The Peer-to-Peer Landscape

Transcription

1 The Peer-to-Peer Landscape Presented by: SimplyCredit Inc Karthik Sethuraman, CEO Alan Bahr SVP, Business Development September 15, 2016

2 Agenda Peer-to-Peer (P2P) Lending Defined Performance of Key P2P Platforms Signs of Disruption Recent Developments Strategies for Credit Unions Q&A 2

3 Peer-to-Peer (P2P) Lending Defined 3

4 A Short Quiz Peer-to-peer (P2P) platforms crowdsource funds primarily from individuals who have cash and lend to individuals who need cash True False Which of the following is NOT a characteristic of P2P platforms? A. Online Loan Origination B. Capacity to Portfolio Loans C. Automated Underwriting D. Loan Servicing FALSE B 4

5 The Term Peer-to-Peer is a Misnomer 80% - 90% 10% - 20% Source: PwC, Feb

6 P2P Shareholders and Investors Institutional investors are banks, hedge funds, or other business entities Approximately 40 different funds have committed to purchase assets from P2P platforms, with at least 12 different funds committing $200 million or more PwC, Feb 2015 Board members at the largest P2P platforms include executives at some of the largest banks in the world including Morgan Stanley and Citigroup... WellsFargo, through its venture capital arm, is the largest investor in LendingClub Forbes, Oct

7 Summary: What is P2P Lending? Increasingly referred to as Marketplace Lending Borrower transactions are consummated online, leading to lowered transactional costs Institutional investors dictate underwriting requirements Most loans are unsecured, but platforms are expanding into other lending types The P2P platform generally services the loan There is no common bond between borrowers and investors P2P platforms intermediate cash flows 7

8 Performance of Key P2P Platforms 8

9 A Short Quiz P2P lending is growing, but it s still a niche business True False P2P platforms encroach on credit union core businesses FALSE True False TRUE P2P platforms are only interested in low credit-quality tiers True False FALSE 9

10 P2P Volume Outpaces Other Lenders 10

11 Top P2P Lenders Worldwide 11

12 P2P Touches on Many Borrowing Needs 12

13 P2P Fills the Entire Credit Spectrum 13

14 Similar Platforms Different Strategies Business Kabbage OnDeck Type of Lending Student Secured Consumer SoFi Common Bond Lending Home LendKey Unsecured Consumer Prosper Lending-Club Avant LendStreet Goldman Sachs SimplyCredit Investor Warehouse Deposits Lending Partners Liquidity Source 14

15 Signs of Disruption 15

16 FinTech Versus Bundled Services 16

17 P2P Strategies Revolve Around: Use of an Online / Mobile Platform Employs Sophisticated Analytics Target Marketing Proprietary U/W and Pricing Models Disseminates Superior Content Consumer Education Electronic Delivery Focuses on User Experience Simplified Application Process Management Tools and Reporting Superior Content Analytics Online Platform and Social Media Focus on User Experience 17

18 Do You Hear These Warnings? I received a great loan offer Can t There s through I just a apply great . and website Don t worry, I ll keep Can get my you what where match I need I it? get online? all the checking account with financial information I you. need. Someone Hmmm I else seems to know Why what can t can I need, I get get the all kinds But of I might financial have when to go I need information services it. from you? elsewhere and support for my other online services. today. What is happening with your average products per member metric? 18

19 Recent Developments 19

20 The Market Leader is Ailing 20

21 What Caused Originations to Fall? Source: LendingClub, Aug,

22 A Short Quiz Which of the following is the primary reason for LendingClub s decrease in originations? A. Falling consumer demand B. An increase in targeted credit quality C. A computer glitch D. A drop in investor demand No, apps doubled No, quality was stable No, systems were fine 22

23 Fewer Apps are Being Approved Source: LendingClub, Aug,

24 Implication of Wall Street Reliance P2P platforms are heavily reliant on Wall Street liquidity When their liquidity diminishes, P2P platforms suffer The platforms offer terms approved by hedge funds and other institutional investors For the benefit of investors, loans are pooled and packaged into notes, similar to mortgage pass-through securities P2P platforms do not introduce borrowers to their investor partners For credit unions, traditional P2P platforms pose a difficult collaboration problem: Loan growth? Direct member interaction? 24

25 Strategies for Credit Unions 25

26 Credit Union Strategies 26

27 Questions and Answers 27

28 Thank You Alan Bahr, SVP Karthik Sethuraman, CEO 28