BankTech

What We Learned About the Lending Industry Last Year

MEDICIFounder and Chief Strategy & Innovation Officer

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.

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Also, as expected, 2015 created a huge traction for personal lending companies with total loans disbursed by the top five companies reaching $28 Bn.

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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.

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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.

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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.

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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:

Other major news:

Banks & FIs to Alternative Lending Firms: Can’t Beat You, so Joining You

Metro Bank Diversifies Lending by Partnering with Zopa

Two Leading Lending Players Team Up #Prosper #OnDeck

Pareto Pulse makes Great Use of Analytics to bring Amazing Alternative Lending Solutions

Alibaba & Lending Club Team Up to bring Innovative Financing Solutions in US

Google & Lending Club Team Up to Deliver New Business Financing Program

Goldman Sachs Ventures Into Peer-To-Peer Lending

Amit Goel

MEDICIFounder and Chief Strategy & Innovation Officer

“Amit Goel is the Founder & Chief Strategy & Innovation Officer for MEDICI. Amit’s vision is to build a strong FinTech market network that involves financial institutions, banks, startups, investors, analysts & other key stakeholders across the ecosystem – helping each one of them in a meaningful way by removing the asymmetry of information and providing a platform to engage & transact.\ \ Amit is passionate about bringing actionable FinTech-focused insights, innovative products & services for the FinTech ecosystem. Some of his work involves startup scores, bank scores/assessments, predictive viewpoints & other innovations that have helped MEDICI’s customers and the ecosystem. He has been named amongst the Top 100 FinTech thought leaders/influencers in the world & Top 10 in Asia multiple times by reputed agencies, consulting firms as well as financial institutions. Amit has built MEDICI (formerly LTP) as a new-age, tech-enabled advisory/research firm, which is now considered the #1 global research & innovation platform for FinTech in the world.\ \ Amit has been writing pioneering viewpoints on financial technology space that have been ahead of the curve since 2010. His data-driven predictions have helped the customers as well as the ecosystem. His past work experience includes a strong background in strategy & market analysis and advisory to clients (from big business houses to Fortune 500 firms) in payments, commerce, financial services & IT/technology. In the past, Amit had also founded a successful consulting & research practice called GrowthPraxis and has worked at Boston Analytics, Frost & Sullivan, and Daimler Chrysler in strategy & research.”