Funding Followers: Investments In Marketplace Lending Platforms Puts An Eye On Global Growth and China

By Jim Kharouf

If you were wondering what the potential for the marketplace lending space might be, you may want to look at how much is being invested in the space.

A February report from FinTech Global, showed investment in the sector hit an all-time high of $8.9 billion in 2017, up 18 percent from $7.5 billion in 2016 and topping the prior record of $8.6 billion in 2015.

Delving a little deeper, the second half of 2017 posted two strong funding quarters, with $2.9 billion in Q3 and $2.7 billion in Q4. While they weren’t record quarters, 55 deals were posted in Q3 and another 45 in Q4.

The largest deal was for Lufax, a Shanghai-based lending platform that raised $1.2 billion. Other significant deals closed last year included: Lending Point and SoFi at $500 million each, and Kabbage with two rounds of funding for $500 million and $250 million. Lendable at $399.9 million, Renew Financial and Bond Street at $300 million.

Lufax is an interesting entity, which is 49 percent owned by Ping An, China’s largest insurer by market cap. Launched in 2011, a wealth management company with a marketplace lending platform that matches borrowers with investors for a 4 percent fee. The company is also planning an IPO with a valuation of around $60 billion.

What is also interesting about the FinTech Global report is the geographic evolution of the marketplace. In terms of investments by region, Europe and Asia continue to grow steadily while the US percentage of overall funding has dropped significantly. North America now represents 30 percent of the funding, Europe 30 percent and Asia 30 percent, with the “other” category representing about 10 percent. Looking back at 2015, Europe was just 23.7 percent of funding, Asia 19.8 percent and North America 50 percent.

The growth of the Chinese, and broader Asia marketplace lending sector is a sign of just how accepted P2P lending is becoming in the region. A Statista.com study showed that China’s marketplace lending sector is dramatically trending upward. Total transactions in 2017 hit $55.9 billion, with estimates of $79.2 billion for 2018 and $107.8 billion next year. By 2022, Statista forecasts the Chinese marketplace lending market to hit $214.9 billion. The number of loans is also poised to explode, from 102 million in 2017 to 127 million in 2018 with a forecast of 203 million by 2022. By comparison, Statista reported the United States transacted $32.9 billion in 2017, and 3.7 billion in the United Kingdom last year.

What this means is that the overall state of the marketplace lending industry is still very healthy.  Furthermore, continued innovation will likely create even better marketplace lending platforms.  This trend should also result in good marketplace lending investment opportunities for investors.

Prime Meridian funds provide investors low cost access to short-duration, high yield loan portfolios by taking advantage of the efficiencies in the burgeoning Marketplace Lending space.  Contact Us today to learn more.