Five Predictions for 2015

Crystal ball - 2015 predictions

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 2014 Predictions

  1. Lending Club will issue $5.3 billion in new loans
    With Lending Club no longer providing timely updates on their loan book we will not know exactly how much they issued in 2014 for quite some time. But I am confident that my $5.3 billion number was overly aggressive. We do know that in the first nine months of 2014 Lending Club issued $2.96 billion in new loans. So, even if they have a breakout fourth quarter I expect they will be under $4.5 billion in total originations for 2014.
  2. Prosper will issue $1.1 billion in new loans
    The opposite happened on my Prosper prediction. Prosper’s growth was far more than I, or anyone else for that matter, expected. They ended the year with $1.6 billion in new loans issued up from just $357 million the previous year.
  3. Google launches a joint venture with Lending Club around Google Wallet
    I was completely wrong on this one. While the official word is that Google and Lending Club are “working together” to develop something no timetable has been set and we may see nothing here for quiet some time.
  4. Mobile becomes widespread for both online consumer and business lending
    While I think mobile use is increasing, particularly on the borrower side, to say it has become widespread today is probably an overstatement. Ron Suber, the president of Prosper, talked often last year about the importance of a mobile strategy for lending platforms but we still haven’t reached a turning point here yet.
  5. Prosper will be profitable by Q3 2014
    I am happy to report that I was right on this one. Prosper turned profitable in the third quarter last year.

I also predicted that Lending Club would have a successful IPO in 2014 although I expected it was going to happen in the first half of the year. But given the public intentions of Lending Club it was a bit of a stretch to call the Lending Club IPO an actual prediction.

My 2015 P2P Lending Predictions

Now on to this year. Let me look into my crystal ball and give five predictions for the coming year.

  1. Lending Club will issue $10 billion in new loans and Prosper $4.1 billion
    I believe the growth will continue unabated at both Lending Club and Prosper but the gap between them will continue to shrink.
  2. Prosper will remain a private company
    Many people are thinking that Prosper will follow Lending Club’s lead here and do their own IPO in 2015. I don’t think that will happen this year. I expect Prosper will remain a private company and will also reject several acquisition offers. They will keep the same core executive team in place for all of 2015 and beyond.
  3. There will be two new marketplace lenders completing an IPO
    So, I have said it will not be Prosper but I do expect two companies to go to the public markets in an IPO in 2015. One, has already confirmed that is their intention: SoFi will go public in the first half of this year. But I think there will be a second IPO and it will be a company that we don’t expect.
  4. A new platform will launch targeting non-accredited investors
    One of the complaints I regularly hear about from readers is the lack of options for non-accredited investors. There are still only two lending platforms available for the investing public: Lending Club and Prosper. I think that changes this year. A new platform will launch targeting small retail investors before the end of the year.
  5. A midsize bank starts their own marketplace lending platform
    There has been a lot of talk about the role of banks in the marketplace lending industry. While some banks, such as Union Bank and Santander, are inking formal partnerships with existing platforms I expect we will see a new bank enter the fray with their own platform. This will not be just an online lead generation website but a true marketplace lending platform with both outside investors and borrowers.

For my bonus prediction this year I am going to talk about acquisitions. I think Lending Club will use their large cash war chest to make at least two new acquisitions. I think they will expand their product offerings by acquiring a traditional lender and one online lender. I have no inside information here, this is just a hunch.

Over to you. I would love to hear whether you think my predictions are on target or way off base. And feel free to make your own suggestions in the comments section below.

Subscribe
Notify of
23 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Simon Cunningham
Jan. 5, 2015 5:31 pm

Nice call on Prosper’s profitable quarter, Peter. And what a year they had.

Great predictions as well. A $10B year at Lending Club would be huge. And I’m intrigued by your prediction of a retail investing lender. I’m not sure how that could work considering the legal fees, etc, but I’m very willing to be wrong.

Would you guess that a factor in Prosper’s desire to stay private is related to their emphasis on being more institutionally driven? I know Lending Club’s IPO was, to some degree, to raise awareness within their more-broad investor base.

BruiserB
BruiserB
Jan. 5, 2015 6:10 pm

Interested more in your thoughts about LC possibly wanting to acquire a traditional lender. Would this provide them with their own bank charter so that they could eliminate the need for WebBank? Is there a regulatory issue that makes it advantageous for them to use a third party issuer of the loans? Would they be able to maintain this if they owned the issuer of the loans?

Ron Ben-Chaim
Jan. 6, 2015 7:56 am

In regards to your fifth prediction, I am wondering what kind of arms-length regulation would be involved (same question if Lending Club decides to buy a bank, which IMO is unlikely). Barclay’s Africa already owns 49% of Rainfin in South Africa, so definitely could happen on that front, and then there’s RBS (https://www.ft.com/intl/cms/s/0/660447b0-5625-11e4-93b3-00144feab7de.html#axzz3O35Hi4wD), but a U.S. bank? Any thoughts on who it might be?

RawRaw
RawRaw
Jan. 6, 2015 9:17 am

What size do you consider midsized bank? And by acquiring a traditional lender, you mean a bank?

I honestly think LC will eventually create a Utah Industrial charter. It just doesn’t seem to make sense not to once they get rolling.

RawRaw
RawRaw
Jan. 7, 2015 9:41 am
Reply to  Peter Renton

I don’t get the impression that Webbank would be for sale. And I don’t think their Industrial Charter would have too many regulatory challenges. Not only is it a business risk, but a business cost.

RawRaw
RawRaw
Jan. 7, 2015 9:41 am
Reply to  RawRaw

And I am not so sure a bank in the 5-20 range would be starting a market place. I could be wrong, but I think the asset threshold would be much higher.

Todd Taskey
Todd Taskey
Jan. 6, 2015 2:26 pm

Do you see further segmentation in the space? StreetShares is doing a very effective job targeting veteran owned businesses for their P2P offering and have several partnerships & endorsements accelerating their marketing effrorts, do you see others finding segments to focus on as the space becomes more crowded?

Fabian
Jan. 6, 2015 4:07 pm

The mobile strategy is very surprising. For Prosper and Lending Club it’s virtually not existing. Ok, they have a mobile version for the Website but that’s it. Lenders and borrowers would probably love to have an Android / iOS App for quick access.

The $10 billion bet on Lending Club for 2015 is probably a good guess. That would consider in average 25% growth quarter over quarter. Their best quarter over quarter growth in 2014 was between Q1 and Q2 with roughly 22% but with the growing popularity and a lot of wind in the sails from the IPO it should work out.
Some of it will depend on the overall economic situation and how other investment alternatives will hold up. Bumpy start for the stock markets around the world into 2015 after signs of another Euro crisis. If the uncertainty continues, investors will look into other directions.
To attract quality borrowers I would guess that Lending Club will invest more into marketing measures to make P2P lending known to a broader audience. That will obviously attract additional investors as well.

More interestingly: There are some articles out there mentioning that the Lending Club stock is overvalued. The stock market price will be driven significantly by the growth and by the fact if Lending Club turns profitable again. With all the cost of the revenue growth they, ended up with a loss lately. Opinions?

Sarfaraz Sadruddin
Jan. 6, 2015 4:30 pm

LC stock by traditional “value” investing philosophy is expensive, but then again warren buffet et al missed out on tech stock

Credit card refi is a trillion dollar+ industry and LC has a long way to take more market share from incumbents

Otherwise P2P is getting Segmented with different platforms with niche market expertise.

Can prosper LC merger happen?

HG
HG
Jan. 7, 2015 12:49 pm

Peter – Thank you for sharing your perspective. Just curious, what are your thoughts on P2P/Direct Investing with Bitcoin this year?

Lina
Lina
Jan. 8, 2015 8:08 am

Regarding #5 above, wouldn’t it be most logical for a consortium of credit unions to provide that service? It’s the core of what credit unions do – people helping people.

Lina
Lina
Jan. 9, 2015 3:32 pm

Peter,

Thank you for your reply. What startup is that?

Stephen Smith
Stephen Smith
Aug. 30, 2015 10:50 am

Peter, First I’ve learned alot from your articles. I’ve been approached by a tech company that is developing applications for p2p lending, I’d be interested in seeing what you think is a great proposal (from any vendor) to a bank for why they should look at p2p lending