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.

Update from Pertuity Direct
Review of peer to peer lending developments in 2008

7 thoughts on “Which of my predictions for p2p lending trends 2008 came true?

  1. Hi there. I work for Zopa UK and would like to set the record straight that we have not closed. Instead we’ve had something of a fantatsic year for growth.
    We did of course withdraw from the US market, which I suspect is what you mean.

  2. I predict you’ll continue to be one of the best blogs covering the P2P lending space globally.

    Thanks for the mentions.

    Rob from Lending Club

  3. I predict for 2009,25% unemployment,700 billion bailout will grow to over 5 trillion.The USD will be 50% of the buying power it is now,rapid inflation,50% of 2008 Prosper loans will default & if you don’t own Real Estate or Precious metals,you will lose your life savings.

  4. In fact, PPDAI offers “Variable interest loans”, so maybe you are right about this prediction too.

  5. There are many viable p-2-p options using your naturally occurring networks. One new source is ZimpleMoney.com ZimpleMoney’s web product enables people or organizations to make and manage direct p-2-p loans. ZimpleMoney is focused on “naturally” occurring networks like family, friends, churches, schools, organizations, non-profits, charities and foundations. ZimpleMoney sends bills, receives payments, post to loan ledgers, sends late notices, sends alerts as to the status of billing and collection process and provides tax records. We also provide a digital document management tool to upload files. You’ll have to negotiate the investment or loan off the ZimpleMoney network, but when there is an agreement ZimpleMoney manages and administers from then on. Take a look at our site at http://www.ZimpleMoney.com Zimpley, Steve Rabago, ZEO ZimpleMoney

  6. and yes there will be indexed variable interest rate options, third party tools, and secondary market opportuities – ZimpleMoney has begun introducing the modules to super/business users.
    Steve Rabago, ZEO, ZimpleMoney.com

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