predictions Archives - Lend Academy

Fintech Predictions for 2019

My annual predictions for fintech and marketplace lending and a review of last year

January 3, 2019 By Peter Renton 1 Comment

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 year’s predictions. I like this process because it gets me to focus on the hot trends that will shape the year ahead and also to review what I missed at this time last year.

Review of my 2018 Predictions

First, let’s review my predictions I made at the beginning of last year. While the fintech industry had a great year in 2018 my predictions fell short in many cases.

Five top 25 banks will launch their own online lending platforms
I would say I was almost spot on with this one. In the last year we have seen new platforms from a number of large banks: PNC Bank (small business loans – powered by OnDeck), HSBC (personal loans – powered by Avant), US Bank (small dollar personal loans built in-house), American Express (point of sale loans with GreenSky). Barclays also launched personal loans this year but this was officially announced late in 2017 so I can’t really include it.
Two new pieces of legislation will be passed that will benefit the industry
While we did not get the long awaited for Madden fix bill in 2018 despite bipartisan support or the IRS modernization bill it was left to the states to take the lead on legislation. Arizona became the first state in the country to pass a bill creating a regulatory fintech sandbox. Then California signed into law SB 1235 which requires consumer-like disclosures on small business loans and merchant cash advances. But I was really thinking federal legislation when I made that prediction so I will give myself a fail on this one.
One of the top five (non-bank) online lending platforms will be acquired
I thought this one was going to come true as there were some rumors during the year but we ended 2018 with no major online lending platform being acquired. Another fail.
A major lending platform will get hit with a cyber attack
I am happy to be wrong on this one. The industry suffered no major cyber attack.
The tech giants consolidate their positions in online lending
So, Amazon was probably the most talked about company in fintech this year but despite that no major news broke about new inroads into fintech from the tech behemoth. Square launched consumer lending with a big splash and filed paperwork to open its own bank. PayPal continues to expand its loan book and has raised its lending limit to $500,000. As this recent CNBC article says Square and PayPal are leveraging data to expand their lending operation while Amazon is still lurking.
2018 is the year of product line expansion
The tone was set by Rob Frohwein, CEO of Kabbage, who said on the LendIt stage last April that monoline online lenders would go the way of the dinosaur. New products were announced by a large number of online lenders from Prosper (HELOCs), OnDeck (equipment finance), SoFi (SoFi Money), Kabbage (payments), MoneyLion (checking account), Upgrade (line of credit), Square Capital (personal loans) just to name a few. It was a breakout year for new products.
Messaging apps start to get integrated into online lending
This was my long shot prediction and it did not come to pass. While p2p payments are being incorporated into messaging apps we are not seeing loans yet, at least not in the US.

If I tally up my predictions here I probably scored about 3.5 out of 7, barely a passing grade. I will see if I can do better in 2019.

My 2019 Fintech Predictions

Three companies will be approved for the OCC Fintech Charter
Despite lawsuits from the states the OCC is pushing ahead with their new fintech charter. I expect several (I am going with three) new companies will apply for the charter and be approved.
Three new fintech hybrid “bank” accounts will be launched paying more than 2%
SoFi Money launched with significant fanfare in mid 2018. This is a hybrid checking/savings account and pays 2% interest (as of today). I expect we will see three new fintech entrants here in this space paying more than 2%. Despite the travails of Robinhood’s offering I think this will mark the beginning of the end of bank checking accounts that pay no interest and charge monthly fees.
The tokenization of lending will begin
Tokenization has become a bit of a buzzword in the blockchain space as everything from art, diamonds, stocks and real estate is being tokenized. But in the securitization space we have not even really begun yet. With the launch of Figure and the work being done by Global Debt Registry this is about to change. I am sticking with the number three as I think we will see three end to end securitization deals completed on the blockchain in 2019.
Employer-based lending becomes a thing
There is more awareness than ever about the importance of employee financial wellness. And in a tight labor market companies are always looking for ways they can offer new benefits to employees. We have had employer-based loan offerings enabled by companies like Kashable, HoneyBee and TrueConnect for some time but they have yet to gain wide traction. I think 2019 will be a breakout year for employer-based lending with dozens of Fortune 500 companies offering it as a benefit.
Explainable AI hits center stage
Artificial intelligence continues to be a hot topic in so many areas of finance and particularly in underwriting. We had the No Action Letter granted to Upstart in late 2017 which gained a great deal of attention. Now, many lenders, both online and traditional banks, are clamoring to incorporate AI into their underwriting with the big challenge being it needs to be explainable to consumers as well as regulators. Many lenders (more than 10) will have this in production by the end of 2019.
Results-based lending takes off in student loans
The student loan industry is moving towards a crisis. Student loan defaults are remaining well above 10% and have the highest delinquency rates of all the major loan categories. Something needs to be done and I think we will see a move towards results-based lending for student loans in 2019, This will mean many universities will adopt student loan programs based on the ROI of their degrees. This will be difficult to quantify but expect to read more about results-based student lending in 2019.
The new major buzz word in finance will be quantum computing
The idea of quantum computing has been around since the 1980s but it is only quite recently that the concept has come to finance. With the explosion in data sources in recent years finance now needs more computing power than ever to understand and make sense of this data. Serious research has already been conducted in this area and while I don’t expect a lot of practical use cases we will see quantum computing embraced as a concept throughout finance in 2019.

Now, there are many other trends that I have left out of this list but this is what I am thinking will be big in 2019. Let me know what you think. Happy to hear your feedback in the comments.

AltFiData Predicts Strong Growth for Marketplace Lending in the US in 2018

Marketplace lending is expected to show robust growth in the USA, UK and Europe in 2018

January 25, 2018 By Peter Renton 1 Comment

Today, leading data analytics provider for marketplace lending, AltFiData, released the total origination numbers for the UK, Europe and the USA. They are predicting solid growth for the industry in all three regions in 2018. The new loan volume for the USA in 2018 is expected be $38.9 billion, a year on year increase of 46%.

Now, we should point out this is not the entire marketplace lending industry in the US, it is only a subset. AltFiData is reporting aggregate numbers just for LendingClub, Prosper, SoFi and OnDeck. Companies like Upgrade, Avant, Square, PayPal, Funding Circle, Kabbage, Streetshares, Biz2Credit, Fundation, just to name a few, are not included. And there are no real estate platforms included.

Having said that the four companies they have covered are pretty much the largest lenders in the space. So, I think it is still interesting to see the growth in loan volume and in particular the aggressive growth in loan volume in the USA for 2018.

I don’t disagree with this assessment. This month I have visited both San Francisco and Atlanta and sat down with more than a dozen platforms. There is a renewed optimism in the space in 2018 with most companies looking at more aggressive growth for this year. We have all learned our lessons from 2016 and there is no longer a grow at all costs attitude but a sense of the need to grow responsibly. I have heard lots of exciting new projects that will be announced throughout 2018 that will contribute to this growth.

We have also noticed tickets sales to LendItFintech USA are up strongly over both 2016 and 2017. My sense is that people are more optimistic and are more willing to invest in their companies in 2018. Some of this could be related to the recent tax cuts as I am seeing business leaders in Davos continuing to praise the positive impact those cuts are going to have on economic activity.

Still, I think 46% growth is a little on the high side for the four companies covered here but I expect we will get close to those numbers. Interestingly, AltFiData is expecting the UK industry to grow at 43%, slightlty slower than the USA, and Continental Europe to grow at 73% off a much smaller base.

Marketplace Lending Predictions for 2018

A review of our 2017 predictions and some new thoughts for 2018

January 2, 2018 By Peter Renton 4 Comments

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 2017 Predictions

First, let’s review my predictions I made exactly one year ago. We had an interesting year as an industry in 2017, it was certainly a better year than 2016. I think I did ok on my predictions from last year although as you can read below I did get some things completely wrong.

2017 will be the year of the bank partnership
I would say I was partially right on this one. We certainly saw a large number of new bank/fintech partnerships with deals closed from Avant, Fundation, Upstart, P2Bi, LendUp, Biz2Credit and many others. And in Europe the floodgates opened with dozens of new deals between lending platforms and banks announced. But in the US I was expecting even more partnership deals than we had so I think it is bit of a stretch to call 2017 the year of the bank partnership here.
The OCC Fintech Charter will receive a positive reception
It was an interesting year for the OCC Fintech Charter. With Thomas Curry leaving as head of the agency in April, then Keith Noreika holding the acting role for a few months and finally Joseph Otting being sworn in to lead the agency in late November it was difficult for any new initiative to get momentum. There was also the case of the Conference of State Board Supervisors suing the OCC over the charter, which was dismissed in December. So, while many of the fintech platforms supported the charter there was no real positive movement this year.
Lending platforms will offer banking products
While we had a couple of platforms offering credit cards for the most part this prediction failed to materialize. With the possible exception of SoFi I think we are still some time away from lending platforms offering a variety of banking products.
One large platform will be acquired
I am going to say I got this one right as one major platform was acquired in 2017. Student lender Earnest was acquired by Navient in a deal announced in early October. My guess that Prosper might be the platform to be acquired was wrong but there were rumors flying around about acquisition talks at more than one major platform last year.
There will be no new IPOs this year
I was almost right on this one but one US lending platform did have an IPO in 2017. Short term lender Elevate went public in April after postponing their IPO in 2016. None of the major marketplace lenders braved the public markets in 2017 as valuations continue to be depressed at many of the leading companies.
China will become an important source of capital outside the USA
I got this one right. China continues to make its presence felt as more US companies are looking for capital from that part of the world. The leading Chinese fund, the CreditEase Fintech Fund, made investments in 2017 in Upgrade, dv01, Orchard, Lenda and Nav just to name a few. China is now becoming a consideration for many more companies looking to raise money.
Artificial intelligence will take center stage
I think I read more articles about AI this year than in the previous five years combined. Whether it is for underwriting, customer acquisition, collections, compliance or cybersecurity AI is now central to the success of many lending platforms. It has taken center stage and will remain important for the foreseeable future.

[Read more…]

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.

January 2, 2017 By Peter Renton 7 Comments

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.

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.
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.
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.
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.
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.
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.
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…]

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.

January 4, 2016 By Peter Renton 15 Comments

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

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.
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.
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.
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.
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…]

Five Predictions for 2015

January 5, 2015 By Peter Renton 23 Comments

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

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.
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.
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.
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.
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. [Read more…]

Five P2P Lending Predictions for 2014

January 3, 2014 By Peter Renton 15 Comments

Happy New Year everyone. Here is my third annual predictions post where I review my previous years predictions and make some new ones for the new year.

Review of my 2013 Predictions

Lending Club will issue $1.62 billion in loans in 2013
Clearly I underestimated Lending Club on this one. As I said one year ago I expected the growth rate to slow down at Lending Club in 2013 from the 179% year over year growth experienced in 2012. Clearly I was wrong here. Their growth rate actually accelerated to 188% in 2013.
Prosper will issue $340 million in loans in 2013
I was a lot closer on my Prosper prediction with the actual loan volume coming in at $357 million. I have to admit, though, after their slow start to the year I thought my prediction was going to end up being overly optimistic. But Prosper had a phenomenal fourth quarter that exceeded everyone’s expectations.
The Prosper class action lawsuit is settled
I am happy to report that I was right on this one. The Prosper Class Action lawsuit that was brought in 2008 was settled in July for $10 million payable over three years.
Peer to Business Lending will boom with at least five new companies
I think I was right with this prediction as peer to business lending did indeed boom in 2013. I reviewed several new small business lenders on the blog including Funding Circle USA (formerly Endurance Lending Network), P2Binvestor, Funding Community and Dealstruck. Other platforms that launched in 2013 were Fundation and Quarterspot (review coming shortly).
Lending Club will release a bankruptcy remote vehicle for all investors
I was completely wrong here. Lending Club made no movement towards creating a bankruptcy remote vehicle for all investors. I think the fact that they are now profitable and in a very strong financial position has probably made this less of a hot button with investors.

My 2014 P2P Lending Predictions

Now on to 2014. Let me look into my crystal ball and give five predictions for the coming year. [Read more…]

My Top Five P2P Lending Predictions for 2013

January 1, 2013 By Peter Renton 25 Comments

Happy New Year everyone. I hope 2013 is treating you well so far. On January 1^st of 2012 I made five predictions for p2p lending in 2012, so now it is time to go back and review how I did. I will also make five new predictions for 2013.

Review of my 2012 predictions

Lending Club will reach $1 billion in total loans – this was by no means a certainty as we started 2012 but I expected Lending Club would break this milestone in December. They did it a month earlier.
Prosper will reach $500 million in total loans – Prosper ended the year at $443 million in total loans issued since inception, so I was a bit too optimistic on this one.
Lending Club will post a profitable quarter – this one probably has come true but we will have to wait a while to know for sure. In the third quarter of 2012 Lending Club posted a quarter where they were cash flow positive and I expect they will carry that momentum over to the last quarter and show profitability for the first time.
A third competitor will take on Prosper and Lending Club – I was completely wrong on this point as no real competitor emerged in 2012. Peerform are still around but they are only available to accredited investors and they were pretty quiet this year – they are not a direct competitor at this stage.
More states will become available for investors – there was no movement here whatsoever as the number of states available to investors at both companies remained static.

My 2013 p2p lending predictions

So now we move to this year. I have a feeling that 2013 is going to be a great year for p2p lending investors. Returns will continue to be good and the industry will maintain the solid growth of the past couple of years. So, here are my top five predictions for this year. I will be sure to check back in 365 days to see how I did.

Lending Club will issue $1.62 billion in loans in 2013
I expect the incredible growth rate of Lending Club in 2012 (179% year over year growth) to slow down somewhat in 2013. Still, with investor money continuing to pour in and an IPO on the horizon I expect another stellar year. But I am predicting the growth rate to fall to around 120-125% in 2013.
Prosper will issue $340 million in loans in 2013
Despite a very rough fourth quarter of 2012 I expect Prosper to have a much better year in 2013 and their growth rate should increase over 2012. But they will remain a distant number two in the p2p lending race.
The Prosper class action lawsuit is settled
A class action lawsuit was filed against Prosper in November 2008 that has been dragging on now for over four years. I believe that in 2013 this lawsuit will be finally put behind us. If Prosper does not win the suit, I think it will be settled anyway. Either way, the matter should be put to bed in 2013.
Peer to Business Lending Will Boom With at Least Five New Companies
In the UK peer to business lending is booming, but in the U.S. there are still virtually no companies (aside from U-Haul) that allow individuals to lend money to companies on an easy to use platform like Lending Club or Prosper. I think that will change in 2013. While the JOBS Act will allow equity investing for the masses, I am only talking about debt – loaning money to businesses. I think this cousin of p2p lending will boom in 2013.
Lending Club will release a bankruptcy remote vehicle for all investors
With LC Advisors, Lending Club has had a bankruptcy remote vehicle for large investors for some time. But retail investors have enjoyed no such protection. I think with the recent approval of Prosper Funding LLC, Lending Club will provide something similar to all investors in 2013.

What do you think? Do you have any predictions of your own. As always I would like to hear your comments.

My Five P2P Lending Predictions for 2012

January 1, 2012 By Peter Renton 46 Comments

Happy New Year! I hope you enjoyed the arrival of the new year last night whatever you did. As for me, I am getting ready to go on a big trip, so it has been a busy holiday weekend for me. Tomorrow, my family is flying to Sydney (my home town) for an extended visit. So, you won’t be hearing much from me for several days until after we get settled in.

Here on the first day of 2012 the entire year lies before us, full of possibilities. So I have spent some time peering into my crystal ball to come up with five p2p lending predictions for 2012.

1. Lending Club Will Reach $1 Billion in Total Loans

Lending Club closed 2011 with $460 million in total loans issued since their inception in 2007, more than half of which were issued this past year. I expect they will issue around $550 million in new loans in 2012 bringing their total loans issued to over $1 billion. The high watermark in new loans issued will be somewhere just over $60 million a month, roughly double what they did in December, 2011.

2. Prosper Will Reach $500 Million in Total Loans

Prosper will also keep their growth record going albeit with smaller numbers than Lending Club. Prosper issued $75 million in loans in 2011 to bring their total since inception to $290 million. I expect 2012 to be a banner year for Prosper with a three-fold increase in volume from 2011. This should take them past $500 million in total loans issued with a high watermark in monthly volume of around $24 million. [Read more…]