Prosper.com made the videos of the Prosper Days 2008 available. Thanks Prosper!
I will just feature one session here. In "Managing large portfolios" Adam Weyeneth, President of Fair Deal Credit talks about the issues for institutional lenders that want to invest into the asset class of p2p loans.
Link to this video and the related videos of the other sessions.
Swiss Cashare.ch recently launched as the first p2p lending platform in Switzerland. The company, owned by Michael Borter (link to German language interview) and Roger Mueller has partnered with the collection agency C&S Credit Management AG, which handles all monetary transactions.
Interest rates and loan durations are set by borrowers and lenders bid in a 14 day auction (minimum bid amount is 500 CHF which is approx 500 US$). If the loan is fully funded further bids in the remaining auction period will cause the interest rate to drop in 0.1 percentage steps, while old bids are outbid.
The fee schredule includes:
This results in borrowers having to pay even if their loan does not fund.
An unusual point in the process is that lenders have to sign a written contract for each successful bid and send it via postal mail to Cashare. That seems a bit uncomfortable to handle.
As Cashare launched only recently there currently are only 4 active loan listings.
If you have used Cashare as a borrower or lender, please share you experiences in the forum. Thank you.
CBS recently featured Prosper and Lendingclub under the headline "Beating the financial giants at their own game".
German p2p lending service Smava.de launched one year ago. Since the launch of Smava 393 loans were funded for a total loan volume of about 1.7 million Euro (approx. 2.6 million US$).
Lender’s viewpoint
In a february survey 33% of lenders answered to be very satisfied with Smava and 63% were satisfied. 48% said their ROI met expectations while 19% said it exceeded expectations.
So far a 7% ROI is realistic. Only 3 loans have defaulted and 11 are (less then 30 days) late. In the past Smava cured the majority of late loans. The Anleger-Pool mechanism spreads the losses of a default across all loans of a credit grade. Therefore when 1 in 100 loans in credit grade X defaults, the lenders invested in the defaulted loan still receive 99% of the principal, while for lenders in the current loans returns are lowered by 1%.
Technically and on the process level Smava functions as promised.
Borrower’s viewpoint
Provided the borrower has a credit grade of at least ‘H’ (95% of the German population have credit grades between ‘A’ and ‘H’ so about 5% are excluded) and he has a sufficient income, chances for obtaining a loan through Smava are good. About two third of the listings were funded. The fee of 1% of the loan amount that Smava charges borrowers is low.
Marketplace development
Smava’s growth has picked up in the last month (see chart).
(Source: smava loan stats, Wiseclerk.com, 03-21-08)
So far Smava has not reached a broad appeal. While press release state 25,000 registered users, only 650 have invested money and roughly 450 wrote a loan listing. Looking at the distribution of lenders by amount invested, the top 50 Smava lenders funded about 700,000 Euro (or about 40% of total loan volume). Currently lenders are limited to a maximum of 25,000 Euro investment.
Attracting new borrowers has been the bottleneck for Smava’s growth so far. An increase of money supply by lenders with no matching demacnd increase led to slightly falling average interest rates in the last weeks (see chart). Before rates increased, especially for credit grade ‘F’ caused by sharpened risk awareness following several late payments.
(Source: smava loan statistic, Wiseclerk.com, 03-21-08)
Smava charges borrowers a fee of 1% of the loan amount. There are no fees for lenders. Total revenue of Smava in the first year therefore was 17,000 Euro (1% von 1.7 million Euro). Prosper, Lendingclub and Zopa have much bigger p2p lending volumes per year. Boober‘s loan volume in the Netherlands is about the same size as Smava’s but in a market with only one fifth the size (by inhabitants). First priority of Smava must be to accelerate growth.
German p2p lending service Smava.de yesterday introduced an optional insurance for borrowers. Borrowers can take out an insurance together with their loan. In the case of death, disability or unemployment (through no fault of one's own), the insurance will pay the repayments. To offer the residual debt insurance (see a definition of residual debt insurance), Smava partnered with an insurance company. The costs for the insurance paid by the borrower are:
It will be interesting to see how many borrowers are willing to opt in to the insurance.
Lenders profit because this lowers the default risk. Unfortunately at the moment lenders can not on a borrower's loan listing whether the borrower selected insurance or not.
11 months after launch defaults at Smava are still rare. Only 3 of 368 loans have defaulted and only 2 are currently late. A chart shows the development of the Smava interest rates since start.
Some news from p2p lending in Asian markets:
Chinese PPdai.com (see earlier coverage) says it has received a first round of funding from Essentia Private equity. The amount was not disclosed.
On February 27th, Zopa's managing director Giles Andrews mentioned in a webchat "I have also been spending time in Asia and hope that we will launch in 2 very significant markets there in 2008, one of which we may even announce shortly….".
In the webchat Giles Andrews also said regarding the US market: "@Tealer We also think that our "competitors" over there are illegal, and I don't want to go to jail!".
Furthermore Zopa said it plans to launch an (optional) capital guarantee product in the UK market.
See earlier coverage of P2P-Banking.com on the p2p lending markets in Corea, China, India or Japan.