Communitylend Closes – Company Focuses on FinanceIt instead

Today Canadian p2p lending site Communitylend announced that it will close the p2p lending marketplace to focus on its consumer lending business. Communitylend will continue to service existing loans; there will just be no new ones.

Quote from the announcement:

If you have been following the CommunityLend Peer to Peer (P2P) Lending story over the years you might have been wondering why we have been so quiet here here recently.   The short answer is that we have been trying to decide how much more time to spend on our P2P Lending site in light of a larger and faster growing consumer lending business we also operate called Financeit™.

We have now made the decision that we will be suspending the operations of our P2P lending site so that our team can focus solely on Financeit™.

This has not been an easy decision for us but one which has come about over time because of our observation that P2P Lending, as it needs to operate within the Canadian regulatory system today, has enough headwinds blowing against it that getting to a significant scale was going to be both expensive and difficult.   As we searched for solutions to these challenges as a P2P Lending operator, we kept our focus on our desired goal, to create a lending product for Canadians that gave them a less expensive and more convenient way to get an instalment loan.

We realized that we needed to get closer to where the borrowing “transaction”’ occurred instead of recruiting the borrower after the fact.  People buy things in a store location (offline and online) and too often just use their credit cards and then carry balances with high interest rates.  We realized that helping people at this transaction moment was the key to driving interest in our lending product.  This conclusion led us quickly to focus on sales finance and starting in late 2010 we launched a market leading sales finance platform called Financeit™. Continue reading

CommunityLend Raises 1.5 Million CAN$

CommunityLend has closed a 1.5 million CAN$ private placement from several individual angel investors and an institutional investment fund. The proceeds of this private placement will go to scaling up loan origination, loan adjudication, and loan servicing operations, the company says, continuing:

This investment comes on the heels of a successful year since our launch as Canada’s 1st (and only) online consumer loan marketplace by CommunityLend Inc. Monthly loan volume has more than doubled each of the last 3 months and we are projecting this pace of growth to continue throughout 2011.

(Source: Communitylend blog)

Review of My P2P Lending Predictions For 2010

In January 2010 I wrote down my predictions for p2p lending trends in 2010. Now let’s see how good my crystal ball was. The black text is my original prediction, with the review added in green and yellow.

More competition and entering more national markets (probability 100%)
This is a fairly easy bet. There are many, especially European markets, where no p2p lending service is operating yet. Even accounting for the fact that laws and regulation in some national markets make it hard or impossible to establish a service, there is still plenty of room. Looking at an individual country, it is much harder to tell. I still wonder that there are no competitors to Zopa in the British market (yet).
As expected this was an easy bet to win. Plenty of new p2p lending companies launched. Zopa got 4 new competitors in the UK (Ratesetter, Fundingcircle, Quakle and Yes-Secure). 3 companies launched in Finland. FairPlace started in Brazil.

More products (probability 100%)
Currently nearly all p2p lending platforms only offer one product: unsecured, fixed term loans. The differences are more in the details of loan funding (bidding, no bidding, markets, listings) but not in the offered product. In 2010 we will see additional products (e.g. secured loans).
Ratesetter introduced rolling monthly loans with variable interest rates. (Note: variable interest rates were one of my predictions for 2008 – I was a bit early on that one). Money360 tries p2p mortgages. CommunityLend might be up to something really interesting with FinanceIt. Some smaller enhancements to the existing product were developed too (e.g. cars as collateral).

A bank will acquire an existing p2p lending service (probability <25%)
While last year’s prediction was that there is the first bank experimenting with p2p lending (and there was), 2010 might see a bank (or other financial institution) buying a running p2p lending service.Buying will be much faster, cheaper and risk-less than if the bank tries to build a new service.
Did not happen. An interesting development was the decision of a Korean Savings Bank to act as a lender on MoneyAuction. Continue reading

P2P Lending Year-End Review 2010

As the end of 2010 approaches here is a selection of main peer-to-peer-lending news and developments covered by P2P-Banking.com:

(Photo by paul (dex))

CommunityLend Starts FinanceIt – Offers Sales Financing Solutions for Businesses

Canadian P2P Lending company CommunityLend has launched new site: FinanceIt. FinanceIt allows Canadian businesses to provide their own in-house financing directly to their customers. Initially FinanceIt targets home improvement vendors, a line of business in which FinanceIt says Canadians finance 51 cents on every dollar spent.

Features of FinanceIt include:

  • A complete lending platform, including ID verification, credit review, EFT, and collections
  • Instant approvals that are valid for 90 days
  • Automated legal documentation
  • Works on iPad and other mobile devices
  • Funds are deposited into our partner’s bank account
  • No fees of any kind

This is a highly relevant development for p2p lending. If successful, CommunityLend will achieve four goals:

  1. Increase loan demand while at the same time cutting marketing expenses/efforts to reach potential borrowers
    The promotion of the loan offers will be in fact done for free by the business that offers the financing for its goods
  2. Build strong business relationships to vendors, which can be broadened should CommunityLend develop more p2p banking products aimed at businesses in the future
  3. Identify borrowers in person (at the store)
    While I cannot judge how crucial this is in the Canadian market, it would be very useful in some other markets for p2p lending services to have
  4. Validate the purpose the loan is taken out for
    Usually in p2p lending unsecured loans can be used for any purpose the borrower wants. While some sites ask the borrower to describe the loan purpose in the listing this is never tracked or validated for it would be time-consuming and costly – just not worth the effort.
    In a financing solution it is obvious what the loan will be used for. How is this information valuable? Communitylend will have very good data on how default rates differ depending on the loan purpose allowing them in mid-term to improve the pricing of the credit risk into the offered interest rate.

I believe this is a major step for p2p lending coming out of a single product niche (unsecured loans) into a broader p2p banking approach. And banks should watch out. Offering financing solutions to businesses is a core product for some banks.

P2P lending marketplaces in other countries should explore if offering loan financing to businesses is a viable route for them to grow too. In fact I know one p2p lending company that already has similar plans in the working and will start financing in 2011. Continue reading

P2P Lending Site CommunityLend Adds Car Loan Cooperation

Communitylend has partnered with Canada’s largest used car site AutoTrader.ca, now offering a car financing option through Communitylend for every listed car.

The option is limited to private listings in Ontario for cars with a sales price of up to 25,000 CAN$.

This is a good partnership for Communitylend as it will profit from increased exposure to potential borrowers.

(Source)

Related Article: P2P Lending With Cars as Collateral