Review of My P2P Lending Predictions for 2012

In January 2012 I wrote down my predictions for p2p lending developments in 2012. The black text is my original prediction, with the review added in green and yellow.

Deeper integration of mobile (probability <25%)
Can you use a p2p lending service from a Smartphone? Sure. Some even have special apps for that purpose. But that’s not what we are talking about here. We are at the advent of a couple years timespan where several players (compare this infographic) will be fighting over market shares in the developing mobile payment market. If there is a role for p2p lending services, it is yet undiscovered (aside from the use p2p microfinance makes of it in underdeveloped countries). No action so far. Continue reading

P2P Lending Predictions For 2012

I really like this time. The new year lies ahead with crispy, yet unknown innovations. What p2p lending developments might happen in 2012. Here are some personal opinions.
Last year I failed big time with most of my predictions for 2012 not coming true.

Deeper integration of mobile (probability <25%)
Can you use a p2p lending service from a Smartphone? Sure. Some even have special apps for that purpose. But that’s not what we are talking about here. We are at the advent of a couple years timespan where several players (compare this infographic) will be fighting over market shares in the developing mobile payment market. If there is a role for p2p lending services, it is yet undiscovered (aside from the use p2p microfinance makes of it in underdeveloped countries).

Introduction of a p2p financed ‘credit card’ (probability very low)
Carried over from last year – did not happen
I envision a p2p lending service where the borrower does not get a loan in one full amount initially but can access liquidity on demand (within a predefined credit line). From the funding side this would work somewhat like lenders investing in Ratesetter’s rolling monthly loans. On the borrower side the customer could either request an additional payout via a web-interface or more sophisticated the service could issue a branded credit card / debit card for that purpose, enabling the customer to access cash instantly on an ATM.
This concept has very interesting advantages as it allows the p2p lending service to build a durable relationship to the borrowers. And for the borrowers it offers the potential of lower rates on short term debt than the high rates credit cards typically carry.

Continue reading

Review of My P2P Lending Predictions For 2011

In January 2011 I wrote down my predictions for p2p lending trends in 2011. Now let’s see how far I was off. The black text is my original prediction, with the review added in green and yellow.

Advent of whitelabel providers (probability 100%)
Okay let’s start this with a safe bet. In 2011 there will be 1-2 companies offering a solution that can be branded and used by p2p lending services and / or p2p microfinance sites. The interesting question here is how the acceptance by potential customers will be. My guess is that it will be slow selling until the companies have set the first pilot customer live.
While there are now whitelabel providers, their business seems to have been very slow in 2011. It seems that the first areas where we will see some activity is possibly p2p equity. As for conventional p2p lending – the companies supplying solutions have become more sophisticated and at least one as adopted their price model. It is now more a revenue sharing deal rather than a big upfront payment, that most startups could struggle with.

Introduction of a p2p financed ‘credit card’ (probability very low)
I envision a p2p lending service where the borrower does not get a loan in one full amount initially but can access liquidity on demand (within a predefined credit line). From the funding side this would work somewhat like lenders investing in Ratesetter’s rolling monthly loans. On the borrower side the customer could either request an additional payout via a web-interface or more sophisticated the service could issue a branded credit card / debit card for that purpose, enabling the customer to access cash instantly on an ATM.
This concept has very interesting advantages as it allows the p2p lending service to build a durable relationship to the borrowers. And for the borrowers it offers the potential of lower rates on short term debt than the high rates credit cards typically carry.
Like the idea and want to discuss/develop it further? Self-promotion plug: You can hire me as a consultant.
Has not happened.

A bank will acquire an existing p2p lending service (probability <25%)
Carried over from last year – did not happen
2011 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.
Largest Italian private Bank bought at least a part. Continue reading

P2P Lending Expectations for 2011

I always enjoy speculating what p2p lending developments might happen in the year to come and then look back in in the end to see how I did. I don’t dare call it forecast, because these are just my personal opinions, though in some cases it’s an educated guess based on what I know individual p2p lending services are working on at the moment.
Last year most of my predictions came true to some degree. Maybe they were not speculative enough – this year I’ll insert 1 or 2 developments with higher degree of speculation.

Advent of whitelabel providers (probability 100%)
Okay let’s start this with a safe bet. In 2011 there will be 1-2 companies offering a solution that can be branded and used by p2p lending services and / or p2p microfinance sites. The interesting question here is how the acceptance by potential customers will be. My guess is that it will be slow selling until the companies have set the first pilot customer live.

Introduction of a p2p financed ‘credit card’ (probability very low)
I envision a p2p lending service where the borrower does not get a loan in one full amount initially but can access liquidity on demand (within a predefined credit line). From the funding side this would work somewhat like lenders investing in Ratesetter’s rolling monthly loans. On the borrower side the customer could either request an additional payout via a web-interface or more sophisticated the service could issue a branded credit card / debit card for that purpose, enabling the customer to access cash instantly on an ATM.
This concept has very interesting advantages as it allows the p2p lending service to build a durable relationship to the borrowers. And for the borrowers it offers the potential of lower rates on short term debt than the high rates credit cards typically carry.
Like the idea and want to discuss/develop it further? Self-promotion plug: You can hire me as a consultant. Continue reading

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 Trends to Watch in 2010

I always enjoy speculating what p2p lending developments might happen in the year to come and then look back in December to see how I did. I don’t dare call it forecast, because these are just my personal guesses, though in some cases it’s an educated guess based on what I know individual p2p lending services are working on at the moment.

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).

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).

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.

Continue reading

Which P2P Lending Developments Happened in 2009 as Forecasted?

In January I published my predictions for p2p lending trends in 2009. 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%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers. In other markets, where there is no national p2p lending service active yet (e.g. Canada, New Zealand), p2p lending will be introduced by the launch of a service. Possible candidates include Communitylend and Nexx.
It is hard to predict when the dormant US players (e.g. Prosper, Loanio) will overcome the regulatory hurdles and if that step is lasting.
The British market which has (compared to other markets) rather low regulatory barriers so far is dominated by a single player –  Zopa. I wonder if we’ll see the launch of a competitor there.

Multiple new services launched in 2009, e.g. Aqush in Japan, Sobralaen in Estonia, Uppspretta in Iceland as well as ill-fated Pertuity Direct in the US. Prosper reopened. The mentioned Communitylend and Nexx did not make it so far, though it looks like  Communitylend missed a launch in 2009 only by weeks. No competition in Britain for Zopa yet.

Boom of social lending services/p2p microfinance (probability 100%)
2008 saw the launch of Babyloan, Veecus and Wokai. Kiva funded more the 1 million US$ new loans in a single week in the end of December. The steep growth of Kiva, MyC4 and other services will continue and new p2p microfinance platforms will launch.

Kiva continued it’s enormous growth and popularity. Vittana and United Prosperity launched. For MYC4 it was a hard year with decreasing loan volumes. Continue reading

P2P lending companies by loan volume – Jan 09

P2P lending is spreading internationally. While the biggest loan volumes are generated in the US market, many p2p lending websites have been established in other international markets.

P2P-Banking.com has created the following overview table listing services that are in operation and ranked them by loan volume. The loan volumes are not directly comparable for they are cumulative since launch of each service and represent different time spans.

In total approx. 740 million US$ have been funded through peer to peer lending/social lending services so far worldwide.


This image may be reprinted on other internet sites, provided it is not altered or resized and the following text (including the direct link to this article) is given as source directly below the image:
Source: P2P-Banking.com

Since the previous version of this table especially Zopa (UK), Lending Club and Kiva thrived. With Prosper, Loanio and Fynanz halted, Lending Club profits from the situation.


This image may be reprinted under the same conditions as the first one.

P2P lending trends to expect in 2009

As last year I’ll again attempt some predictions on what trends and developments can be expected in peer-to-peer lending 2009.

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers. In other markets, where there is no national p2p lending service active yet (e.g. Canada, New Zealand), p2p lending will be introduced by the launch of a service. Possible candidates include Communitylend and Nexx.
It is hard to predict when the dormant US players (e.g. Prosper, Loanio) will overcome the regulatory hurdles and if that step is lasting.
The British market which has (compared to other markets) rather low regulatory barriers so far is dominated by a single player –  Zopa. I wonder if we’ll see the launch of a competitor there.

Boom of social lending services/p2p microfinance (probability 100%)
2008 saw the launch of Babyloan, Veecus and Wokai. Kiva funded more the 1 million US$ new loans in a single week in the end of December. The steep growth of Kiva, MyC4 and other services will continue and new p2p microfinance platforms will launch.

First Banks experiment with own p2p lending applications (probability 50%)
While p2p lending volumes are far from being a business threat to banks – banks do watch the developments. Possibly in 2009 a bank will launch its own p2p lending application. The principal aim will not be to generate revenue, but rather to collect experience and to gauge acceptance by the bank’s customers. It will be interesting to see banks testing the water on their path to implement a p2p lending concept that supplements their core business.

Continue reading

Which of my predictions for p2p lending trends 2008 came true?

In January 2008 I made some predictions what might happen in p2p lending this year. Now I’ll check on those (the black colored text is the original text, the green and red texts are the review as of today):

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers, especially in the largest market: In the United States Globefunder.com and Loanio.com will launch. In other markets, where there is no national p2p lending service established yet (e.g. Canada, New Zealand, Spain), p2p lending will be introduced by the launch of a service.

Loanio did launch, but went into quiet period shortly afterwards. As did Prosper. Zopa US closed. Fynanz launched. Competition in the US is in fact lower than at the End of last year. Internationally several p2p lending services launched.

Insurance against defaults (probability 75%)
Not totally new, since Boober.nl and Smava.de already offer some protection of the loan principal. Insurance can be implemented as a classical insurance product (supplied by an insurance company) or as a market mechanism, spreading the risk over multiple loans.

Several p2p lending services offer insurance.

Secondary market (probability 25%)
One of the disadvantages for lenders currently is that on all p2p lending platforms, the invested money i locked in for the duration of the loan term. Prosper.com has already announced that it plans a secondary market, enabling lenders to sell and buy loans any time. Depending on the market there are huge regulatory hurdles to allow trading of loans. For example German executives told P2P-Banking.com that on the German market a secondary market is unlikely for years to come.

Zopa Italy and Lending Club introduced secondary markets.

Cross-market lending (probability <25%)
Aside form the social lending approaches (Kiva, MyC4, Microplace) so far all service are open only for lenders and borrowers that live in the same market. If lenders could lend to borrowers in markets with higher key interest rate than the market the lender lives in, the advantages could outweight the risks. In the European Union due to the Euro zone there would be no currency exchange risk. Again there are steep regulatory hurdles to be taken.

Has not happened.

Variable interest loans (probability ?)
So far all loans are for fixed terms (prepayment allowed) with fixed interest rates. Variable interest loans could add flexibility. The interest rate could rise or decline following an indicator (e.g. market prime rate). Another possibility would be a mechanism where the variable interest rate would rise or fall as a result of the level of defaults of the credit grade. This could protect lenders, if the actual default ratio is higher then the forecasted default ratio.

Fynanz loans have variable rates. But this is the only example so far.

Third party bidding management (probability?)
Just a thought. Lenders could allow a third party to manage their portfolio. Like an investment funds the lender would invest an amount of money, while the funds manager does the actual selection of loans. This could possibly be done by a sophisticated software (would you trust this?) selecting loans by statistical analysis of performance of loans with similiar parameters or by a fonds manager. The later is unlikely because the amount of time needed for each loan is too high to be covered by fees.

Prosper introduced bidding via API in February.

I’ll publish my p2p lending predictions for 2009 in January.