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Less that two years after the first P2P launched in the U.S., it looks like we'll soon have at least five companies chasing this new market, six if you include Virgin Money.
The most well known is Zopa, the person-to-person lending pioneer which opened in the UK in 2005 and now has nearly 200,000 members. Its long-awaited U.S. launch is scheduled for next week. I'll be speaking with marketing director Wade Lagrone tomorrow, but Jane Kim broke the news in today's Wall Street Journal (here). The market forecast in the article, predicting as much as $9 billion in P2P originations by 2017, is from our upcoming Online Banking Report on P2P lending (note 1).
Zopa is working with six credit unions, including FORUM Credit Union, to match lenders with borrowers. And unlike other P2P lenders, Zopa's is guaranteeing the lender's principal. That will reduce potential returns, but make participation more like buying a CD from a bank. So, it will be interesting to see how the company differentiates its offering from traditional bank/credit union fare. We'll have more when the site opens to the public next week.
We also hear that GlobeFunder and Loanio are about to launch, possibly yet this year. Loanio has not revealed its strategy, but GlobeFunder is positioning itself as a microlender in the same vein as the Nobel prize-winning approach of Grameen Bank. For more info, read the GlobeFunder blog.
All three will be included in our upcoming Online Banking Report (note 1). We'll also look at Prosper, Lending Club, LoanBack, and Virgin Money (formerly Circle Lending).
Note:
1. Online Banking Report subscribers will have access to the report as soon as it is published on Dec. 8. Nonsubscribers can put their name on the announcement list here and receive a prepublication discount code to save 10%. Please mention "P2P report" in the subject line.
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Comments (8)
Can you elaborate on how the Credit Unions are involved?
Are they providing the "bank account" for Zopa to secure and insure the Lenders money (in a 1 year CD) and then sharing in the Loan spread above the 5% interest rate (similar to a typical loan on their books less a Zopa servicing fee)?
Posted by anonymous | November 29, 2007 5:46 AM
Posted on November 29, 2007 05:46
Couple of comments:
1) Congested? There are thousands of firms (banks) in the US willing/trying to lend money. Six firms trying to establish p2p lending can only be considered "congested" if the demand can only support one or two. And that's the key question isn't it. Hopefully, someone like Forrester will come out soon w/ some consumer research on the demand for p2p lending.
2) "the most well known is Zopa..." made me chuckle. Well known to who? Industry insiders, maybe. I bet that not more than 2% of the general population has heard of most of these firms (Virgin being the exception).
Posted by Ron Shevlin | November 29, 2007 6:28 AM
Posted on November 29, 2007 06:28
@Ron...No question there's lots of demand (borrowers). But the unknown here is whether the marketplaces can provide enough value (ie. attractive rates) for both sides of the equation, borrowers AND lenders. That's been tricky so far.
Posted by Jim Bruene![[TypeKey Profile Page]](http://www.netbanker.com/nav-commenters.gif)
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November 29, 2007 8:07 AM
Posted on November 29, 2007 08:07
@ Ron:
The P2P lenders are similar to E-bay in that they provide a marketplace for parties to make transactions - it just happens that the transactions are loans. There's inherent benefits to participants in the market to have more people in the same marketplace. Any given borrower does better when there are more lenders available to bid, and vise versa. Just like with the online auction marketplace (E-bay), there's too much benefit to consolidation to indefinitely support a large number of players fighting it out. It's only a matter of who survives long enough and adjusts fast enough to end up on top.
Posted by Mike | November 29, 2007 9:26 AM
Posted on November 29, 2007 09:26
@Mike
I don't think the comparison to auction sites is valid. In auction sites the biggest wins it all because you need a large community to have millions of DIFFERENT article in supply and demand.
With p2p lending sites you only have one product: loans. Even taking into account the paramaters terms, creditgrades and other borrower related parameters there is still a very homogeneous product "traded"
Still one (the biggest?) p2p lending service might prevail in the long run, but possibly for different reasons then with auction sites
Posted by Claus | November 29, 2007 2:21 PM
Posted on November 29, 2007 14:21
How do 6 credit unions cover 50 states? The only way I can see this working is if Zopa is a SEG to each CU.
Posted by Jeffry Pilcher | November 29, 2007 9:41 PM
Posted on November 29, 2007 21:41
I would also like to know how the credit unions are to be involved. It seems to me that having a financial institution involved would add to the p2p platform.
Posted by Real Estate Raj | March 27, 2008 5:42 PM
Posted on March 27, 2008 17:42
I would also like to know how the credit unions are to be involved. It seems to me that having a financial institution involved would add to the p2p platform.
Posted by Real Estate Raj | March 27, 2008 5:42 PM
Posted on March 27, 2008 17:42