2017 Recap: Marketplace lending movement, New Highs in Securitization volumes, Big Players Enter P2P space

Marketplace lending platforms experienced growth in 2017. During the first quarter of the year, marketplace lenders securitized $3 billion in loans, roughly double the number in the same periods in 2016. The second quarter saw another $3 billion in loans, with 9 securitizations – up 75%. Fueling this growth has been revised lending criteria, less lending to weaker consumers, shortened loan terms and higher rates.

 

Big Players Enter the Fray

 

Goldman Sachs announced plans to launch a new platform that would allow customers of other brokerages to apply for loans. The loans – sized between $75,000 to $25 million – would use borrowers’ existing portfolios as collateral. Meanwhile, P2P lender Prosper Marketplace struck a deal to sell up to $5 billion in consumer loans over the next two years.

 

In June, SoFi took a big step to becoming a bank by applying for a bank charter. The move helps the company add deposits, checking and savings accounts to its existing loan and wealth management products. Through the third quarter, SoFi was the largest originator of new loans on the strength of its student refinance, unsecured consumer and mortgage loans.

 

Lending Club eclipsed $28 billion in loans to more than 1.5 million borrowers over the past 10 years, making it the largest P2P lender in the industry.   We saw continued growth through the third quarter, albeit at a slower rate. Marketplace lending deals totaled $2.6 billion.

 

Data from the Cambridge Centre for Alternative Finance (CCAF) found that small businesses are driving expansion in the UK’s lending market.  Peer-to-peer lending accounts for 15 percent of all new loans lent to small businesses by UK banks.   And research by Transparency Market Research expects the opportunity in global P2P lending to soar –  reaching nearly $900 billion by 2024, up from $26 billion in 2015. One reason for the growth – higher returns. Lending Club is expanding the market by positioning loans that provide higher risk-adjusted returns than fixed income, but with lower interest rate risk.

 

Sources:

PeerIQ Marketplace Lending Securitization Tracker Q2 2017, http://www.peeriq.com/assets/PeerIQ%20MPL%20Securitization%20Tracker%20(2Q2017).pdf

PeerIQ Marketplace Lending Securitization Tracker Q3 2017, https://www.lendacademy.com/peeriq-marketplace-lending-securitization-tracker-q3-2017/

Wall Street Journal, 5/22/17, http://online.wsj.com/public/resources/documents/print/WSJ_-B001-20170522.pdf

Business Insider, 12/8/17, http://www.businessinsider.com/cambridge-report-uk-alternative-finance-altfi-worth-46-billion-in-2016-2017-12

Transparency Market Research, 5/8/17, https://www.transparencymarketresearch.com/pressrelease/global-peer-to-peer-lending-market-size.htm