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Marketplace Lending News Roundup – April 21

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News

During the week I share the latest marketplace lending and fintech news on Twitter as it happens. Then every Saturday I take the most interesting news items and blog posts from the past week and share them here.

Goldman Sachs Comes to the App Store from The Wall Street Journal – Goldman Sachs continues their push into retail banking with the acquisition of mobile app Clarity Money.

Inside a Kabbagehead from Banking Exchange – Good piece on Kabbage CEO Rob Frohwein’s LendIt Fintech USA 2018 keynote from last week talking about how online lending platforms need to evolve.

How US banks are preparing for the GDPR from Tearsheet – While GDPR is a European Union regulation any US company with EU customers will have to comply by May 25.

How fintech lenders give mortgage borrowers an edge from MarketWatch – The National Bureau of Economic Research released a report on mortgage lending this week looking at the impact fintech platforms have had on the mortgage process.

CFO Usama Ashraf Talks Borrowing and Investing with Prosper from LendEDU – Interesting Q&A with the CFO of Prosper on why he decided to move from a traditional bank (USAA) to a leading fintech platform.

This fintech partnership could serve as template for small banks from American Banker – The partnership between New Resource Bank and P2Bi is a very interesting one. American Banker delves into this partnership and what it might mean for other community banks.

Mid-sized P2P platforms taking bigger market share from P2P Finance News – In the UK the largest online lending platforms are showing slower growth than the mid-sized platforms. [Read more…]

PeerIQ Releases Their Marketplace Lending Securitization Tracker For Q1 2018

We see another robust quarter for marketplace lending securitizations with $4.3 billion in new deals

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Securitization continues to grow for the marketplace lending sector. As they do at this time every quarter PeerIQ released their Securitization Tracker today. It showed another strong quarter with $4.3 billion of total issuance. This total was up 34% from Q1 2017 but down slightly from the record total in Q4 2017.

The cumulative total of all marketplace lending securitizations to date is now $33.4 billion across 114 deals as demonstrated in the above graphic.

SoFi lead the way again with $2.6 billion or around 60% of the market with two huge student loan deals and a consumer loan deal. Regardless of the challenges they have had over the past year they have continued to execute very well on the securitization front. Below is the league table for 2017 and Q1 2018 for the marketplace lending sector.

Here are some of the other findings from this quarter’s report:

  • We observed an unprecedented 21 months of non-stop issuance – Markets remain in a “risk-on” mode and MPL investor appetite continues to grow.
  • Spreads tightened this quarter, amidst rising rates and increased volatility, and we saw deals price at record tights – Average spreads at issuance are tighter in the consumer and student spaces across credit tranches.
  • All deals this quarter were rated – DBRS continues to lead the rating agency league table, while Kroll dominates the unsecured consumer sub-segment and we continue to see increased engagement from the top 3 ratings agencies.
  • Tranches continue to get upgraded – Ratings’ Agencies have upgraded 33 consumer MPL tranches and 51 student MPL tranches so far.
  • Goldman Sachs, Deutsche Bank, and Morgan Stanley continue to top the issuance league tables with over 55% of MPL ABS transaction volume.
  • With the potential for policy error on interest rates, regulation and trade expect a volatile credit environment in 2018.
  • We should also see emerging ABS issuers like Upgrade.

You can download the report for free from the research page at PeerIQ.

Wrap-Up of LendIt Fintech USA 2018

Highlights from the many keynotes and more at LendIt Fintech USA 2018 held in San Francisco April 9-11

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Peter Renton, Bo Brustkern and Jason Jones open LendIt Fintech USA 2018

Last week the sixth annual LendIt USA conference took place in San Francisco. Officially known as LendIt Fintech USA 2018 this event was, in my opinion, the best we have ever produced. As I do at this time after every LendIt event, here are my thoughts on some of the ideas that were shared by the keynote speakers as well as a summary of the rest of the event.

The opening keynote, for the second year in a row, was delivered by Scott Sanborn, the CEO of LendingClub. He gave a different kind of presentation this year. He didn’t talk much about LendingClub at all, instead choosing to focus his keynote on financial health and the looming crisis that maybe coming. He gave us all something to consider beyond just disruption, he said we should think about three key areas: financial inclusion, regulatory innovation and customer alignment. He ended with a call to action for the industry. He wanted everyone to focus on what problem you are solving and what you can do to help restore financial health to all Americans.

Scott Sanborn, the CEO of LendingClub, delivers the opening keynote at LendIt Fintech USA 2018

For the first time ever we had the CEO of Quicken Loans, Jay Farner, on stage at LendIt. Quicken Loans has become the largest mortgage lender in the country, bigger than all the banks. It was interesting to hear Jay talk about innovation. He said it is not enough today to just be faster. You need to fundamentally rethink the process, do it in a new and different way. This is where good entrepreneurial businesses will succeed because they start with a blank sheet of paper. He said there is no reason a mortgage should take longer than 10 days.

Long time readers of Lend Academy will know the name Chris Larsen. He was the co-founder and former CEO of Prosper. He left Prosper in 2012 to start Ripple, his most ambitious startup yet. Ripple is trying to revolutionize the way money is sent around the world. As he said in his discussion with Jo Ann Barefoot in finance, when it comes to moving money, we are living in a pre-internet world. It takes days to send money around the world and yet email moves instantly. It is inevitable that this will change and when it does Chris said there will be a Cambrian explosion in innovation and economic development.

Max Levchin first made a name for himself as a co-founder of PayPal but today he is most well known as the CEO and co-founder of Affirm. Affirm is attacking point of sale financing, a space that is somewhat fragmented with few big incumbent lenders. In his discussion Max said that software is eventually going to eat the credit card. We are going to move to payments made by phone but we have more work to do on the software side before that becomes the standard way people pay. Interestingly, he also attacked the APR (annual percentage rate) standard as a bad way of judging credit products. We need to reinvent a way to compare financial products that is not just focused on the APR.

[Read more…]

Upgrade Announces New Personal Credit Line Product at LendIt Fintech USA 2018

This first of its kind product combines the benefits of a personal loan with the ease and convenience of a credit card

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While the personal loan has been around for centuries and the credit card has been around for decades they have never been combined into one product before. Until now. On stage at LendIt Fintech USA 2018 today Renaud Laplanche, the CEO and co-founder of Upgrade, will announce this groundbreaking new product.

I chatted with Renaud last week to get the latest news on Upgrade and to talk about this new product. He immediately wanted to start talking about financial health. As an industry we should be doing more to help the overall health of consumers and not just sell them a personal loan.

At Upgrade they are trying to do just that. They have released a broad suite of free tools to help consumers understand their credit health. They have credit monitoring tools like many other vendors but what Upgrade has done that is new is create a credit score simulator. This tool will show you a couple of dozen “what if” scenarios personalized to your own situation that are very practical and useful. There are also many articles and short videos to help people understand credit more. Having both credit monitoring and loans under one roof also provides benefits to users with a tighter integration between the two products.

There is more to discuss here but let’s get back to the focus of this article: Upgrade’s new Personal Credit Line.

How This Personal Credit Line Will Work

[Read more…]

New Fintech IPO on the Horizon with GreenSky

The latest fintech IPO is likely to be GreenSky which focuses on point of sale finance.

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One of the quiet achievers in fintech is a company called GreenSky. They have flown under the radar for years despite their astounding success. Every time the Lend Academy team has seen them mentioned in the press we take great interest since little is known about the company. It wasn’t until this cover story in Forbes last year that we learned much at all.

This could be about to change. The Wall Street Journal reported this afternoon that GreenSky has confidentially filed with the SEC for an IPO. From the article:

The Atlanta company, which operates a lending platform that enables retailers, health-care providers and home contractors to offer loans to their customers, could seek to raise $1 billion at a valuation of roughly $5 billion, some of the people said.

If GreenSky manages to raise $1 billion in a debut, it would be in rare company. Since 2015, just six U.S.-listed technology companies have raised that much or more, according to data provider Dealogic.

So who is GreenSky exactly and what do they do? We wrote about the company earlier this year when we learned of their $200 million funding round from PIMCO which made them the most valuable company in the online lending space. The company has a unique model where they partner with merchants and contractors to offer financing at the point of sale. They view themselves as more of a tech company since they do not actually lend any money. This capital light business model has likely led to much of the success they have seen. Instead of lending their own money GreenSky has relationships with about 15 banks. On the tech side, the process is paperless and all done through a mobile device.

According to details from the WSJ, the IPO could happen as soon as this summer for the Atlanta based company. However, people noted that the IPO plans are still in their early stages and the company may still do another private share sale.

Conclusion

It has been quite some time since we’ve seen a US fintech IPO, but GreenSky could change all of that. There are many companies out there that have publicly indicated a willingness to do an IPO when conditions become favorable. Maybe the GreenSky IPO could provide a trigger and we could see more companies follow. Other fintech IPOs across the globe that may come to fruition this year include FundingCircle and Lufax who have discussed going public in London and Hong Kong respectively.

Larry Summers Has Resigned From the LendingClub Board

The former Treasury Secretary is being replaced by Stanford Economics Professor Susan Athley

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Larry Summers speaking at LendIt USA 2015

I still remember the day well. It was back in December 2012 when the LendingClub PR people reached out to me to say they had an announcement of a high profile new board member. I am normally a bit skeptical of these announcements because a PR person’s definition of high profile and mine were usually quite different. That was not the case here.

When I heard it was Larry Summers joining the board I was astounded. Here was a former Treasury Secretary under President Clinton and former head of the National Economic Council under President Obama believing our industry was going places. Keep in mind this was back in 2012. LendingClub was two years away from their IPO and while they were getting traction (they had just crossed $1 billion in total lending the previous month) in many ways they were still a startup. The industry as a whole was still very much unknown and this announcement really grabbed everyone’s attention, including mine.

Yesterday, we learned that after nearly six years Mr. Summers will be leaving the board of LendingClub. He is being replaced by leading economist and Stanford professor Susan Athey. While she is not nearly as well known as Larry Summers she still brings serious economics clout to the board.

She is the Economics of Technology Professor at Stanford Graduate School of Business. In 2007, she was awarded the prestigious John Bates Clark Medal for the best American Economist under the age of 40. Her recent academic research and teaching focuses on platform competition, financial technology, the impact of the internet and social media on consumer behavior, and new econometric methods for analyzing big data. Interestingly, she also sits on the board of travel marketplace Expedia as well as blockchain startup Ripple.

According to LendingClub’s press release here is what Professor Athey had to say about joining the board: [Read more…]

Kabbage Data Shows Mobile is the Future for Small Business Lending

Kabbage's study shows the increased usage of mobile devices for loan applications

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Mobile devices have changed consumer expectations. People now expect that you can have access to anything you might need right from your mobile device. While this has historically been the case for consumer financial apps, Kabbage released data today on small businesses which shows they too are leveraging mobile to better manage their business.

They analyzed behavior of almost 150,000 small business and found that between April 2014 and February 2018 loans accessed through mobile increased by more than 360 percent. Dollars accessed through mobile increased over 1,220 percent. According to the press release:

Today, 17 percent of all small business loans and nearly 15 percent of total dollars accessed via Kabbage are through mobile. At this rate, Kabbage predicts one of every five dollars funded to small businesses will be through a mobile device by the end of 2018.

Kabbage has always been a forward thinking small business lender so it isn’t surprising to see them interested in researching mobile usage so heavily for their small business borrowers. They currently allow small businesses to apply, qualify and withdraw funds from their app which is available in the App Store and through Google Play.

Chief Revenue Officer, Victoria Treyger stated in the press release:

The growth of mobile lending is evidence of an enormous change occurring in this industry. Small business owners are increasingly digitally savvy and are adopting new technologies faster than ever before. Lending is no different. Kabbage is pioneering this shift in lending by making it a priority to meet small business owners where they are and integrate seamlessly into how they’re already running their businesses.

Conclusion

While some people may not be surprised that a fintech company offers a mobile app it’s important to realize that Kabbage is not your typical small business lender. Try applying for a small business loan from any traditional bank through an app on your mobile device. We’ve also seen significant investments in mobile on the consumer side. Companies like MoneyLion are taking more of a mobile first approach to lending. I think this strategy is going to serve these companies well over the long term as mobile adoption for loans eventually overtakes the desktop experience.

Prosper Reports Full Year 2017 Results

Prosper originated $2.9 billion in 2017 and now has surpassed $11 billion in total loans.

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Today, Prosper reported their full year results for 2017. Prosper is still a private company, but is regulated by the SEC which requires them to provide quarterly and year end results. Prosper’s full 10-K which includes all of the details about their business is available using EDGAR on the SEC website.

The company originated nearly $2.9 billion in loans, up from approximately $2.2 billion in 2016. From our perspective there were two major milestones for the company in 2017. One was the $5 billion consortium deal announced at the beginning of 2017 which was a commitment from investors to purchase loans over a two year time period. The company also successfully raised their Series G funding in September, 2017. As noted in our piece on the announcement this was a significant down round from their previous fundraise in 2015 but it reflected the reset expectations when it comes to valuations.

While the company had a net loss for the year of $115 million, this was largely due to the consortium of investors as noted in the press release: “Net loss of $115 million included $89 million of non-cash charges related to warrants to purchase preferred stock that were issued to a consortium of investors and a third party in connection with a settlement agreement.”

Adjusted EBITDA was $5 million, up $43 million from the year before and more importantly Prosper was cash flow positive for the year, generating just over $1 million in cash. Other financial metrics are shared below:

Prosper’s accomplishments in 2017 were critical to their success going forward. While there are no longer headlines touting massive growth at Prosper, they still are originating a significant amount of consumer loans and they are doing so profitably. The consortium secured investors for a 2-year period and they now have cash to invest in new projects. It’s going to be interesting to see what innovations come to bear in what seems like an ever increasingly competitive consumer loan market.

Early Returns From Open Banking Show a Mixed Picture

Where does the UK stand after more than two months since the introduction of open banking?

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Open Banking kicked off in the UK this past January. Thus far we’ve seen slower adoption among traditional banks, a small uptick in wide public knowledge and some digital banks becoming early leaders.

The promise of open banking for the customer looks to be clear, more access and control over their data to find the best financial services at the best cost. Fintech companies see great promise with the program as they are hoping it levels the playing field against the traditional powers.

[Read more…]

About Lend Academy

Lend Academy has been bringing you all the news and information about peer to peer lending since 2010. Founded by Peter Renton, Lend Academy not only has the most active news site, but also the largest online forum and the first and most popular podcast in the industry.

The Lend Academy team loves peer to peer lending and our staff have all invested their own personal money in one or more of the platforms. Lend Academy Media is part of Cardinal Rose Group which also owns LendIt, the leading industry conference, and has a majority interest in NSR Invest.

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