July 16, 2015
Ron Suber - President, Prosper Marketplace
Before Prosper, Ron was Managing Director at Wells Fargo Securities. Prior to Wells Fargo, Ron served as the Head of Global Sales and Marketing and Senior Partner for Merlin Securities. Ron also served as President of Spectrum Global Fund Administration, and spent 14 years at Bear Stearns where he served as Senior Managing Director and Manager of Global Clearing Sales.
It has been another great quarter (Q2 - 2015) for Prosper with $912.4 million in new loans issued, up 147% from Q2 2014. Their blog revealed on July 9th that they have crossed $4 Billion in total loans issued since inception. We caught up with Ron and asked him about marketplace lending and Prosper.
LTP: What are the top three reasons why borrowers should bypass traditional banks and consider marketplace lending?
For borrowers who typically seek fairly small loans for consumer purposes—like consolidating debts, paying for home repairs or financing personal/family purchases—marketplace lending revolutionizes the way loans are accessed. While a traditional bank loan is still an option for consumers, marketplace lending is an alternative with greater options.
Three reasons why consumers should consider marketplace lending with Prosper:
- We are committed to providing convenient, cost-efficient access to capital with a great customer experience. At the same time we are fair and transparent to both our investors and borrowers.
- Interest rates are relatively low as compared to banks or credit cards. The interest rates start as low as 5.99% APR for the most qualified borrowers.
- We have a superior consumer-focused product that is fast and with an easy online application.
This platform is also an opportunity to level the playing field between institutional and individual investors.
LTP: Do you need to have a license in each state? (Are there any entry barriers?)
License requirements vary by state. Currently, we are open in 32 US states, plus Washington D.C. for investing through Prosper.
Prosper is currently available only to investors who reside in the following states: Alaska, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Rhode Island, South Carolina, South Dakota, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.
Prosper is available to borrowers in almost all U.S. states.
LTP: With such low interest rates and a fast & easy application process for the borrower, why isn’t everyone using marketplace lending? Do you think all the potential investors and borrowers know about the lending products you offer access to?
That's a great question. We are in the middle of this transformation phase in the lending space; education, awareness and understanding will be the catalysts that spark consumer adoption in the next phase.
The same way Uber changed transportation and Airbnb changed lodging, marketplace lending will change the way people invest, borrow and pay for things.
Marketing and awareness is a huge factor. As leaders in the marketplace lending space, we have to maintain the dialogue, educate and share information with the public to create an understanding of these new platforms and vertices. We have to do more work on the borrower side of things. There is great interest on the investor side of the platform, and we are working hard to increase awareness on the borrower side as well. We can offer access to even more personal loans through our platform if more people are aware of the offering and see the benefits.
LTP: Is there a vertical-specific strategy? We are referring to some acquisitions you made.
Yes. In verticals where we see bigger opportunities, we are going to the next level and building a vertical-specific capability. In this case, the acquisition of American HealthCare Lending (now Prosper Healthcare Lending)—a leading patient financing platform—for $21 million in cash is an important part of the strategy to grow awareness and expand product offerings and capabilities into new vertical markets.
Prosper HealthCare Lending gives its nationwide network of healthcare providers the ability to offer affordable payment options to consumers who would like to finance medical procedures at the point-of-service.
LTP: How much time does it actually take to get a loan?
If a person goes online, visits Prosper and fills out the form properly without leaving anything blank, and submits any required documentation, then the loan could be disbursed in 2-4 days. We are constantly working on making this process faster.
At a minimum, registered investors or borrowers must be US citizens or legal residents who are at least 18 years old with a valid bank account and a valid Social Security number. Prosper compares the applicant’s name, Social Security number, address, telephone number and bank account information against consumer reporting agency records, and other anti-fraud and identity verification databases.
Receiving funding for a loan is a result of a number of components: creating a listing, investors viewing your listing and committing to fund your listing. Going online and creating a listing is just a request for a loan. Eligibility for a loan is not guaranteed and requires that a sufficient number of investors commit to fund your loan and that you meet other criteria. All loans through Prosper are made by FDIC-member banks.
LTP: Credit card loans worked because it is available at the point-of-sale and is available immediately. Is there an opportunity for firms like Prosper to provide access to real-time loans?
There is certainly an opportunity because over 50% of the loans taken through us go to fund credit card debt. A POS terminal equipped with the capability of providing loans in real time for consumers shopping for big-ticket items—a person can apply for it and get it approved instantly. Think car dealerships; travelers might want to take out a last-minute loan before heading off on that foreign trip.
[Ron suggested that our readers should see the Lendit Video listed at the bottom of this page]
LTP: What are the other growth opportunities?
Prosper Marketplace is hiring an average of 10 people a week across all areas of the business. This includes marketing, engineering, credit and risk, finance, customer support, verification, business development, etc. We are always focused on bringing in great people. We also see tremendous opportunity in having smart data on both the credit side and the investing side.
The future of marketplace lending includes:
- Access and distribution
- Loan selection
- More leverage providers
- Building brands
Recently, Prosper Marketplace has formed agreements with community bank consortiums to work with their banks to offer their customers access to loans through the Prosper platform. These programs offer banks additional fee income generally at little risk, which arguably enhances the safety and soundness of the institution.
LTP: In terms of challenges, what keeps you awake at night?
As we have many stakeholders involved in this marketplace model, we need to make sure that there is a balance. We are able to get as many borrowers as investors so that we can find a match every time. Plus, FinTech in general and peer-to-peer lending in particular means a company has to take care of technology, analytics, marketing, sales, regulatory work and more.
With a focus on where Prosper is headed: These are the New Big Hairy Audacious Goals (BHAGs) for the marketplace lending industry that Ron discussed during a recent keynote:
- Universal standards
- Multiple agency ratings
- Capital treatment
- Listed vehicles in the USA
- Top bank partnerships
- Mainstream adoption
- $20 billion in one year
- United States Government Accountability Office | Report to Congressional Committees
- Person-to-person lending: New Regulatory Challenges Could Emerge as the Industry Grows, GAO-11-613, July 2011.