In 2012 U.S. P2P Lenders Issue $871 Million in New Loans

So 2012 is in the books now and we can certainly say that it was the best year ever for the U.S. p2p lending industry. Total loan volume between Prosper and Lending Club in December was $103.7 million and for the year the total was $871.1 million. To put that in perspective in 2011 total loan volume was just $332.5 million, so this year we saw a 162% increase. Although the vast majority of that volume came from Lending Club as they went from strength to strength in 2012.

Lending Club Ends 2012 With $94 Million in Loans in December

Lending Club ended December like they have done every month this year, with record loan originations. The December total was $94.1 million and they ended the year with $714.7 million in total loans. There was only good news for Lending Club all year as every month of 2012 saw record loan originations.

Lending Club crossed $500 million in total loans in February and then the $1 billion mark in November. They finished the year with $1.178 billion in loans issued since they started in 2007, with $717.9 million of that total issued in 2012. This compares to just $257.4 million in total loans issued in 2011, a staggering 179% year over year increase.

If you dig into the numbers a little December was an unusual month for Lending Club. Total number of loans originated was actually down this month for the first time since February. In fact, Lending Club issued more loans in September (6,087) than they did in December (6,066). But thanks to the highest ever average loan size of $15,511 they still easily managed a record month. It will be interesting to see if that trend continues into 2013 but that average was well above the previous record monthly average of $14,196 set in February.

Below is the Lending Club 18-month chart. The black line is the three-month moving average.

Lending Club p2p loan volume through December 2012

Prosper Has Their Worst Month of 2012 in December

December was a month that Prosper would rather soon forget. With just $9.6 million in new loans it was the worst month of the year for Prosper and the third consecutive month of significant volume declines. Two of the top three Prosper institutional investors, Worth-Blanket2 and MI2 had no lending activity whatsoever in December according to Prosper Stats and the number two investor Index_Plus had a lower than average month investing.

What made matters worse in December was the problem that Prosper investors encountered the week before Christmas. For several days no payments were credited to investor accounts due to a software problem. It has now been resolved but it left some investors feeling a bit disillusioned and it certainly didn’t help Prosper’s loan volume this month. You can follow the conversation about this issue on the forum.

When you look at 2012 as a whole Prosper’s numbers look much better. They originated a total of $153.2 million up over 100% from 2011 when their total was $75.1 million. If Prosper can rebound from their bad fourth quarter and have a really good first quarter of 2013 most investors will forgive and forget. But they need to start out the year strong.

I had a conversation with senior management at Prosper last week and while they are disappointed with their performance in December they did say that January will come with some more positive news for Prosper. Part of this news will be the fact that the SEC has approved the Prosper Funding LLC registration, their bankruptcy remote vehicle. This became effective on December 27th and I will have a more detailed write-up about it later this week.

Below is the 18-month chart for Prosper, as you can see the downward trend has become steep in the last quarter.

Prosper 18-month p2p loan volume chart through December 2012

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Dec. 31, 2012 7:51 pm

I really hope to see Prosper come out of this slump in Jan. They have an excellent platform in terms of UI, functionality, and investor returns. IMHO they are ahead of LendingClub in some areas… But the slump in loan originations has me worried.

Jan. 1, 2013 4:43 am

With Prosper forming this limited liability company (LLC), and now approved by the SEC, I’m confident they will generate a lot of new money in 2013.

I’ve been with Prosper (and Lending Club) 17 months now. Prosper always had me a little worried because of how far they were from being profitable, or more specifically, I worried about them going out of business and who would have legal claim to the notes (Prosper assets) I was invested in. Now that worry is gone and I feel very safe adding new money to my account in 2013. This is a very smart move by Prosper.

Roy S.
Roy S.
Jan. 1, 2013 11:46 am

In my opinion, Prosper’s software problem pretty much sums up 2012 for Prosper. I am still of the opinion that it would not have been an issue had the proper protocols been in place. As I said previously, I don’t work in IT. But I’m fairly confident that with any new release you have a plan in place in case the software upgrades cause problems you can roll back the system to how it was prior to the release–if you can’t (and I really don’t know how you can’t), then you better damn well be sure the upgrade is flawless in execution (i.e. test the damn thing). I don’t think there is any excuse for this mistake. It does, however, highlight Prosper’s overall lack of execution.

LC focused on expanding their lending base, while Prosper seemed more than content to cater to a few large institutional investors at the expense of the small lenders. I would be interested in seeing a chart of the new active investors by month for both Prosper and LC. I’m fairly confident in saying that LC experienced greater growth in both new investors and average amount of cash transfers by existing investors. But either way, when you take out the 3 biggest investors at Prosper, you can see the results above. I am coming to the conclusion that Prosper’s platform is more for the institutional investors while LC’s platform is more for the retail investors.

I REALLY hope that Prosper’s “positive news for 2013” is not another round of VC funding. Or another large institutional investor coming on board. If that is all they have, then that will be a HUGE disappointment. I’m hoping more for a shake-up within the company or at the very least a new strategy. Doing something (ANYTHING!) that will make them actually competitive with LC would be nice so that they don’t need to use their bankruptcy remote vehicle.

Sorry to be a negative Nelly, Peter, but I have become rather sour on Prosper over the last year. Here’s to hoping 2013 will be a better year for them.

Dan B
Dan B
Jan. 2, 2013 4:20 am
Reply to  Roy S.

Roy…………….By the same token what do you suspect would happen to Lending Club monthly volume if you suddenly eliminated their top 3 institutional investors? Well, I don’t know exactly…………but I’m confident that it wouldn’t be pretty.

Jan. 2, 2013 9:34 am
Reply to  Dan B

I am not sure it makes any practical difference to the smaller fish even if LC implements a similar protection for retail investors. Back in August through October, I found at least several loans (D-G) per day that fit my criteria. However, especially since December, I have had to go for days before being able to pick up one or two. It seems to me that the best loans are already scooped up by the big investors before they have a chance to hit the open platform. LC seems to increasingly cater toward institutional investors.

But for Prosper, at least, if you’ve got fast trigger fingers, you can still compete with the likes of worth_blanket2. They don’t set aside a percentage of loans for the big investors to pick first.

If LC keeps doing that, they might push the smaller investors to Prosper. That’s why I continue to play both platforms. With no viable third competitor on the horizon and with p2p lending continuing to grow, I don’t see why we shouldn’t invest in the two platforms to take advantage of the strength of each.

Dan B
Dan B
Jan. 2, 2013 1:35 pm

Investforfreedom………..I’m not sure if I’m ready to make the leap that connects the (perhaps temporary) inability of certain individual investors to find notes to their liking at LC to the conclusion that LC is now favoring institutional investors.

It was just several months ago that right here on this blog, this exact line of thinking was used on Prosper when certain investors found that they weren’t able to find enough loans that fit their tastes & subsequently suggested that Prosper was catering to the institutional investors at the expense of retail investors.