Happy New Year everyone. Here is my annual predictions post where I review my previous years predictions and make some new ones for the new year.
Review of my 2015 Predictions
- Lending Club will issue $10 billion in new loans and Prosper $4.1 billion
I was a bit optimistic on my loan volume predictions. While both companies had a great 2015 Prosper came in at $3.7 billion for the year, below my $4.1 billion projection. We won’t know Lending Club‘s final numbers until their next earnings call in a few weeks but we do know that they did $5.8 billion through Q3. So, if they keep a similar growth rate to previous quarters I would expect around $2.5 billion in Q4 for $8.3 billion in total loans for the year. Still a great year but below the aggressive numbers I projected.
- Prosper will remain a private company
I got this one right. Prosper remained a private company with not even a whisper of an IPO for them in 2015.
- There will be two new marketplace lenders completing an IPO
This one I got completely wrong. Given the state of the IPO market today compared with 12 months ago it is not surprising that no other U.S. based marketplace lending went public in 2015.
- A new platform will launch targeting non-accredited investors
I was only partially right on this one. While several new platforms contacted me throughout the year with their intention to launch for retail investors the only offerings that actually launched in 2015 were from existing real estate platforms Groundfloor and Fundrise.
- A midsize bank starts their own marketplace lending platform
This was an interesting one. While I also did not get this one right there was more talk about the banks role and response to our industry in 2015 than ever before. We did see news break in June about the intention of Goldman Sachs to create their own platform but nothing has materialized on that front yet. I think I was just a year early on this (see prediction #4 below).
I also predicted that Lending Club would make two acquisitions and I was dead wrong on that as well. Lending Club is biding their time on acquisitions but clearly they will grow their borrower base at some point through acquisitions. I am confident that the predictions I got wrong will all come true in the near future, some in 2016 as you can see below.
My 2016 P2P Lending Predictions
Now on to this year. I am going to see if I can improve on my somewhat dismal performance from 2015. Here are several predictions I feel confident making for 2016.
- Lending Club will launch an auto lending operation this year
We have heard for some time that Lending Club is going to be moving into a new vertical in 2016. We know it will be a consumer lending operation but we know very little else about it. I have no inside information here whatsoever but I am predicting that the new vertical will be auto loans.
- Consolidation will begin
There are dozens of marketplace lending platforms that have launched in the past year. Some will fail and some will be gobbled up by the larger players. We haven’t seen much in the way of consolidation to date but I think 2016 is the year it begins in earnest with at least three newer platforms being acquired by a larger competitor.
- There will be five IPOs in our industry in 2016
Last year I said there would be two IPOs of U.S. platforms and there were none. I am doubling down this year and predicting five IPOs. There are many platforms today who are large and getting ready and some of these will pull the trigger. Now, the big “if” here is the state of the public markets. If the IPO market remains soft for most of 2016 then we will likely not get to five IPOs but if the environment strengthens then I think five is the number.
- Three large banks will build platforms
One large bank we already know about. As I said above Goldman Sachs is busy planning their launch that will likely happen in 2016. I have also heard rumors of two other large banks contemplating a move here. So, I think by the end of 2016 we will see three large banks with their own online lending operations. Now, I don’t think they will be true marketplaces, they will be balance sheet lenders but they will be competing directly for borrowers with the marketplace lenders.
- A Chinese company will buy a U.S. marketplace lending platform
The size of the Chinese market is staggering and many of the largest lending platforms in the world are in China. Eventually, they will want to make a move into the U.S. market. I might be a little early with this one but I am going out on a limb to say that one Chinese platform will buy a U.S. platform in 2016.
For my bonus prediction this year I am going to revisit the retail investor. Long ignored by most platforms (outside of Lending Club and Prosper) the retail investor will become more in favor in 2016. I think we will end the year with at least five new platforms offering their loans to retail investors and we will also see several publicly traded investment funds.
Update: One prediction that I had in my original list that didn’t make it into the initial article is the emergence of a trade association. This is something I have been talking about for some time and I think it will happen in 2016.
Let me know what you think about these predictions for 2016. And feel free to make your own suggestions in the comments section below.