Countries

P2P Lending Sites in North America

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Below is a map of the p2p lending landscape in the US and Canada. It shows active and discontinued p2p lending services (including p2p microfinance).

The fastest growing services are Lending Club, which funded 12 million US$ new loans in August, and Kiva. Prosper’s growth is stagnating. Other US based services are Vittana, United Prosperity, Zidisha (all microfinance) and People Capital (student loans). CommunityLend is the only p2p lending site active in Canada.

All of these marketplaces have been featured earlier in the P2P-Banking.com blog. If you want more information about any of them just enter the company name in the search box on the top right of this blog.

Notice to other websites: You are free to copy and use this map, provided you agree not to alter or resize the image and you will set a link to this article.

Related resource: P2P Lending Sites in Europe (Map)

Fundingcircle’s First Month Figures

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Fundingcircle.com launched on Friday August, 13th. According to figures the company released, the p2c lending service had a good start. Apparently many lenders took advantage of the cashback offer, and immediately after lending sold loan parts to other lenders on the secondary market. Review the following numbers reported by Funding Circle:

  • 11 small businesses have fully accepted loans from Funding Circle lenders totalling 317,000 GBP
  • Funded businesses range from environmental consultancies and recyclers, to restaurants and retailers, and manufacturing and engineering companies
  • Over 1,000 lenders and borrowers have joined
  • 20 loan requests from small businesses have been listed on Funding Circle, with a good number of businesses in the credit underwriting process
  • Monthly interest rates for borrowers range from 7.4% to 10.7%
  • ~10,000 bids have been placed on loan requests
  • ~500 loan parts have been successfully transferred from one lender to another

Could Auxmoney Fee Hike Damage Image of P2P Lending?

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Auxmoney.com is the second largest (by loan volume) p2p lending service in Germany. The new loan volume per month is about 700,000 Euro (approx 900,000 US$). A recent estimate puts the monthly revenue of Auxmoney at about 57,000 Euro (approx. 74,000 US$; based on August numbers). The majority of these revenues comes from the sale of so-called ‘certificates’, which the borrower can optionally buy. Examples for certificates are credit scores, income validations or car value assessments.

The fees for the optional certificates as well as the listing fee are due in any case – regardless whether the borrower’s request for a loan is funded or not.

Effective September 1st, 2010, Auxmoney raised several fees:

  1. Lender fee for successful bids is now 1% of bid amount – at least 1 Euro (previously there was a flat fee of 1 Euro per successful bid)
  2. Borrower fees for successfully funded loans are now 2.95% of loan amount (previously 1.95% or 2.50% of loan amount depending on loan term)
  3. A new rule in the terms and conditions states that the auction duration of a listing that has not completely funded after 14 days will automatically prolong as long as the listing is not funded or the maximum duration of 90 days is reached or the borrower objects to the prolongation. The borrower can object to the extension any day he wants by pressing a button in the online interface. If he does that the listing ends after 5 more days.
    Every additional day (!) of extension (beyond the original 14 days) the borrower is charged 1 Euro (approx. 1.28 US$).
    Therefore if the loan does not fund within 90 days and the borrower did not stop the listing, he is charged 76 Euro extension fee on top of the original 9.95 Euro listing fee.

With the legal construct Auxmoney has selected, the listing fee, the fees for the certificates and the extensions need not be factored into the APR that Auxmoney calculates.

Could these circumstances damage the image of p2p lending?

P2P Lending worldwide has received positive press coverage and benefits from offering an alternative to the currently ill reputed banking sector. Only occasionally are single players causing  bad publicity (e.g. the high default rates of Prosper or the Boober failure). Looking at the German market, press coverage for p2p lending was nearly all positive. One exception was the warning of a well-known consumer advocacy which accused Auxmoney of using false marketing claims on its website. Auxmoney sued the publisher – the case is still ongoing.

The latest change in the fee policy of Auxmoney could lead to a negative change in the perception of p2p lending by consumers. Should internet users start to associate p2p lending with high fees that are charged even if no loan was obtained (currently on average 10-20% of all loan listing on Auxmoney are funded – see green line in this chart) then p2p lending would risk losing any competitive advantages over bank loans.

Fees at other p2p lending services have risen several times in the past too in the struggle of these marketplaces to become profitable. While these fee increases do impact the attractiveness for the users the difference is that at least the fees in most cases only apply to loan transactions on funded loans.