P2P and Marketplace Lending: 2014 In Review
With two IPOs, increasing demand, and new found popularity, marketplace lending continues its tremendous growth. Here are some highlights from the leading stories in marketplace lending in 2014 and a glimpse of what 2015 might bring.
1. P2P lending reaches new highs
According to each P2p lending platform, both Prosper and Lending Club are on track to more than double the number of P2P loans issued in 2014 over 2013. Prosper originated more than $2.5 billion in loans this year compared to roughly $750 million in 2013. While that’s impressive growth, industry leader Lending Club originated more than $4.1 billion in 2014 exceeding the 2013 number of $2.06 billion according to the company’s website.
2. Lending Club and OnDeck IPOs
The P2P lending industry was validated with the success of Lending Club’s initial public offering. As the biggest P2P lending platform in the United States, the stock rose 56% on its first day of trading to $23.43 raising more than $1 billion.
Less than a week after the Lending Club IPO, On Deck Capital also went public at $20 closing its debut at $27.98 a 40% increase raising $200 million.
The success of the Lending Club and OnDeck IPOs set the scene for many more marketplace lending platforms to go public with prime candidates being Prosper, Funding Circle and Kabbage.
3. Demand for peer-to peer lending loans surpasses supply
As professional lenders on the platforms can verify, loans are being snapped up at lightning fast speed. While receiving little attention, much of the lending platform access is not available to new funds and institutional investors due to the huge demand from the existing investor base which already has a seat at the table. Firms with established connections like Prime Meridian Capital Management are still able to access these platforms in scalable capacity. Look for lending platforms to expand the number of loans available at various credit scores, and money raised through going public or private equity used to increase advertising and marketing budgets to further increase loan originations.
4. Interest in marketplace lending expands
American Banker has named “marketplace lending” its Innovation of the Year, stating, “2014 was a Gold Rush year for online marketplace lending.” Publications like The Economist, American Banker and more have written many articles in the past year discussing everything marketplace lending related including platforms, investing and its future.
Conferences, such as LendIt and Market Place Lending Meet-Ups, are entirely devoted to marketplace lending. In 2014, there were more conferences for marketplace lending than ever before with new ones emerging like the Online Lending/P2P Symposium in Miami. 2015 is already packed with many more of these conferences, symposiums and meet-ups.
The general public’s interest has risen in the past year as well. As shown by Prime Meridian’s P2P Lending Trend Watch, one can easily see the spike in 2014 for Google searches relating to peer-to-peer lending.
5. New P2P lending and marketplace lending platforms emerge; others receive major rounds of funding
New platforms, like Patch of Land- a peer real estate lending marketplace, have emerged focusing on specific segments of the peer-to-peer lending space. More platforms have increased in popularity in 2014 like CommondBond and SoFi, which are dedicated to the student loan segment.
Former PIMCO CEO Mohamed El-Erian is the lead investor for startup platform Payoff in which he took a $12 million equity stake. SoFi received an $80M Series C round of funding including investor Peter Thiel in April 2014 and another round for an undisclosed amount was raised from private equity groups; Kabbage receives a $50M Series D investment.
Look for existing p2p lending platforms to expand into different segments of p2p lending, the continued growth of existing platforms, and new contenders to emerge as the broader category of financial technology (also known as FinTech) continues to change how we view and work with money in 2015.