Shanda Group Buys 11% Stake in Lending Club

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Chinese billionaire Chen Tianqiao has bought a close to 12 percent stake in Lending Club.

Singapore-based private investment group Shanda Group, which is led by Chen, said on Monday that it saw the online lender’s battered stock as an attractive buying opportunity.

The sale of the 11.7 percent stake comes as growth in Lending Club’s loan originations is slowing and regulatory interest in the sector is increasing.

Lending Club shares were up in yesterday’s trading. The stock had fallen more than 40 percent since the May 9 announcement of Chief Executive Officer Renaud Laplanche’s resignation after an internal investigation found the company had knowingly sold 22 million US$ of loans that did not match the buyer’s specifications.

‘We have been in discussions with Shanda regarding their investment, and we look forward to a continued dialogue with them,’ a Lending Club spokesman said.

Shanda Group said in a statement that it was a “strong believer” in the business model that Lending Club has pioneered and was “positive on its long-term prospects as it continues to evolve and refine its business.”

The company bought a total of about 29 million Lending Club shares for $148.7 million. It also has call options to buy 15.7 million shares for $11.2 million. Some of the shares were bought before Laplanche’s resignation but the bulk of the purchases were conducted after May 9th.

(Source: Reuters & other)

 

Zopa Partners With Online Mobile Retailer

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P2P lending platform Zopa will finance loans for customers of newly launched online mobiler retailer Unshackled.

Customers can fund the purchase of handsets by taking out a finance deal with Zopa. The APRs on launch will range from 9.7 per cent to 24.9 per cent. Customers will also be able to pay off early at no extra cost or make additional payments.

The partnership is Zopa’s first online retail agreement, with its service integrated in to Unshackled.com sales platform using the Zopa API.

Jaidev Janardana, Zopa CEO added: ‘With the majority of consumers getting a bad deal on their mobile phone, partnering with Unshackled means we can offer consumers better, fairer and more transparent deal in financing their phone.’

Zopa Launches Car Loan Refinance

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Today UK p2p lending service Zopa announced it will extend its product range to offer ‘Zopa Car ReFi‘, a refinancing product for car loans. It is positioned to allow consumers to refinance existing car loans at a better rate.
Zopa’s credit risk algorithms, combined with in-depth vehicle information, act together to provide customers with a free and instant personalised savings estimate, prior to those customers taking out the product.

Ownership of the vehicle remains with Zopa’s Lenders until the final payment, when it will be transferred to the borrower.

Jaidev Janardana, Zopa CEO said, ‘We are thrilled to launch the UK’s first seamless car refinancing service, helping thousands of consumers drive down the cost of car ownership. This is a market worth £12bn per year with plenty of space for customer-first innovation – something we have specialised in at Zopa for over 11 years. Buying a car is by far the most common reason for a customer to take a personal loan from Zopa, so we are proud to now also offer a product that can help customers that already have a car on a finance agreement. …’

Zopas Car Loans

Feeding Creatures of Habit

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Many Fintech startups compete with banks and other incumbents by offering easy to use and attractive user interfaces. They appeal to users because they offer a modern packaging for processes and at the same time work hard to make these core processes they concentrated on more efficient  (unbundling).

User interfaces are an important aspect for p2p lending marketplaces too. While a very innovative user interface might have contributed in winning the investor, once he registered he not only wants an easy to use user interface he also likes constancy. Sounds paradox?

Fact is, that some p2p lending marketplaces are not that easy to use and offer complex functionality e.g. auctions, secondary markets with discounts and premiums. The investor spends considerable time to learn how to use the functions efficiently. Once he has mastered to efficiently use all the features and reports to achieve good results he will dislike any major changes the marketplace introduces since these force him to “relearn” his way around and render his previously acquired level of experience worthless.

I have experienced this several times on multiple marketplaces. But you don’t have to take my word for it, just look at a forum after a major redesign and you won’t have to search hard to find lots of investors venting their negative opinions rather strongly.

Now knowing that p2p investors are creatures of habit, what could a p2p lending marketplace do to ‘feed’ those? Freezing in standstill is not an option. Even the most conservative investor expects the marketplace to evolve and offer new features.

My suggestions are:

  • The platform should decide early on for a main navigation structure and stick with that. Changes and optimizations should subordinate to that structure and not change this main navigation
  • Development of new features should take wishes of investors into account (do surveys) but not be driven by them entirely
  • Test extensively before releasing. I am repeatedly surprised how many bugs there are in main features after a release (that is they show in main processes and not only in special constellations)
  • Measure, measure, measure. It is sensible to do A/B testing for all larger changes measuring the performance of previously defined KPIs (e.g. bounce rate). If the new version performs worse than the previous version the team should be brave enough to scrap the new developed version even if that means time and cost spent for developing it is lost without an output
  • If URLs change or cease to exist do an automatic redirect to the new URL
  • Even if the marketplace does not encourage the use of tools and automation, it should not ignore the fact that some investors will develop tools and workflows that helps them to speed up their monitoring and investment. The marketplace should consider how the changed impact and process might impact these. The very least that can be done, is to inform investors in advance of an upcoming major change.

Continue reading →

Results of a Study Among Spanish Investors

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Spanish p2p lending marketplace Arboribus completed a study among 1,500 investors on its platform. Arboribus facilitates loans to SMEs in Spain.

Some of the main findings:

  • 50% of the participants in the survey reinvest their profits
  • 43% intend to increase their investment
  • 30% of investors see the opportunity to assist SMEs to get the funding to go ahead with their projects
  • 29% like that it is an alternative to invest independent from banking. The transparency of the p2p lending and control over where the money of this new model is invested directly collides with the opacity of the banks and the distrust in the management of their savings
  • in 60% of cases the investor selects the company depending on the sector to which belongs
  • only 12% analyze the balance sheet and income statement before investing
  • 27% connect via mobile phones, smartphones and tablets

Arboribus infographic
(Source: Arboribus)

US Treasury Issues Whitepaper on Marketplace Lending

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After reviewing information obtained through an RFI the US treasury today published a whitepaper on marketplace lending.

The white paper titled, “Opportunities and Challenges in Online Marketplace Lending,” provides an overview of what the Treasury Department heard in response to its Request for Information, and it contains research on and recommendations for the industry.

Executive Summary

This white paper has been prepared by the Department of the Treasury (“Treasury”) to continue the work initiated by the issuance of the Request for Information (“RFI”) “Public Input on Expanding Access to Credit through Online Marketplace Lending.” This white paper establishes an overview of the evolving market landscape, reviews stakeholder opinions, and provides policy recommendations. This paper also acknowledges the benefits and risks associated with online marketplace lending, and highlights certain best practices applicable both to established and emerging market participants.

Advances in technology and the availability of data are changing the way consumers and small busi­nesses secure financing. Online marketplace lending has emerged as an industry offering faster credit for consumers and small businesses. Through this effort, Treasury took steps to understand the potential opportunities and risks presented by this evolving industry. By engaging directly with industry, Treasury hoped to foster discourse about how this industry could best serve the financial needs of the American public. Treasury received approximately 100 responses to the RFI from online marketplace lenders, trade associations, consumer and small business advocates, academics, investors, and financial institutions. Comments covered a wide range of issues, but several common themes emerged, including the following:

1. Use of Data and Modeling Techniques for Underwriting is an Innovation and a Risk: RFI commenters agreed the use of data for credit underwriting is a core element of online marketplace lending, and one of the sources of innovation that holds the most promise and risk. While data-driven algorithms may expedite credit assessments and reduce costs, they also carry the risk of disparate impact in credit outcomes and the potential for fair lending violations. Importantly, applicants do not have the opportunity to check and correct data potentially being used in underwriting decisions.

2. There is Opportunity to Expand Access to Credit: RFI responses suggested that online marketplace lending is expanding access to credit in some segments by providing loans to certain borrowers who might not otherwise have received capital. Although the majority of consumer loans are being originated for debt consolidation purposes, small business loans are being originated to business owners for general working capital and expansion needs. Distribution partnerships between online marketplace lenders and traditional lenders may present an opportunity to leverage technology to expand access to credit further into underserved markets.

3. New Credit Models and Operations Remain Untested: New business models and underwriting tools have been developed in a period of very low interest rates, declining unemployment, and strong overall credit conditions. However, this industry remains untested through a complete credit cycle. Higher charge off and delinquency rates for recent vintage consumer loans may augur increased concern if and when credit conditions deteriorate.

4. Small Business Borrowers Will Likely Require Enhanced Safeguards: RFI commenters drew attention to uneven protections and regulations currently in place for small business borrowers. RFI commenters across the stakeholder spectrum argued small business borrowers should receive enhanced protections.

5. Greater Transparency Can Benefit Borrowers and Investors: RFI responses strongly supported and agreed on the need for greater transparency for all market participants. Suggested areas for greater transparency include pricing terms for borrowers and standardized loan-level data for investors.

6. Secondary Market for Loans is Undeveloped: Although loan originations are growing at high rates, the secondary market for whole loans originated by online marketplace lenders is limited. RFI commenters agreed that active growth of a securitization market will require transparency and significant repeat issuances.

7. Regulatory Clarity Can Benefit the Market: RFI commenters had diverse views of the role government could play in the market. However, a large number argued that regulators could provide additional clarity around the roles and requirements for the various participants.

In order to encourage safe growth and access to credit through the continued developments of online marketplace lending, this white paper introduces the following recommendations to the federal govern­ment and private sector participants:

1. Support more robust small business borrower protections and effective oversight;

2. Ensure sound borrower experience and back-end operations;

3. Promote a transparent marketplace for borrowers and investors;

4. Expand access to credit through partnerships that ensure safe and affordable credit;

5. Support the expansion of safe and affordable credit through access to government-held data; and

6. Facilitate interagency coordination through the creation of a standing working group for online marketplace lending.

In addition, this white paper identifies potential trends that will require ongoing monitoring. These include the evolution of credit scoring, the impact of changing interest rates, potential liquidity risk, increasing mortgage and auto loans originated by online marketplace lenders, potential cybersecurity threats, and compliance with anti-money laundering requirements. The business models and data-driven algorithms supporting this industry have largely developed in favorable credit conditions. Treasury believes it is important to consider policies that could minimize borrower risks and increase investor confidence in a less favorable credit environment. Continue reading →