The article provides you with a flashback of the major touchpoints for the lending FinTech segment in 2015. Innovation was seen on personal and business lending aspects.
For the past two to three years, the technology-based personal lending industry has been experiencing the launch of multiple startups. With high-interest rates charged by conventional financial institutions, the newly devised models launched by personal lending companies enable consumers to get access to quick and easy loans or refinance at a comparatively lower rate. These models also offer a huge opportunity for consumers to make money as an investor on the respective forums. We analyzed this segment thoroughly and have come up with our proprietary LTP9 segment for leaders in technology-based personal lending.
Also, as expected, 2015 created a huge traction for personal lending companies with total loans disbursed by the top five companies reaching $28 Bn.
On the other end, alternative business lending companies have recently emerged in the lending space, leveraging state-of-the-art technologies to help non-profit organizations, small businesses, high-tech startups and up-and-running companies with their needs for loans, grants, equity-sharing arrangements, etc. These past two to three years have witnessed more than 100 players looking to be part of the alternative lending industry. We at LTP have also extensively researched to provide the LTP9 Leaderboard for technology-based alternative business lending.
Another highlight for the year was Lending Club announcing a profitable quarter for the first time after its IPO. It also predicted a 70% YoY growth in operating revenue and adjusted EBITDA margin of 18% for 2016.
However, not everything seems to be as smooth as advertised. Tech-lending also has its set of challenges that have slowly started to show up in China as covered in our article “China’s P2P Lending Market 4X Compared to the US, but There’s Another Side to the Story.” Three years ago, there were only 50 P2P Platforms. By the end of 2014, there were 1,575 P2P platforms operating in China, according to data provider Wangdaizhijia. The demand of P2P lending in China has overshadowed that of the US where the model was first developed. By the end of 2014, Lending Club and Prosper Marketplace—two platforms that dominate the US market—had cumulatively issued roughly $10 billion worth of loans. In the same time period, P2P lending in China had reached more than $42 billion.
Given the explosive growth, fraud and other problems have occurred. According to the Morgan Stanley report, more than 370 P2P lenders have already shuttered since China’s first peer-to-peer lending website launched in 2007 and more than 270 platforms failed in 2014. Adding to this, a director at the Economic Investigation Bureau had stated that approximately 70 P2P platforms involving approximately 6 billion yuan were under investigation. Bai Chengyu, General Secretary of the China Association of Microfinance, has estimated that 80% or more of these P2P platforms may fail if regulations are not strict.
Here are some of the major startups that have raised funding in the lending segment in 2015:
- SMB lending technology provider Mirador secured $7M in its Series A round.
- Lending company Earnest raised $275M in Series B led by Battery Ventures.
- Alternative lending player Avant announced $325 million in Series E funding.
- iZettle, a European mPOS Player, forayed into lending with $67M in fresh funding.
- Achieve Lending, the Kayak of student loans raised $500k through crowdfunding.
- Affirm raised $275 million to target large-scale expansion.
- Square raised additional capital to boost its lending business.
- Even raised $1.5M, offering alternatives to lending products for the underprivileged.
Other major news: