Services

Zopa Promotional Offer: Rate Promise

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Today Zopa announced yet another promotional offer for lenders: Rate Promise. In this limited time offer Zopa promises lenders that ‘… the money you lend within the Offer Period, for up to 5 years, will earn an average return of 5% over the lifetime of those loans.‘ That is after fees. The offer is valid from January 9th till Feb. 3rd. Actually for some lenders this will mean even higher guaranteed returns – see full T&C of the Rate Promise here.

I think Zopa’s repeated promotional offers (cash backs and now rate promise) are signals that Zopa feels the impact of the p2p lending competition which entice Zopa’s customers with models that seem more appealing (there has been a lot of discussion that with the introduction of Safeguard Zopa became much less transparent) or could yield higher returns. In terms of p2p lending loan volume originated per month the main competitors are certainly gaining ground on Zopa.

While this is a (nearly) no risk offer for those lenders managaing to invest during the promotion duration, users on the Zopa Talk board do wonder what longtime impact this has for Zopa. And rightly so as Zopa will have to cover any shortcomings from its fee margin. Done repeatedly it will effectively result in an unlisted fee decrease.

I am sure it will fulfill the probable short term goal: increase funds on offer and originations in January.

Prosper Raises $25M Round Led by Sequoia Capital and Blackrock

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Prosper Marketplace announced yesterday that it has raised 25 million US$ in additional funding to accelerate the company’s growth . The round, which was led by existing partner Sequoia Capital, also includes a new investment by Blackrock, the world’s largest asset manager, as well as a broad representation of existing investors.

Since bringing on a new management team in January 2013, the Prosper platform has achieved growth in its monthly loan originations, rising from $9 million in January to $32 million in August.

This round came pretty quick after the last 20 million US$ round in January.

Source: Prosper press release

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Zopa Discontinues 1 Year Loans

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Zopa stopped accepting applications for 1 year p2p loans today and now concentrates on 2-5 year loan terms.

…we’ve stopped accepting applications for 1 year loans.

We introduced 1 year loans at the start of the year, with the expectation that they would become a strong channel for new loans and provide good returns to savers.  We have found that a large number of customers have now come to us applying for 1 year loans, but unfortunately we approve comparatively few of them and for the time being we believe it is ultimately better for savers to bring in more applicants for 2-5 year loans (which are much more popular choices of loan length) than continue to assess 1 year applicants.

Prosper Settles Class Action Lawsuit – Pays 10M US$

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In a Form 8-K SEC Filing of today, Prosper announced that it settled the class action lawsuit that has been going on since 2008 (see first coverage by P2P-Banking.com). The plaintiffs claimed that Prosper sold unregistered securities. The claimants originally filed for 47M US$. Under the settlement Prosper will pay 2 million US$ now and 8 million US$ spread out over the next 3 years.

The class members in the Lawsuit alleged that PMI offered and sold unqualified and unregistered securities in violation of the California and federal securities laws. The class members in the Lawsuit sought rescission damages against PMI and the other named defendants, as well as treble damages against PMI and the award of attorneys’ fees, litigation costs, and pre-judgment and post-judgment interest (collectively, the “Claims”). In exchange for a full release of the Claims as to all class members against all defendants, and subject to Court approval, PMI agreed to pay settlement consideration in the total amount of $10 million according to the following schedule: (i) $2 million within 10 days of entry of an order by the Court granting preliminary approval of the settlement (“Preliminary Approval”); (ii) $2 million on the one-year anniversary of Preliminary Approval; (iii) $3 million on the two-year anniversary of Preliminary Approval; and (iv) $3 million on the three-year anniversary of Preliminary Approval.

Lending Club’s Cost Advantage Over Banks

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If you are not totally new to p2p lending then you probably already heard the list of competitive advantages the p2p lending services have over banks: They don’t need branches, they don’t have old legacy infrastructure/software they need to maintain, they need less staff, their processes are faster, …

But how can this advantage be quantified?

On the Lendit 2013 conference Lending Club CEO Renauld Laplanche told the audience about a study conducted by McKinsey that calculated the cost advantage Lending Club has compared to a typical bank. He showed this chart:


(Source Lending Club /Lendit 2013; view larger image)

For 2015 the chart projects a cost advantage for Lending Club of over 400 basis points over banks. This is huge. Not surpisingly Lending Club has the biggest advantages by maintaining no branches and in collection and origination. or marketing Lending Club will have higher costs than banks.

Banks will eventually embrace p2p lending

Laplanche foresees that more and more banks will actually make use of p2p lending services as platforms to invest or to fund their borrowers to profit from the faster processes and the lower costs. At the conference Laplanche announced the first cooperations with banks and says he expects more to come.

His reasoning is that p2p lending like many other innovations will pass through 3 stages: rejection, adoption and then acceptance by the incumbents. Following this argument, p2p lending could right now be early in the stage of adoption by the industry.

He showed this chart to illustrate how the music industry reacted to disruption by Apple:


(Source Lending Club /Lendit 2013; view larger image)

Zopa Announce Business Loans

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Zopa has announced that they will start to offer business loans soon. Zopa will start with loans to sole traders.

Soon we will introduce business loans to Zopa, offering good value loans to sole traders.

We’ve chosen to start our business loans with sole traders for two reasons:
1. We saw that there were few opportunities for smart sole traders, with a good credit and trading history, to access good-value loans.
2. Sole traders are often looking for loans of a similar size and time period as our personal loan borrowers so offering these loans doesn’t require big changes for our savers to the way they choose to lend