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LendingClub Closing Down Their Platform for Retail Investors

The peer to peer lending platform that LendingClub pioneered will be closing down completely at the end of the year

October 7, 2020 By Peter Renton 23 Comments

Views: 16,584

There is big news out of LendingClub today for their tens of thousands of retail investors. They have given notice that they are closing down their Notes platform at the end of the year and individual investors will no longer be able to invest in any loans originated by LendingClub.

This is a disappointing development for the industry, as LendingClub was a pioneer in peer to peer lending, and for me personally as I have multiple LendingClub accounts going back more than a decade.

All investors should have received an email this morning detailing their plans. Here is an excerpt from that email:

As we move towards becoming a full-spectrum fintech marketplace bank, we have looked closely at our current and future product suite and have started development of new products to help our members keep more of what they earn and earn more on what they keep. Unfortunately, under a prospective banking framework, it is not economically practical for LendingClub to continue to offer Notes. So, we had to make the difficult decision to retire the Notes platform effective December 31, 2020.

While LendingClub began in 2007 as 100% focused on individual investors over the years it has moved to a much more institutional investor-focused approach. This was understandable as it is difficult to originate huge loan volumes on the back of just retail investors.

It is true that LendingClub has deemphasized individual investors over the past several years. We saw that the loan trading platform was closed down earlier this year, we have seen investors in some states being locked out of investing, increased investment minimums and there have been few, if any, new innovations for retail investors in many years.

Now, we are coming to the end of an era. The peer to peer lending model has not proven to be the wonderful innovation that it promised. There are virtually no platforms operating at scale today that have a pure retail investor approach. UK platform Ratesetter was probably the biggest, at least in the West, and that was sold earlier this year to a traditional bank for a fraction of what it was once worth. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: lendingclub, p2p lending

Views: 16,584

The Chinese P2P Lending Sector Facing Severe Challenges Right Now

Many platforms are going out of business but the strong platforms will survive

July 30, 2018 By Peter Renton 1 Comment

Views: 527

My first trip to China was back in 2014 when I was invited to speak at a closed door meeting with Chinese regulators and leading P2P lending platforms. They wanted to learn about the US market and trends I was seeing here at the time.

Back then new platforms were launching pretty much every day as p2p lending became the hot new investment. The number of platforms grew to well over 3,000, a number that everyone agreed was not sustainable. But new platforms kept on launching, attracting both investors and borrowers with relative ease.

Five Platforms a Day Are Failing Right Now

We all knew the party was going to end at some point and it looks like 2018 will be the year of reckoning. According to industry data provider, Wangdaizhijia (loosely translated as Online Lending House), platforms are failing at a rate of around five a day with 114 platforms shutting down between July 1 and July 24.

Many investors are losing their money as platforms either shut down completely or suspend withdrawals. While some platform failures have been due to outright fraud it seems that most have been hit with much higher default rates than expected. As we have learned in this country in recent years underwriting unsecured consumer loans is hard. It requires deep knowledge of consumer credit and even then positive investor returns are not guaranteed.

In a recent article in the South China Morning Post (SCMP) , the head of the Beijing Internet Finance Association, Ning Tang, who is also the founder of CreditEase, was interviewed and they had this to say about him: [Read more…]

Filed Under: Peer to Peer Lending Tagged With: China, failure, LendIt China, p2p lending

Views: 527

How to Open Up a New LendingClub Account in 2018

In this post we share the process of opening up a new LendingClub account, the first in a new series we will be sharing over the coming quarters.

April 5, 2018 By Ryan Lichtenwald 10 Comments

Views: 336

Peter Renton, the Founder of Lend Academy opened his first LendingClub account in mid-2009. I opened my first LendingClub account in early 2013. While we are intimately familiar with the platform and the changes over the years things are on autopilot from the investment perspective. It has been a long time since we have gone through the process of opening a new LendingClub account.

Recently LendingClub reached out to us offering to fund a new LendingClub account so we could go through the new investor experience step by step. We wanted to take this opportunity to take a fresh look at opening and investing through LendingClub as a complete beginner. As outlined after the video below we’ll be sharing video content and blog posts along the way as this account matures.

Opening up a new LendingClub Account

The new LendingClub account setup is a simple, straight forward process, taking less than five minutes. As you’ll see in the video below LendingClub asks for some basic information during the signup process and then asks for information for the initial funding of the account.

Although I had to link my bank account manually in the video below, LendingClub now has the ability to connect your bank account quickly, simply by using your bank’s login credentials. Up to 15,000+ banks are available for linking, including USAA, Citi, Bank of America, and Chase.

New LendingClub Experiment

As mentioned earlier, LendingClub is funding our new account with an initial deposit of $5,000. This is part of a new program they are launching this year with a small subset of bloggers in the investing space. While they paid to fund this account we have complete freedom to write whenever and whatever we want. We considered this a good opportunity to start a new account from scratch and share the experience as both my and Peter’s accounts at LendingClub have been open for many years.

Once we invest this initial capital all principal and interest payments will be reinvested in new loans. Every quarter we will detail what is going on with this account, much like Peter shares his own returns.

In this series of posts we hope to answer several questions new investors may have such as:

  • What does signing up for a LendingClub account entail?
  • How do I setup automated investing?
  • How long does it take to deploy funds?
  • What returns could a potential investor expect starting in 2018?

Stay tuned in the coming weeks for our next video as we outline how to setup automated investing.

Filed Under: Peer to Peer Lending Tagged With: account, lendingclub, marketplace lending, opening, p2p lending, review

Views: 336

What the SoFi Acquisition of Zenbanx Means for the Future of Fintech

An analysis of the acquisition and how it fits in with SoFi's overall strategy.

February 7, 2017 By Todd Anderson Leave a Comment

Views: 176

In a move viewed as a step towards becoming more central to their member’s financial lives, SoFi acquired Zenbanx for $100mn in an all-stock deal. The deal will allow SoFi to offer their members the ability to open bank accounts, another area of finance that SoFi is keen to disrupt.

Fintech companies of all kinds have started to partner with banks but this deal is different. It marks the first time that an online lending platform will have the ability to accept deposits.

During Peter Renton’s latest podcast with SoFi CEO Mike Cagney, they discussed the future plans of the company and how they view themselves in the market. Mike explained that they are building SoFi to be a new kind of financial services firm. “We’re one that embraces the idea of beyond the product, it’s really around the concept of money, career and relationships, that’s what we’re trying to deliver into our member base.”

While the specific terms of the deal were not disclosed, the Wall Street Journal reported that “it was an all-stock deal valued at nearly $100 million”. It was also disclosed that the majority of the Zenbanx staff will be joining SoFi and Zenbanx founder and CEO Arkadi Kuhlmann will be coming on board to run the development of new banking services. Initially Zenbanx customers will not notice any difference, but in a few months when SoFi starts rolling out their new banking products all current Zenbanx customers will migrate to the new SoFi platform.

Zenbanx offers a mobile account in the U.S. and Canada that lets people save, send and spend money in multiple currencies. According to a Bloomberg article, Zenbanx had raised about $10mn in venture financing from Tencent Holdings and Recruit Strategic Partners at a $129mn pre money valuation. The global footprint of Zenbanx and the recent move into Australia will help SoFi transition into more of a global brand, something they are keen to do. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: fintech, marketplace lending, p2p lending, SoFi, Zenbanx

Views: 176

GROUNDFLOOR Expanding Footprint to Real Estate Borrowers

GROUNDFLOOR doubled the states they lend to and is seeking to accelerate growth for 2017.

September 1, 2016 By Ryan Lichtenwald 3 Comments

Views: 29

GroundFloor-Logo

Last year we featured GROUNDFLOOR who was the first p2p lending firm to leverage Regulation A+ in Title IV in the JOBS Act. Now about a year later there have been many companies who have taken the same path, but GROUNDFLOOR remains unique in their structure. Today, GROUNDFLOOR announced that they are opening lending to 12 more states. I had the chance to talk with Brian Dally, Co-Founder and CEO to learn more about the news and what the company has been up to.

GROUNDFLOOR previously only offered loans in Georgia, Alabama, Florida, Illinois, Maryland, New Jersey, North Carolina, South Carolina, Virginia, Tennessee, and Texas.

They have now added Rhode Island, Massachusetts, New Hampshire, Michigan, Missouri, Minnesota, Colorado, Arizona, Utah, Nevada, Oregon and Washington. The states chosen were ones that met their underwriting criteria and they also focused on states that were not too far away for a control group.

What’s important to understand about GROUNDFLOOR is that they are different from many of the real estate crowdfunding companies that exist. They are focused only on retail investors and the platform is open to both accredited and non-accredited investors. When I spoke to Brian he said that the best source of capital next to depositors are non-accredited retail investors.

Loans are fractionalized where investors purchase pieces of loans similar to that of buying a loan on Lending Club. This is structured differently than the REIT products that have been launched recently under Regulation A+. Investors from the following states can invest in projects, with a $10 minimum per deal: Georgia, California, Illinois, Maryland, Massachusetts, Texas, Virginia, Washington State and D.C.

Brian noted that they have carefully controlled growth as they learned about losses, default rates etc. Now that they feel confident, the next step was to expand to these 12 states. Currently just under 2,000 lenders have invested on average $6,000 for a total of $12.5 million across over 100 loans. Loans average $125,000 across loan terms of 6-12 months and 45 loans have now been repaid. The platform has experienced no defaults and zero loss of principal. Investors have earned a weighted average annual rate of return of 14% over the 9 month average term. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: crowdfunding, GROUNDFLOOR, p2p lending, real estate

Views: 29

Marketplace Lending in Italy Still in Infancy but Long Term Potential is Promising

We learn about the p2p lending industry in Italy in a guest post from P2P Lending Italia.

August 31, 2016 By Ryan Lichtenwald Leave a Comment

Views: 72

marketplace_lending_Italy

[Editor’s note: This is a guest post from Edoardo Matarrese and Roberto Condulmar of P2P Lending Italia an Italian language site focused on P2P lending.]

The latest AltFi data on European marketplace lending volumes speak for themselves: as of the latest available figures Italy accounts for a minuscule 0.27% share of the volumes originated by the industry since inception.

True, the UK accounts for the lion’s share of the European pie at 84.80%, suggesting that marketplace lending in Europe is currently a tale of two markets: the UK, and “all the others”. But Italy’s share looks extremely low even in comparison with France’s 3.33% and Germany’s 5.55%. It is approximately one third the size of Finland, a country whose population is over 10 times smaller than Italy’s.

However, a closer look at the recent changes that occurred in the Italian marketplace lending ecosystem would suggest that the infant may soon turn into a child. Over the last 12 months the number of platforms has grown from two (the historical pioneers Smartika and Prestiamoci, both active in loans to individuals) to eight. Two new platforms have joined the segment of loans to individuals: Soisy and Younited Credit, the latter having clearly taken the lead in new monthly originations after only four months since launch thanks to the strong support of its French mother company (the former Pret d’Union).

Four more platforms have been established to provide financing for businesses. Two of these are already operating: Borsa del Credito (which focuses on medium term (36 to 60 months) financing for micro-businesses and SMEs) and Workinvoice, which as the name suggests is a marketplace for companies aiming at financing their business via the sale of some of their receivables.

Before the end of 2016 they will be joined by Instapartners, an initiative backed by an impressive team of former top consultants and well known entrepreneurs and CashMe. Both newcomers will be focusing at least initially on offering short term financing solutions to SMEs.

The growth in the number of players is starting to generate the virtuous “network effects” typical of very early growth phases in any new industry. For sure, investments in advertising and communication are on the rise, attracting potential lenders and borrowers and the media’s interest.

Data collected from sources such as Milan’s Polytechnic (publisher of an annual report on Crowdfunding which from this year also included “Crowdfunding Lending”) or our own site P2Plendingitalia.com (a specialist blog/site in Italian which collects monthly figures from all the platforms) are still very modest in absolute terms.

The industry’s estimated total volumes since inception as of the end of June 2016 stood at €45.6 mn (approximately $50 mn USD). By comparison, the same figure at the same date for the UK was 161.5 times larger at £5.8 bn pounds (AltFi estimates).

Looking at the future: it is not difficult to understand what is driving the recent growing interest from backers of marketplace lending platforms. Italy is a market only marginally smaller than the UK, in terms of population (60 mn people vs the UK’s 65 mn) or measured by the size of its GDP. It is also home to over 6 mn businesses, of which 4 mn classified as “micro-businesses”. Finally the pool of savings held by Italian households is huge. According to Bank of Italy’s data, total financial assets held by Italian households at the end of 2014 amounted to €3.9 tn (approximately $4.3 tn) and total net wealth was estimated at €8.7 tn ($9.5 tn USD).

The long term potential looks promising and future developments in the country are certainly worth monitoring!

Filed Under: Peer to Peer Lending Tagged With: Italy, p2p lending

Views: 72

P2P Lending and the Indian Market

We hear from a p2p lending leader in India to learn more about the industry there.

May 20, 2016 By Ryan Lichtenwald 1 Comment

Views: 74

p2p_lending_India

[Editor’s Note: This is a guest post from Rajat Gandhi. Rajat is the Founder and CEO of India’s largest P2P platform, Faircent.]

The thing about disruptive technology is that one does not know what to expect and where it will go. The Internet is a great example. It was science at the hand of academics and researchers, but became technology once computer companies got involved and various applications and usage spun out if it.

This means regulations and often usage of such technology plays the catch up game. It is often many years after a disruptive technology comes into picture that we can truly enjoy its benefits or iron out the gray areas.

We can easily state that this decade is about financial technology. Traditionally, the domains of big banks and deep pockets, startups and smart individuals are driving a paradigm shift in the sector today. From something as revolutionary as Bitcoin and the Block chain technology, to innovations like crowdfunding and peer-to-peer lending, the sector has been abuzz with change. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: India, p2p lending

Views: 74

Just Released: The 2015 UK Alternative Finance Industry Report

The latest report will give you an in depth understanding of the marketplace lending industry in the UK.

February 18, 2016 By Ryan Lichtenwald Leave a Comment

Views: 3

Alternative_Finance_Industry_Report

In November, 2015 we reported that the most comprehensive study was being conducted on marketplace lending for the Americas by the University of Cambridge. The same research center has just released their UK study of the entire alternative finance industry there. The report titled “Pushing Boundaries” was released today and was headed up by the Cambridge Centre for Alternative Finance at the University of Cambridge and Nesta. While the report shows how 2015 was all about pushing boundaries, the report proposes that 2016 is when alternative finance goes mainstream.

In total 94 companies participated and included many of the top companies in marketplace lending in the UK. The report highlighted three key themes: increasing market share, the real estate crowdfunding opportunity and fraud and malpractice fears. The full report can be viewed on KPMG’s website who also was a partner on the study. Below are a few highlights from the report: [Read more…]

Filed Under: Peer to Peer Lending Tagged With: crowdfunding, p2p lending, research, study, survey, UK

Views: 3

P2P Lending Best Practices 2016 – An Investor’s Guide

We review the best practices of investing in p2p lending for new investors to be successful.

January 21, 2016 By Ryan Lichtenwald 8 Comments

Views: 238

P2P Lending Best Practices

When investing in p2p lending there are a few best practices that every investor should follow. These best practices should be applied to any investment on a marketplace lending platform, including Lending Club and Prosper. We first covered this topic in 2011 and while many of the best practices remain the same, there are new considerations as the industry has matured.

Diversification

Investors should start an account by investing in at least 100 notes, and preferably many more. In the case of Lending Club and Prosper this means an account size of $2,500 ($25 x 100 notes). We’ve covered diversification in depth and this remains the most important factor in having a successful p2p investing experience.

The reason for this boils down to one point which is that the more notes you invest in, the less impact one individual note default will have on your portfolio. Your investment strategy should always start with investing in as many notes as possible and as a general recommendation this should be your approach as your account grows unless you are unable to keep cash invested. We often find individuals that have had a negative experience with a platform lack this key best practice.

Accredited investors should also consider investing across many platforms since there are many more options available today. Many of these other lenders focus on other demographics, whether it is the sub-prime market with higher projected returns or the millennial demographic. Beyond consumer credit, there are now platforms that cover almost every lending vertical including  small business loans, real estate loans, student loan refinancing and many more.

Throughout the next few years we are likely to see more options for retail investors in the form of Regulation A+ deals such as the new Fundrise eREIT and 40-Act funds. These will increase opportunities for further diversification. [Read more…]

Filed Under: Peer to Peer Lending Tagged With: best practices, Lending Club, p2p lending, Prosper

Views: 238

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.

December 28, 2015 By Ryan Lichtenwald 1 Comment

Views: 908

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…]

Filed Under: Peer to Peer Lending Tagged With: China, China Banking Regulatory Commission, p2p lending, regulation

Views: 908

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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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