Growing pains: Peer to peer lending hits puberty

Growing pains: Peer to peer lending hits puberty

The eye-popping climb in the number of people attending the LendIt USA conference over the past four years reflects a real coming of age for peer-to-peer lending.

The first, in 2013, attracted 300 delegates. The second lured in just under 1000, while 2500 attended in 2015. Last week, the number swarming the Marriott Marquis hotel in San Francisco was nudging 4000.

Peer-to-peer lending (also known as “marketplace lending” to reflect the large proportion of funds that come from institutions rather than retail investors) matches borrowers with yield-hungry investors on an internet platform. A decade since it was born in the United States, marketplace lending is now mainstream. In the past 12 months, 24 per cent of all personal loans in the US were provided on a P2P platform, according to Lending Club, the leading player in the US market.

Lending Club was the largest provider of personal loans in the US last year: it facilitated loans of $US8.4 billion ($10.8 billion) – more than any single US bank. Lending Club has 1.4 million members (defined as borrowers and investors on the platform), and across the US, 2.5 million people are using marketplace lending platforms. P2P lending is also surging in Europe and in China.

Volumes are edging higher in Australia, too. The leading player, SocietyOne, said last week it had crossed the symbolic milestone of $100 million in loans matched on its platform. This followed a surge in activity over the first quarter of this calendar year, when new loan growth for personal and agribusiness loans jumped by $30 million.

SocietyOne co-founder Greg Symons was in San Francisco for LendIt last week and says the vibe there reflects an industry that is fast maturing. While venture capital investors still hosted plush parties for the big platforms – the hottest invitation was to Victory Park Capital’s exclusive shindig for 200 people in the San Francisco Press Club – Symons says the mood reflects the new reality in Silicon Valley, where financiers are much more discerning about business models. They want to see fintechs with a clear path towards profitability.

This is a stark contrast to LendIt USA 2015, which was held soon after the initial public offerings of Lending Club and OnDeck, an online business lender. Talk last year was all about breakneck growth, as platforms clambered for “unicorn” status.

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