On July 18, Reuters reported that Lufax, one of China’s largest online wealth management platforms, planned to exit its peer-to-peer (P2P) lending business. This comes amongst China’s massive crackdown on several companies to contain broader financial risks. Initially, a lack of regulation resulted in a surge of such platforms, even peaking at 4000 in 2015 at an estimated value of $130.7 billion. In late 2015, a lending giant of those times, Ezubao caught the attention of the media. The company turned out to be at the helm of a Ponzi scheme and duped over 0.9 million investors. Since then, the high number of P2P startups has fallen to less than half and is expected to go down further.
This trend was seen in other regions across the globe as well. In the UK, BondMason is also shutting down its P2P lending business since they feared their inability to provide returns to its investors. Lendy collapsed into administration a few weeks earlier. According to estimates, the investors may lose close to tens of millions of pounds following half of the platform’s loans going into default. In the early days of US P2P lending, Prosper and Lending Club were also shut down for a short duration due to regulatory troubles.
Thus, although we see that the P2P Lending Market had a high potential for growth, several businesses were forced to shut down due to high default rates, lack of funding, or regulatory hurdles. In light of this, MEDICI brings to you some of the P2P Lending businesses that have recently announced the ceasing of their operations:
- Lufax is an online internet finance market place and one of China’s largest online wealth management platforms. It is backed by financial giant Ping An Insurance. Recently, in July 2019, it announced its plan to exit its once-core peer-to-peer lending business. “Regulatory pressure” was quoted as the reason behind this exit.
- Bondmason, a UK-based online savings and investments platform, used to source investments from across the peer-to-peer market for its clients. In May 2019, it announced its decision to stop new investment offerings and wind down its services. The platform was experiencing increasing costs, which include regulatory, compliance, and client acquisition costs.
- Lendy, another UK-based, fast-growing property-focused P2P platform, closed its business after being on an FCA watchlist for the past six months. Lendy was the last platform to be authorized by the FCA back in 2018 but went bust in May 2019.
- UK BondNetwork, a platform for corporate bonds, announced to close P2P lending business in February 2019. The company said that the business will be shifting its focus to new services with a new management team.
- GraduRates was a UK-based provider of peer-to-peer loans for postgraduate students. The company was founded in 2012. In 2014, with a new regulatory regime, the founder decided to shut down the business. It transferred its loans to RateSetter, thereby not affecting its customers.
- Lovefruitful was a UK-based P2P mortgage platform. In November 2015, it closed its platform to new investors. The reason it stated was that the business model “wasn’t sustainable to scale.” In a shift of regular protocol, the company agreed that the capital of all investors would be proportionately returned as opposed to a first-come-first-serve basis.
- Encash, formerly known as Yes-Secure closed down in 2014. The company, headquartered in the UK, had made only three loans in 2013, and no loans in 2014. To close down, they agreed to buy lenders out (£40,000), including loans which are classed as late.
- Quakle was a social lending site for a small band of 'peer-to-peer' lenders. In 2011, the business collapsed within a year of its launch, despite them claiming that all borrowers had been credit checked. Ironically, the reason provided for the shutdown was too many poor-quality borrowers.
- Wellesley & Co., founded in 2013, was a peer-to-peer lender. It allowed property developers to borrow cash from savers who were grappling with losses. In 2019, it announced to close the P2P lending products and instead decided to focus on listed bonds.
- Ezubao was among the top players in China’s P2P industry during its peak. By mid-2015, the company had raised around RMB 50 billion. However, as discovered in late 2015, the company Ezubao was at the center of a Ponzi scheme that had duped over 0.9 million investors.
- tuandai.com was one of China’s major peer-to-peer (P2P) lenders. The platform collapsed in March 2019. The shutdown left thousands of investors of the platform struggling to receive their life-savings. The P2P lending website was put under investigation for illegal fundraising, and several have been arrested so far.
- LoanMeet was a Bengaluru-based micro-enterprise focused P2P lending platform founded in 2016. It raised an undisclosed amount of seed funding from Chinese and Indian investors. However, in 2019, the company decided to shut down its operations as it failed to raise subsequent funds.
- Zhongdoubao was Tencent-backed e-commerce company Mogujie’s online lending platform. The Hangzhou-based company was amongst those that were forced to wrap up their operations as a result of the Chinese regulatory crackdown. In March 2019, Mogujie decided to shut down this business as it was unable to fulfill regulatory requirements and ensure the security of funds.
- Puddle, a provider of microcredit in a peer-to-peer platform, announced its shutdown in 2018. The startup was founded in 2012 in the United States. The aim was to connect customers to their community lenders. After five years of operations, the founders realized that the business model was “unsustainable.”
- BitLendingClub, a Bulgarian based peer-to-peer bitcoin lending platform, was founded in 2014. It offered several features auction-style lending and efficient interest rate discovery. In 2017, it announced the decision to shut down due to regulatory pressure.
- TrustBuddy, a publicly-traded peer-to-peer lending platform, was listed in Stockholm. It closed its operations in 2015 following the identification of serious misconduct. The company reportedly made loans to borrowers without the consent of investors, or without the association of any investor. The company officially filed for bankruptcy in October 2015.
- WHY own it, a Germany-based a peer-to-peer online lending application, was founded in 2012. A year after its launch, the company broadened the scope of lending from only friends to include strangers. However, despite this, the app was shut down in February 2015. The reasons cited by the founder included failure to attract new customers and lack of a proper business model.