One of the biggest challenges for a new internet startup to offer an innovative financial service is to gain the trust of its potential customers. Consumers approach new concepts with legitimate caution.
The book ‘P2P Kredite – Marktplätze für Privatkredite im Internet‘ examines how p2p lending services can address the uncertainties and what measures can be used to build trust. After a short introduction of how p2p lending works and a look at Cashare, Smava, Zopa and Prosper the author covers the aspects credibility, safety, reputation, guarantee, sanctions, information and communication. Fabian Blaesi also describes how community features can help.
In an empirical study the importance of several factors for the perception and acceptance of p2p lending services by lenders is quantified.
In a telephone call MYC4 executive Jes Colding yesterday gave P2P-Banking.com a preview of the future positioning of MYC4. The two main goals are risk mitigation and new provider structure.
All new providers will have to take a direct stake in the loans they provide. They will have to guarantee 20% of the outstanding portfolio. The guarantee can either be provided by a bank deposit or by a bank guarantee. Loans from an already active partner on the MYC4 market place, Fusion Capital, are already covered by a 15% guarantee. The agreements with new partners will also adapt a new fee structure. While in the past as much as 2/3 of the provider fees were deducted from the loan upon disbursement, in the future a minimum of 75% of the fee will be payable as the loan repays. Limiting fees payable on disbursement to a maximum of 25% of the total fees will align the interest of the providers with the interest of the investors, says Colding.
MYC4 will also shift towards a new kind of partners. The reasoning is that microfinance partners, which MYC4 solely worked with in the past, sometimes have cheaper access to capital already and cannot reach the 3 loan segments MYC4 wants to target in the future: SME, rural and youth.
SME (small and medium size enterprises) To fund SME loans MYC4 aims to partner with consulting and private equity companies that already work with these clients. Colding cited Fusion Capital as an example.
Rural Here MYC4 will have supply chain partners and outgrower schemes. Colding gave two interesting examples for the supply chain model. A large Danish supermarket chain wants to increase the amount of African produce on offer. The loans will be used to enable the farmers to upscale their production. And most interesting: Colding says MYC4 will be advertised on the products (e.g. bags of frozen peas) as well as in the supermarket. A solar system company wants to sell more solar power systems in Kenya. Here MYC4 loans will allow groups of people to buy a system, the manufacturer is paid upon delivery and the group repays MYC4 investors over the loan term. While these are not business but consumption loans, Colding says MYC4 will allow them because of their social and environmental impacts. A third example, which is already available to invest in on the MYC4 market place is loans to Armajaro farm shops in Ghana, which have been fully underwritten by Armajaro, one of the world’s largest cocoa bean wholesaler.
Youth 65% of the population in Sub-Saharan Africa are under the age of 25. Many are well educated but have slim employment chances, leaving starting a business as only option. High risk normally makes funding unavailable to them. Funding via MYC4 investors would not be sustainable for the same reason. Therefore MYC4 partners with the International Labour Organisation (ILO), Geneva. The ILO and the provider partners will underwrite up to 90 percent of the risk.
Congratulations to Zidisha for reaching the finalist round for the Echoing Green grant, which provides early seed funding for innovative social enterprises. Echoing Green is known for its ability to discover highly successful models of social change at the early start-up phase. Continue reading →
Fred’s blog has an analysis of the financial data of the series D funding round Prosper Marketplace recently completed. The analysis shows that the valuation by the VCs per share issued dropped from 9.69 US$ per share in round C (June 2007) to 0.72 US$ per share in round D.
Canadian p2p lending service CommunityLend announces:
MorWEB partners with CommunityLend Inc. to provide direct access to unsecured lending options for the Canadian Mortgage Broker market
Marlborough Stirling Canada (MSC) is pleased to announce that direct access to CommunityLend, Canada’s only online Peer-to-Peer lending service, will now be available to the broker market using MorWEB.
MorWEB brokers will now be able to seamlessly refer clients directly to CommunityLend to arrange unsecured loans from private investors. This will provide another value added service to customers of mortgage brokers using MorWEB. Phase one of this novel integration is now available on the MorWEB platform with a more comprehensive integration scheduled for later this year.
CommunityLend, …, launched earlier this year and is exploring a number of different marketing options to spread the word about its services and to recruit good quality borrowers looking for more competitive rates for small unsecured loans.
â€We are excited by the opportunity to work with one of Canada’s leading software providers to the Mortgage industry,†noted Michael Garrity, CEO of CommunityLend. “We understand the important role of Mortgage Brokers in helping their clients to find the best rates on loans to meet their needs. …â€
Since CommunityLend is restricted to accredited investors* by regulation, this marketing move uses an existing multiplier to reach potential lenders. It continues the earlier reported trend of existing financial institutions partnering with new p2p lending players.
This twitter post caused some speculation that Zopa UK is working to add a secondary market to the p2p lending service. I didn’t contact Zopa management asking to comment on this for I believe they probably would neither have confirmed nor denied plans on a secondary market.
As discussed before the issue with offering a secondary market isn’t the technical or commercial implications, but to find a model that is in compliance with regulation.
