Zopa

P2P lending and the financial crisis

wiseclerk

It has been said before – there might have been no better time to establish p2p lending. With the established system shaken and many consumers not getting loans as easily as before the market environment is good for peer-to-peer lending.

P2P lending gets good media attention. The Uncrunch.org initiative (in which Lending Club takes part) in the Change.org vote for new ideas finished in the Top 15.

On the demand site all p2p lending companies benefit from the crisis. On the supply site, in my opinion the effect is mostly positive too, but  some lenders are hesitant to invest their money in a new, innovative model and rather seek a save haven for it.

P2P lending sites that have demonstrated low default rates over a longer time and therefore low risk fared best – especially at Zopa UK supply rose strongly lately.

Bonmot from Spanish Comunitae:

Pues no sabemos si la crisis es buena para Comunitae, pero de lo que no cabe duda es de que Comunitae es buena para la crisis.

Translates to: “Well, we do not know if the crisis is good for Comunitae, but what is certain is that Comunitae is good for the crisis.”

P2P lending trends to expect in 2009

wiseclerk

As last year I’ll again attempt some predictions on what trends and developments can be expected in peer-to-peer lending 2009.

More competition and entering more national markets (probability 100%)
In many markets multiple p2p lending services will compete for the attention of lenders and borrowers. In other markets, where there is no national p2p lending service active yet (e.g. Canada, New Zealand), p2p lending will be introduced by the launch of a service. Possible candidates include Communitylend and Nexx.
It is hard to predict when the dormant US players (e.g. Prosper, Loanio) will overcome the regulatory hurdles and if that step is lasting.
The British market which has (compared to other markets) rather low regulatory barriers so far is dominated by a single player -  Zopa. I wonder if we’ll see the launch of a competitor there.

Boom of social lending services/p2p microfinance (probability 100%)
2008 saw the launch of Babyloan, Veecus and Wokai. Kiva funded more the 1 million US$ new loans in a single week in the end of December. The steep growth of Kiva, MyC4 and other services will continue and new p2p microfinance platforms will launch.

First Banks experiment with own p2p lending applications (probability 50%)
While p2p lending volumes are far from being a business threat to banks – banks do watch the developments. Possibly in 2009 a bank will launch its own p2p lending application. The principal aim will not be to generate revenue, but rather to collect experience and to gauge acceptance by the bank’s customers. It will be interesting to see banks testing the water on their path to implement a p2p lending concept that supplements their core business.

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Review of peer to peer lending developments in 2008

wiseclerk 3 Comments

As the end of 2008 approaches here is a look back on the highlights of peer to peer lending news in 2008:

Breaking news: Zopa withdraws from US market

wiseclerk 2 Comments

After several hours speculation following an email sent to some US lenders of Zopa including the statement “In addition, the Zopa social networking Web site will no longer be available as of October 9, 2008″, the Zopa CFO (UK) has posted a clarifing statement on the Zopa discussion board.

The email from Affinity Plus is partially correct in that we are transferring our customers relationships to the credit union they either borrowed from or bought a CD from (invested in). We are NOT shutting the website today. As most of you know, Zopa’s US operation has a very different model to that in the UK and Italy in that it works in partnership with financial institutions (the credit unions) rather than being a pure peer to peer marketplace as it is here and in Italy. So while our model is doing very well in current market conditions, the US has been adversely affected in a way that couldn’t have been predicted when we launched and is no way the fault of our partners. For me, a real shame is that we weren’t able to launch the original model over there for regulatory reasons, esp given what a great job the regulators have turned out to have been doing there over the last few years, but that is another story….

The decision has not been taken lightly, and has obviously been difficult for our US colleagues, but due to the current credit crisis we have decided to withdraw from the US marketplace. This decision will have no impact on Zopa’s other activities in the UK, Italy and Asia. Zopa’s UK operation has experienced significant volume increases in 2008 with huge growth in new members and increasing lender returns, while continuing to maintain excellent credit quality – currently less than 0.5% of loans are affected by any kind of late payment issue, with actual losses below 0.04%. Zopa Italy has achieved the highest growth of any European peer-to-peer operation since its launch in January, and has recently launched the first secondary market for any peer-to-peer operation.

Zopa’s US customers’ deposit accounts continue to be insured by the NCUA up to $250,000, and servicing of those accounts as well as the loans will be assumed by the credit unions within 90 days.
…

The US website does not appear to have any statement regarding the changes.
Update: There is a blog entry on the Zopa blog now.

Requesting a Zopa (US) loan can harm your credit history

wiseclerk 2 Comments

Tom of Prosper Lending Review found out that when he tried to request a Zopa loan not only was he rejected, but the Zopa credit inquiry was listed on his credit report. Unlike other p2p lending services in the US Zopa does a hard pull. The Zopa FAQ states:

We think it’s best if you assume that there will be an impact to your credit score. That means you should only get a quote if you really would be interested in a Zopa Loan.

Bad.

Zopa.it – facts and figures

wiseclerk

Zopa.it goes live: 16th January 2008*
Average gross return on money lent-out through Zopa.it: 7.66%
Average annual cost on loans (APR) borrowed through Zopa.it: 9.45%
Registered members of Zopa.it: 23,242
Total loan volume since launch: €2,787,090
Number of loans: 535
Loan volume currently under evaluation process: €336,690
Average loan amount: €5,210
Average loan duration: 31 months
Amount rate late:€6,622.24 (percentage amount late: 1.88%) = 6 loans (this fig. as of end of Aug.)
Demographic characteristics of the Zopa users:
Female:     15%
Male:         85%
18 – 24 years old:      5%
25 – 34 years old:     32%
35 – 44 years old:     35%
45 – 54 years old:     19%
55 – 64 years old:      7%
65+  years old:     2%
First 3 regions by number of registered members: Lombardia (18%), Lazio(13%), Campania(9%)
The most popular uses for the money borrowed from lenders through Zopa.it:
Home improvement /furniture: 28%
Debt consolidation / pay off loan from relatives: 26%
Car / motor bike: 12%
Unexpected expenses / Repairs: 9%
Family events (wedding, school fees, medical expenses…): 7%

All data as of Sep. 3rd, 2008 (Source: Zopa Italy management, Zopa blog)

*public launch; there was a 2 month period before, that was open by invitation only since Nov. 14th