta and Xavier Cabo, two graduates of the Tulane University’s A.B. Freeman School of Business, founded RebirthFinancial.com to enable small businesses from Louisiana easier access to loans.
Interested businesses are screened and once approved can apply for loans between 5,000 and 100,000 US$ with loan terms ranging from 5,000 to 100,000. There is only a small fee of 100 US$. Apart from that fee, the business model of Rebirth Financial bases on earning from the interest rate spread.
Any US resident can lend. Minimum amount is 50 US$. Rebirth Financial is not subject to SEC registration.
It will be very interesting to see how the first p2c lending service in the US develops. Funding Circle in the UK had a good start. Rebirth Financial has already announced that Louisiana is only the start and that they plan to expand nationwide.
Notice the headline of the article. I have chosen it, because I found it hard to describe what Fidorpay is. And Fidor itself meets the broad scope of questions, that the novelty service provokes, with a main FAQ of no less than 115 questions and answers. But I’ll try my best:
Fidorpay is a prepaid e-wallet that can be used via web or mobile apps (they currently have an iPhone app and are working on android). Once a user has transferred money into this account he can send money to other Fidor Pay users.
Sounds like Paypal? There are important differences:
The Fidorpay system works nearly in real-time. That means money is credited to the receiver’s account within a very short time frame and can be used by him then. (Paypal offers fast notification, but it takes much longer for the money to be actually available in the recipient’s account for future transactions).
Sending (and receiving) money is fee free
Starting February, 1st 2011 Fidorpay users can now lend money via Fidorpay to ‘friends’
So how does the lending part work?
A Fidorpay user can ‘lend’ any amount between 5 and 500 Euro to anyone. This is possible even if the recipient does not (yet) have an account but his email-address or mobile phone number is know to the lender. Loans are interest-free. They do not have a fixed term, instead the lender can send the friend a request to repay anytime. Unlike sending money, lending is not fee-free; Fidorpay charges a one time fee of 0.49 EUR (approx. 0.68 US$).
Is this p2p lending then?
It is in a pure technical/infrastructural way, since it does enable one person to lend another person money (over a distance) via internet or mobile phone.
But it is not the p2p lending in the sense it is most commonly used in this blog for it lacks any marketplace and validation aspect. It only takes a lending process that would have offline taken place with cash handed over to a convenient online level. If the borrower refuses to repay the loan Fidorpay itself does not enforce the repayment in any way.
How is it relevant to p2p lending then?
Fidor with Fidorpay shows how an infrastructural footing for p2p lending could look that omits most of the conventional banking structure. Since Fidor has a banking license, some of the regulation requirements are solved. If all lenders and borrowers of a p2p marketplace would (mandatory) become Fidorpay users then all payments and repayments could take place inside the Fidorpay system. The process would become faster and transactions could possibly be cheaper.
Are we there yet?
Far from it. I think Fidorpay gives a glimpse of what mechanisms could be used in the p2p lending marketplace of the future. Since it is currently not a main banking connection of the customers, amounts in the wallets are small. And maximum transaction amounts are limited for security and regulation reasons.
But ‘conventional’ banks should watch out and p2p marketplaces should think and review what possibilities Fidorpay and potentially evolving similar services will offer them to advance their service.
Key data about Fidor and Fidorpay
Founded 2003 Fidor Bank AG commenced its banking activities in December 2009 and brands itself as a ‘community bank’ using web 2.0 instruments in combination with latest technology. Related video: Speech by Matthias Kröner at Finovate, London. Fidor Bank states 19,600 users at the end of 2010. The current number of users is approx. 23,000. It is unclear from the press statements if all users are paying customers.
Fidorpay is available to residents of Germany with a German bank account.
Estonian p2p lending service isePankur successfully improved the loan quality in 2010. The company added several validation steps for loan applications. On top of the existing credit bureau checks and it’s own scoring model isePankur introduced several manual checks on the borrowers in May and July. Since September borrowers need to submit bank statements which isePankur uses to verify information presented in the loan application. The measures implemented are listed in detail here.
CEO Pärtel Tomberg told P2P-Banking.com: “… these [new] loans will … be the most profitable social banking loans for investors across the globe”.
To prove this claim Isepankur is publishing real time performance data on its marketplace.
‘Unlike other companies you can see the quality of loans per month so the growth rate of the portfolio will not hide the actual returns from loans issued previously.‘ says Pärtel Tomberg.
The charts reflect the drastic reduction of bad debt from loans issued after May 2010 and the very positive impact on lender returns.Continue reading →
