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Marketplace Lending Predictions for 2017

My annual gaze into the crystal ball brings you seven predictions for 2017 as well as a review of my last year's predictions.

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Crystal ball - 2016 predictions

Happy New Year everyone. As I do every year at this time I make a few predictions for the year ahead as well as review my previous years predictions.

Review of my 2016 Predictions

As we know 2016 turned out in a way that was completely unexpected. Regardless, I will go through what I thought would happen in 2016 – some things I got right and with others I was way off.

  1. Lending Club will launch an auto lending operation this year
    Despite the challenges at Lending Club in 2016 I did get this one right. They launched a new auto lending operation in October in their first new product expansion in more than two years.
  2. Consolidation will begin
    I was not really right with this one. While consolidation did begin somewhat in 2016 my suggestion of three platforms buying acquired by larger competitors did not really come true. We saw several platforms go out of business but only one or two minor acquisitions.
  3. There will be five IPOs in our industry in 2016
    I was embarrassingly wrong on this one. I expected the IPO market to rebound in 2016 and several of the large platforms to take advantage of the public markets. I was completely wrong with zero IPOs in our industry in 2016.
  4. Three large banks will build platforms
    I was pretty much right on this one. We had Goldman Sachs launch their Marcus platform in 2016 and we also saw Wells Fargo launch their Fastflex product for online small business lending. While outside the US, German banking giant Commerzbank launched their own online lending platform.
  5. A Chinese company will buy a U.S. marketplace lending platform
    This did not happen in 2016 although interest in the US marketplace lending industry in China has never been stronger. I think I was probably a couple of years early on this prediction.
  6. The retail investor will become more in favor in 2016
    The retail investor certainly became more in favor this past year. There were some new Reg A+ deals announced and Lending Club made several moves aimed at increasing retail investor volume including the one just last month providing bonuses for new IRA investment.
  7. A new trade association will finally launch
    This was an easy one to predict as many of the leading companies have been talking about it for some time. The Marketplace Lending Association launched in April and we had several other initiatives launch as well.

[Read more…]

The Top 10 Most Important Marketplace Lending Stories of 2016

In our annual retrospective we break down some of the biggest news stories that we covered on Lend Academy this year.

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Sunset-2016

Many of us in this industry will be glad to see the last of 2016. It has been a difficult year on many fronts, certainly the most challenging in the industry’s short history. This was the year of the pullback as the rapid growth of the last decade dissipated amid a downturn in investor interest due to missteps at some of the major players. But there was also some good progress made this year as you can see in many of the stories below.

Here are my top 10 most important news stories that we published on Lend Academy in 2016.

1. Lending Club Founder Renaud Laplanche has Resigned as CEO

It was a very easy choice for the biggest news story of this year. The departure of Lending Club founder and CEO Renaud Laplanche was the most important news story of this past decade. He was the leading figure in the industry. His drive and vision was one of the main reasons not just Lending Club but the entire industry had seen such growth over the previous few years. The news of his departure rocked the industry globally and led to a dismal 2016 for many lending platforms.

2. New Fintech Charter Proposed by the OCC

There has been talk about a new regulatory structure for marketplace lending since the GAO report way back in 2011. By September it was clear that the Office of the Comptroller of the Currency (OCC) was going to take the lead here. In early December the head of the OCC, Thomas Curry, announced the plans for a new fintech charter that will launch in 2017. They are currently seeking public comment on this idea until January 15, 2017. This will be a big story to watch in 2017.

3. The Goldman Sachs Consumer Lending Platform Called Marcus Has Launched

[Read more…]

KPMG and H2 Ventures Release the Global Fintech 100

The third annual list of global fintech leaders includes innovative companies from 23 countries around the world.

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kpmg-h2-ventures-fintech-100

This week KPMG and H2 Ventures released their third annual Fintech 100 list. This list is actually two lists of 50. The first list called the Leading 50 highlights those established fintech companies that are true leaders in their field. The second list is called Emerging Stars and as the name implies features those newer companies that have a great deal of promise.

The researchers ranked the companies on the Fintech100 by considering the following five factors:

  1. Total capital raised
  2. Rate of capital raising
  3. Geographic diversity
  4. Sectorial diversity
  5. X-factor: degree of product, service and business model innovation (a subjective measure that is applied only with respect to companies appearing on the 50 Emerging Stars list)

The list covers many areas of fintech with lending leading the way. Here is a breakdown of the categories for every company: [Read more…]

What I Learned on the LendIt China Tour and Lang Di Fintech Conference

LendIt has just spent a week in China hosting our third annual Executive Tour that culminated in the inaugural Lang Di Fintech Conference in Shanghai

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What a 10 days I have had in China. The LendIt team has just finished hosting the third annual LendIt China Executive Tour as well as the first ever Lang Di Fintech conference. This trip to China has been one of my favorite experiences since starting in this business 5 ½ years ago. I have learned a great deal, made many new connections and got to spend a lot of time with the 37 people who came on the full seven-day Executive Tour. Here is a review of the past week with many of the highlights.

The Global Fintech Investment Summit in Hong Kong

Jason Jones opening the LendIt AMTD Global Fintech Investment Summit

Jason Jones opening the LendIt AMTD Global Fintech Investment Summit

The LendIt China Executive Tour began in Hong Kong last week where we gathered for the inaugural Global Fintech Investment Summit. This was an event cohosted by LendIt and AMTD, an investment bank and advisory group based in Hong Kong. We brought together a group of almost 150 investors to meet with the tour participants, which consisted primarily of platforms and funds.

Tour members were able to make short presentations to investors and we also organized a ton of 1-on-1 meetings. Lots of new connections were made there with most participants reporting significant interest from the investors. We also visited the Hong Kong offices of CreditEase where we met with people from their investment team who are looking to make investments in international platforms.

Tencent’s WeBank and Weilidai

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Chinese P2P Lenders Expanding into Wealth Management

The transition into wealth management is a common theme for many Chinese p2p lenders.

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Map of China

[Editor’s note: This is a guest post from Tharon Smith, Managing Director of LendIt China. Tharon is an expert in fintech in China and is also the founder of Strontium Group, a firm specializing in cross border investing.]

Wealth management in China is growing rapidly.  According to China Daily, total balances of wealth management products held by banks totaled 23.5 trillion yuan ($3.6 trillion) at the end of 2015. This is an increase of 56 percent year over year. The portion held by banks accounted for 26 percent of the total 90.36 trillion yuan for wealth management products held by other financial institutions.

Peer to peer lending companies account for the majority of non-bank financial institutions in China and most have transitioned to wealth management service providers.  These firms prefer to be acknowledged as wealth management institutions and have practically insisted “P2P” is a bad word in the industry. This is partially due to companies distancing themselves from the bad actors in the space such as Ezubao, but these companies truly are starting to become more than p2p lenders.

The Wealth Management Specialists of the Future

They want to be seen as capital service providers, specifically wealth management specialists for the future, utilizing technology and reflecting the values of younger generations. To cater better to the Chinese market, the inaugural Lang Di Fintech conference we are hosting later this month focuses on much more than p2p lending.

Ru Bing, Chief of Wealth Management department of Creditease in a short conversation told me that the main reasons for this shift to wealth management are the following:

  1. A single product such as P2P has never been a good way to attract clients.
  2. Good quality P2P products are rare to obtain; as P2P concept is so competitive.
  3. Wealthy clients have different tastes in investing.
  4. Clients should have different asset classes in their portfolio for optimal diversification.
  5. More products and cross-selling can help develop deeper relationships with clients.

As more wealth managers come online they will be challenged to develop these relationships with limited online products.  Chinese internet based wealth management institutions will need to devise creative and unique investor relations activities in order to combat this challenge. Although, with respect to driving and developing deeper relationships with investors, China may have an embedded cultural advantage with norms such as “guanxi” and “saving face” that guide relationship building over the long term.  How companies execute on this will indicate likelihood of success. [Read more…]

China is the Biggest Market in Fintech – the World Just Doesn’t Know it Yet

LendIt Co-Founder Jason Jones gives his thoughts on the China fintech industry and why it is dominating the world.

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China_Fintech

China is the biggest market in fintech but the world just doesn’t know it yet.  It is true, take a look at the chart above.  Chinese companies, ranked by market cap, dominate fintech with 4 of the top 5 fintech companies in the world.  The largest company, Alibaba’s Ant Finance, recently closed the world’s largest private funding round for an Internet company at $4.5 billion. The third largest company, Lufax, is the world’s best example of a fintech company incubated inside a large scale financial services company (Ping An Insurance).

I often talk about insurance tech as the next big category and ZhongAn Insurance is the world’s largest and fastest growing online insurance company.  Finally, ecommerce giant JD.com has created an entirely new Internet Finance division and has raised $1b from an investor group led by Sequioa to focus on building a full stack fintech company that includes supply chain small business lending, consumer lending, wealth management, payments, equity crowdfunding, insurance, and securities and brokerage businesses.

This list doesn’t even include private companies like CreditEase or new entrants like real estate behemoths Greenland and Dalian Wanda, online travel companies like Ctrip and Qunar, phone maker Xiaomi, digital media companies like Sina, Sohu, and Phoenix Finance, Internet pivots like RenRen and Shanda, and huge conglomerates like HNA Group.  Seriously, everywhere you turn in China you find a new company with an Internet Finance strategy. [Read more…]

Leading Chinese Platform CreditEase Makes First Investment on Avant and Prosper

The P2P lending platform turned wealth management firm creates the first Chinese offshore fund to invest in loans issued by western platforms.

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CreditEase invests in Avant and Prosper

I first became aware of CreditEase back in June 2013 at the inaugural LendIt conference in New York. We met with some of their management team back then and when they told me their loan origination volume I couldn’t believe it. I really thought they must have got something wrong in the currency conversion. Even back then they were much larger than Lending Club or any other platform I knew.

Today, they are one of the leading lending platforms in China having issued over US$15 billion in loans last year. But they are far more than a lending platform. Wealth management is now a major focus as their clients have sought out their expertise in making investments beyond their P2P lending platform in China – in 2015, approximately 50% of all CreditEase revenue came from non-P2P products.

Which brings us to the focus of today’s article. CreditEase has raised $80 million from their wealth management clients to invest on international marketplace lending platforms. Over the last several months they have conducted a thorough due diligence process where they looked at around 60 different lending platforms from all over the world.

I chatted with Richard Williamson, an Australian who is running corporate strategy for CreditEase, and has been leading this effort. Given the background of their investors in P2P lending the goal was to deploy this capital on similar consumer or small business lending platforms.

[Read more…]

Massive $7.6 Billion Fraud at Large Chinese P2P Lending Platform

The biggest financial fraud in Chinese history has been perpetrated by executives from Ezubao, a large P2P lending platform.

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Chinese p2p lending fraud

The scale of the fraud is breathtaking. Around 900,000 individual investors have collectively been bilked out of US$7.6 billion, according to Chinese officials, in one of the largest Ponzi schemes ever conceived.

While the total money involved is less than the infamous Madoff Ponzi scheme the number of people involved is far greater. Ezubao, until a couple of months ago one of the top 10 largest P2P lending platforms in China, has been shut down and 21 executives have been arrested. Even though Ezubao only launched in July, 2014 it quickly grew, attracting hundreds of thousands of investors with promises of 9-15% returns.

It has been reported that an estimated 95% of all borrower listings on Ezubao were fraudulent. Meanwhile the top executives used investor money to enrich themselves – spending on items and gifts including real estate, cars and luxury goods, according to the Xinhua news agency.

A Blow to P2P Lending in China

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Marketplace Lending Predictions for 2016

I stare into my crystal ball and provide predictions for the year ahead as well as review my predictions from one year ago.

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Crystal ball - 2016 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 2015 Predictions

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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. [Read more…]

Chinese Regulators Release First Draft Of Rules For Peer to Peer Lending Industry

Chinese p2p lenders will likely soon have to operate under a new set of rules.

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Chinese P2P Lending Regulation

Chinese regulators released a draft of new rules for Chinese p2p lending platforms today. According to several reports, the China Banking Regulatory Commission (CBRC) is seeking public comment on the new rules through January 27th. The Chinese market has been largely unregulated up until this point and platforms failing have been in the spotlight in recent weeks. Part of this is attributable to how many p2p companies exist in the industry in China, which is estimated to be several thousand.

Below is a summary of some of the major items included in the proposed rules. [Read more…]

ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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