LendIt Europe conference in London, where I have been the last three days, was a special highlight for me. The expertise and knowledge level of the attendees as well as the quality of the presentations is outstanding. The number of attendees jumped from from about 450 last year to more than 750 this year. And it was a chance for me to chat with representatives of many European p2p lending marketplaces.
Biggest news
- Funding Circle acquires Zencap. Funding Circle buys German SME loan marketplace Zencap, which is active in Germany, Netherlands and Spain thereby expanding into continental Europe.
I have done a separate blog post on this. - Insurance company Aegon will invest 150M Euro on Auxmoney
Dutch insurance, pension and asset management Company Aegon will invest the amount in German consumer loans on the Auxmoney marketplace. This is a major move for both Auxmoney and the industry as it is the first big institutional investment coming form an insurer. It shows the industry has matured enough to attract capital from a clientele which is deemed rather conservative and long-term oriented in their investments.
Peter Renton opening Lendit Europe conference (Source: Lendit Europe; photo used with permission)
Major trends
There are so many things evolving and it is sometimes hard to see which are the most relevant ones. And it certainly is a question of perspective. But from my view the three biggest developments are
1. Institutional investors will increasingly dominate the investor side
There is quite a consensus among most of the p2p lending marketplaces that institutional capital is very important for growing and scaling the marketplaces. While marketplaces value a mix of capital sources and many of them feel an obligation to retail lenders, which allowed the industry to create itself, the volume will be increasingly dominated by institutional investors. One way some platform see as a route to cater for a broader base of retail investors is to create funds that allow retail investor to buy into this asset class through traditional distribution channels. Still those platforms that are open to both kinds of investors pledge to guarantee equal access and not allow institutional lenders preferential access.
The ‘Up and coming European platforms’ panel I moderated with panelists from Investly, Lendix, Mintos, Zencap and Fellow Finance (Source: Lendit Europe; photo used with permission)
2. Continued expansion in additional geographies
The headline news with the merger of Funding Circle and Zencap fits into the bigger picture as many platforms are moving beyond there national market. Examples include:
- Matthias Knecht said that Funding Circle deems the Italian and French markets for SME loans as attractive targets for further expansion
- Twino expanded into Polish loans
- Lendix is considering expansion into Spain
- Crosslend will soon open to Dutch loans and Dutch investors
- Investly eyes expansion
- Fellow Finance, which so far was available only to local Finnish investors launched an english language version of the site; expecting to attract retail investors from continental Europe
- Pret d’Union expanded into Italy
- Afluenta exanded into Peru and will expand into Mexico
On the other hand Aaron Vermut, CEO of Prosper, said at the dinner event ‘Global trends in consumer lending’ (thanks again for the invitation to that -it was very interesting) that Prosper has no plans to expand into other geographies, as that would distract Prosper too much and all activities are focused on the US market which offers a huge potential for further enormous growth.
3. The UK market offers a perfect environment for p2p lending companies
The UK market is a market were all puzzle pieces are falling into place and offer p2p lending marketplaces (and other alternative finance companies) an environment that has no parallels in any other country
- The leading p2p lending marketplaces set up the P2PFA with represents about 90% market share (by volume) and was successful in getting heard when it came to new regulation
- Regulation is specifically tailored considering aspects of p2p lending
- The regulatory body FCA actually welcomes, if there are new entrants in the markets. In his speech Financial Conduct Authority Director of Strategy, Christopher Woolard, in essence said that the FCA thinks that the more new platforms are entering the market (providing they meet the minimum requirement) the better.
- The government is highly supportive with new tax rules that allow offseting defaults against earned interests and investing into p2p lending through the new alternative ISAs
- The British business bank is lending on multiple platforms for SME loans and open to consider more platforms, with the criteria for eligibility available on their website.
Given these preconditions analyst Cormac Leech is predicting that alternative finance companies might take away as much as 20-30% of bank’s consumer lending activity and more than 40% of banks SME lending activity over the next 10 years. Banks are still looking to find out what an appropriate startegy is to respond to that, and according to Matt Hammerstein of Barclay they’ll need to execute the strategy fast, once they defined it.
The debate on how this asset class will fare in the next recession is still ongoing.
Networking is a most essential part of Lendit (Source: Lendit Europe; photo used with permission)
The following is a random selection of tids and bids from what I heard thoughout Lendit Europe and by no way a complete representation of news and topics:
- Tomoyuki Sugiyama told me that Crowdcredit started lending money from Japanese investors on Bondora
- Viventor launched its marketplace for loans that are secured by mortgages
- Loanbook Capital raised a 1.1M EUR round led by fintech investor Gustav Andersson. The round also includes a 2M EUR commitment on the platform marketplace.
- Special greetings here to Lee Birkett of Emoneyunion on whom I seem to have made a long lasting impression by being too candid with my opinion 🙂
- The Trustbuddy scandal was also a topic. While everybody thinks it is outrageous, some of the British platforms think something like that could not happen as the measure taken would prevent it and make it outright impossible (which I doubt as it is hard to detect and stop criminal manipulations)
Networking is also the fun part of the conference – here at the pre-conference cocktail reception (Source: Lendit Europe; photo used with permission)
Thanks again to the Lendit team for the great event. I am looking forward to next year and hope to see you all there again!