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<p><em><span style="line-height: 1.5em;"><span id="docs-internal-guid-eaae21d7-2098-f7e0-00bc-867757912a34">This story was originally sent to thousands of professionals just like you in this morning's PAYMENTS INSIDER daily newsletter.  Don't be left in the dark while your competition gets ahead each morning. <strong><a href="http://www.businessinsider.com/intelligence/insider-newsletter?&amp;utm_source=House&amp;utm_term=CtgrPr_PI-alternative-loans-2015-6-23&amp;utm_campaign=CtgrPr_nlsa">Learn more about our 7-day FREE trial now »</a></strong></span></span></em></p><p><span style="line-height: 1.5em;"><div class="KonaFilter image-container display-table float_right"><div><div class="image"></div></div></div>We recently cited a </span><a href="http://e.businessinsider.com/555a0c88fa13a170348b48a12qvwn.13/VW4rzsPo6SzNjpXAA5403" target="_blank">survey</a><span style="line-height: 1.5em;"> from Richards Kibbe &amp; Orbe LLP showing 85% of institutional investors were looking to put some money into alternative loans or the platforms themselves. The survey also shows that among these investors, small business loans are the most desirable:  </span></p><ul><li>31% of respondents were interested in investing in small business loans. </li><li>The other three loan categories - consumer, real estate, and education - each captured the interest of about one-quarter of investors. </li></ul><p><em style="line-height: 1.5em;"><strong><span id="docs-internal-guid-eaae21d7-2112-8e20-f05d-75b50b373b9c">Finding this article interesting? Thousands of professionals just like you had it in their inbox first. Stay ahead of the curve and gain a comprehensive understanding of the latest news &amp; trends, start your day with the PAYMENTS INSIDER.<a href="http://www.businessinsider.com/intelligence/insider-newsletter?&amp;utm_source=House&amp;utm_term=CtgrPr_PI-alternative-loans-2015-6-23&amp;utm_campaign=CtgrPr_nlsa">  Get 7-days FREE »</a></span></strong></em></p><p><span style="line-height: 1.5em;">The results show that ultimately, investors are seeking opportunities in lending platforms across the board, but small businesses might lead the pack because there's high borrower-side demand in this area - small businesses are often highly likely to be rejected from receiving a loan at a traditional bank. This is because it is less profitable for banks to lend money to them -  it is just as costly to underwrite a small business loan compared to a larger loan with higher returns. </span></p><p><span style="line-height: 1.5em;">Marketplace lenders use a different underwriting model that makes it easier and quicker for businesses to gain access to financing, and therefore, these businesses are beginning to flock to these platforms. </span></p><p><span style="line-height: 1.5em; color: #222222;">Don't miss another day of breaking developments! Stay ahead of the curve and gain insight into the latest news &amp; trends. Join thousands of other professionals who start the day with PAYMENTS INSIDER. </span><strong><a href="http://www.businessinsider.com/intelligence/insider-newsletter?&amp;utm_source=House&amp;utm_term=CtgrPr_PI-alternative-loans-2015-6-23&amp;utm_campaign=CtgrPr_nlsa">Try it FREE for 7 days now »</a></strong></p><p> </p>

Institutional investors are flocking to these alternative lending platforms

<ul><li><strong>The platform said the decision was due to ongoing economic challenges. </strong></li><li><strong>It registered a 72 per cent annual increase in loan volumes on its platform.</strong></li><li><strong>The company's share price dropped by 84 per cent this year.</strong></li></ul><br /><keyword id="6355999" type="General" weightage="20" keywordseo="ai" source="Orion">AI</keyword> lending platform <keyword id="1178543" type="General" weightage="100" keywordseo="upstart" source="Orion">Upstart</keyword> has laid off 7 per cent of its total workforce (around 140 employees), as it faces weakening demand for loans in the US due to significant hikes in interest rates.<br /><br />The lending platform which has about 2,000 employees, notified its affected employees about the layoff on Tuesday, reports TechCrunch.<br /><br />"Given the challenging economy, we are making this difficult decision for the long-term health of the company. We do not expect any further layoffs, and continue to hire for roles that are strategic to our business," an Upstart spokesperson said in a statement.<br /><br />In its latest filing with the <keyword id="108474" type="General" weightage="50" keywordseo="us-securities-and-exchange-commission" source="Orion">US Securities and Exchange Commission</keyword> (<keyword id="6362470" type="General" weightage="50" keywordseo="sec" source="Orion">SEC</keyword>), it said the decision was due to ongoing economic challenges and the "reduction in the volume of loans" on its platform.<br /><br />In its last quarterly results, the platform registered a 72 per cent annual increase in loan volumes on its platform.<br /><br />The company's share price dropped by 84 per cent this year.<br /><br />The market cap of Upstart once reached $32 billion. It is now less than $2 billion.<br /><br />Rough economic conditions have hit several technology companies globally, including in India, as startups face an acute funding crunch.<br /><br />SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/india-on-track-to-become-third-largest-economy-by-2030-morgan-stanley/articleshow/95248406.cms">India on track to become third-largest economy by 2030: Morgan Stanley</a><br /><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/entertainment/news/its-srks-birthday-today-and-his-iconic-film-ddlj-is-back-in-pvr-cinemas/articleshow/95248418.cms">It's SRK's birthday today and his iconic film DDLJ is back in PVR cinemas</a><br /><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/news/your-social-behaviour-is-connected-to-your-gut-as-well-as-brain/articleshow/95248029.cms">Your social behaviour is connected to your gut as well as brain</a>

AI lending platform Upstart lays off 7% of employees

Cryptocurrency exchange <keyword id="12393531" type="General" weightage="100" keywordseo="vauld" source="Orion">Vauld</keyword> on Monday announced to suspend all withdrawals, trading and deposits on its platform with immediate effect owing to "financial challenges".<br /><br />Darshan <keyword id="52501" type="General" weightage="80" keywordseo="bathija" source="Orion">Bathija</keyword>, CEO of Vauld, said that a significant amount of customer withdrawals in excess of $197.7 million has happened since June 12, when the decline of the cryptocurrency market was triggered by the collapse of Terraform Lab's UST stablecoin, Celsius network pausing withdrawals, and Three Arrows Capital defaulting on their loans.<br /><br />"In furtherance of this, we have engaged the services of Kroll Pte Limited as our financial advisor, as well as <keyword id="2839992" type="General" weightage="50" keywordseo="cyril-amarchand-mangaldas" source="Orion">Cyril Amarchand Mangaldas</keyword> and Rajah &amp; Tann <keyword id="6356662" type="General" weightage="50" keywordseo="singapore" source="Orion">Singapore</keyword> LLP as our legal advisors in <keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword> and Singapore, respectively," said Bathija.<br /><br />The cryptocurrency exchange last month reduced its headcount by about 30 per cent amid volatile market conditions.<br /><br />Bathija said the company is currently in discussions with potential investors into the Vauld group of companies.<br /><br />"We intend to apply to the Singapore courts for a moratorium i.e. a suspension of the commencement or continuation of any proceedings against the relevant companies so as to give us breathing space to carry out the proposed restructuring exercise," he informed.<br /><br />The company said that specific arrangements will be made for customer deposits as may be necessary for certain customers to meet margin calls in connection with collateralised loans.<br /><br />Vauld has already reduced its marketing expenses, slowed down hiring efforts, reduced executive compensation by 50 per cent and paused most vendor engagements.<br /><br />Founded in 2018, the Singapore-registered startup raised $27 million and aimed to reach one million users in the US, followed by <keyword id="28249" type="General" weightage="50" keywordseo="europe" source="Orion">Europe</keyword>, Singapore and India.<br /><br />Earlier this month, cryptocurrency broker Voyager Digital suspended all trading, deposits withdrawals and loyalty rewards, as top crypto hedge fund Three Arrows Capital (3AC) filed for bankruptcy in the US, in which Voyager has made significant investments.<br /><br />Singapore-based cryptocurrency exchange Bybit has laid off 2,000 employees while global crypto exchanges and firms including Coinbase, Gemini, Crypto.com and others announced to downsize their workforce.<br /><br />Cryptocurrency lending platform Celsius has laid off 150 employees which is a quarter of its workforce, as the global crypto market goes through its worst meltdown.<br /><br />SEE ALSO:<br /><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/politics/news/who-will-get-the-party-symbol-bow-and-arrow-if-shiv-sena-splits/articleshow/92611630.cms">It’s not the CM seat but the one who wields ‘bow and arrow’ will be the Sena head</a><br /><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/sustainability/news/ban-on-single-use-plastic-kicks-in-across-india-as-the-country-recognises-the-choking-impacts-of-plastic-waste-on-the-environment/articleshow/92600992.cms">Ban on single-use plastic kicks in across India as the country recognises the choking impacts of plastic waste on the environment</a>

Crypto trading and lending platform Vauld stops customer withdrawals, trading, and deposits

<keyword id="2721952" type="General" weightage="80" keywordseo="crypto" source="Orion">Crypto</keyword>currency lending platform <keyword id="93940" type="General" weightage="20" keywordseo="celsius" source="Orion">Celsius</keyword> has laid off 150 employees which is a quarter of its workforce, as the global crypto market goes through its worst meltdown.<br /><br />The platform last month paused all withdrawals citing "extreme market conditions".<br /><br />According to Israeli media outlet Calcalist, it has now sacked around 150 of its employees.<br /><br />"We are focused and working as quickly as we can to stabilise liquidity and operations, in order to be positioned to share more information with the community," Celsius wrote in a blogpost.<br /><br />"We are operating with the entire community and all clients in mind as we work through these challenging times," it added.<br /><br />Celsius raised $750 million in funding late last year, reaching a valuation of $3 billion.<br /><br />The American-Israeli company had processed $8.2 billion worth of loans and had $11.8 billion in assets by May this year.<br /><br />Earlier this month, cryptocurrency broker Voyager Digital suspended all trading, deposits withdrawals and loyalty rewards, as top crypto hedge fund Three Arrows Capital (3AC) filed for bankruptcy in the US, in which Voyager has made significant investments.<br /><br />The development comes as popular crypto tokens such as <keyword id="12177405" type="General" weightage="50" keywordseo="bitcoin-and-ethereum" source="Orion">Bitcoin and Ethereum</keyword> nosedived by nearly 70 per cent from their record highs amid the economic meltdown.<br /><br />Last month, cryptocurrency exchange Vauld decided to reduce its headcount by about 30 per cent.<br /><br />Singapore-based cryptocurrency exchange Bybit has laid off 2,000 employees while global crypto exchanges and firms including <keyword id="1972612" type="General" weightage="50" keywordseo="coinbase" source="Orion">Coinbase</keyword>, Gemini, Crypto.com and others announced to downsize their workforce.<br /><strong>SEE ALSO:<br /><br /> <a href="https://www.businessinsider.in/cryptocurrency/news/coinbase-blockchain-com-and-kraken-are-still-hiring-for-hundreds-of-roles-despite-mass-crypto-layoffs/articleshow/92617952.cms">Coinbase, Blockchain.com and Kraken are still hiring for hundreds of roles despite mass crypto layoffs</a><br /><br /> </strong><a href="https://www.businessinsider.in/cryptocurrency/news/crypto-exchange-coinflex-says-it-needs-more-time-to-restart-withdrawals-as-it-scrambles-to-fix-a-47-million-bad-debt/articleshow/92576321.cms"><strong>Crypto exchange CoinFlex says it needs more time to restart withdrawals as it scrambles to fix a $47 million bad debt</strong></a>

Cryptocurrency lending platform Celsius lays off a quarter of its workforce

<ul class="summary-list"><li><keyword id="11893898" type="UNKNOWN" weightage="60" keywordseo="crypto" source="Orion">Crypto</keyword> lender Babel is freezing withdrawals for users due to "unusual liquidity pressures."</li><li>It's the second major platform to do so this week as the crypto market faces a massive selloff. </li></ul><p>Another major <keyword id="12982163" type="UNKNOWN" weightage="60" keywordseo="crypto-lending" source="Orion">crypto lending</keyword> platform has stopped letting people take out their holdings.</p><p>Babel <keyword id="11895316" type="UNKNOWN" weightage="60" keywordseo="finance" source="Orion">Finance</keyword>, which is based in Hong Kong and boasts a customer base of 500, <a href="https://babel.finance/article-views.html?id=50">said</a> Friday that withdrawals from its services will be "temporarily suspended" as cryptocurrencies face a brutal and widespread selloff.</p><p>"The crypto market has seen major fluctuations, and some institutions in the industry have experienced conductive risk events," Babel <a href="https://babel.finance/article-views.html?id=50">said</a> on its website. "Due to the current situation, Babel Finance is facing unusual liquidity pressures."</p><p>Babel did not immediately respond to Insider's request for comment.</p><p>The firm was last valued at $2 billion in May, <a href="https://www.reuters.com/markets/wealth/crypto-lender-babel-finance-valued-2-billion-after-latest-fundraising-2022-05-25/">Reuters</a> reported, and only allows the trading and lending of bitcoin, ethereum, and stablecoins.</p><p>It's also not the only lending platform to halt withdrawals as liquidity pressures mount amid a worsening market rout. </p><p>Celsius Network said Sunday that <a href="https://markets.businessinsider.com/news/currencies/crypto-lender-celsius-freeze-withdrawals-transfers-accounts-market-tumble-bitcoin-2022-6">it was doing the same for its 1.7 million customers</a>, citing "extreme market conditions." </p><p>Celsius users told Insider this week that <a href="https://www.businessinsider.com/celsius-crypto-lending-customers-frozen-withdrawals-liquidity-defi-2022-6">they're anxious about their holdings currently trapped on the platform.</a> One user said he has $105,000 worth of crypto stuck on the app. Another said she may have lost two years' worth of income.</p><p>The price of <a href="https://markets.businessinsider.com/currencies/btc-usd?utm_medium=ingest&amp;utm_source=markets">bitcoin, still the largest and most well-known cryptocurrency, has declined 70% from a November 2021 peak</a>. The slump has dragged down the <a href="https://markets.businessinsider.com/news/currencies/crypto-market-value-1-trillion-bitcoin-winter-ethereum-inflation-cardano-2022-6">entire market's value below $1 trillion for the first time since February 2021. </a></p><p>The rout's also impacted hedge funds like the 10-year-old, crypto-focused Three Arrows Capital, also known as 3AC. The firm has hired "legal and financial advisers," <a href="https://affiliate.insider.com?u=https%3A%2F%2Fwww.wsj.com%2Farticles%2Fbattered-crypto-hedge-fund-three-arrows-capital-considers-asset-sales-bailout-11655469932%3Fmod%3Dlatest_headlines">the Wall Street Journal reported</a>, following massive losses sparked by a <a href="https://www.businessinsider.com/crypto-investing-crash-terra-luna-lost-life-savings-stablecoin-ust-2022-6">major investment in stablecoins that later tanked. </a></p><p>3AC is also <a href="https://markets.businessinsider.com/news/currencies/three-arrows-faces-possible-insolvency-after-unforeseen-liquidations-1031529814">now faced with $400 million in liquidations,</a> according to <a href="https://www.theblock.co/post/152665/ftx-deribit-bitmex-liquidated-three-arrows-capital">The Block.</a> </p><p>Founders Zhu Su and Kyle Davies, meanwhile, have "ghosted" their business partners as they grapple with concerns over insolvency, <a href="https://www.vice.com/en/article/n7zw7x/founders-of-dollar10-billion-crypto-hedge-fund-have-ghosted-after-bets-go-bad">Vice reported</a>.</p>

Another crypto lending platform is freezing withdrawals as the industry's downward spiral continues

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>LendInvest</span></p><p class="caption">Christian Faes, LendInvest.</p></div><p></p></div></div>LendInvest, an online platform for financing short-term mortgages, has signed a warehouse financing deal with Australian investment bank Macquarie.</p><p>The deal gives LendInvest access to over £40 million to fund mortgages with. LendInvest's online platform matches short-term mortgage borrowers with funding, either from retail investors or institutional investors. Investors get returns of around 5% per annum.</p><p>The Macquarie funding deal means the London startup now has access to over £260 million of institutional money it can finance mortgages with. Four other banks currently lend over the platform, although LendInvest would not say which ones. A spokesperson did say that one is a <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> challenger bank.</p><p>LendInvest CEO and cofounder Christian Faes says in a statement announcing the deal:</p><p style="padding-left: 30px;">LendInvest is creating the most diverse capital base of any mortgage lender in the market which is a key differentiator for our business. By welcoming another significant institution and funding line to our business, we are putting in place the foundations for a very scalable move into longer duration lending and ultimately the mainstream UK mortgage market.</p><p style="padding-left: 30px;">Macquarie is a leading global financial institution with a proven deep knowledge of the UK mortgage market. We look forward to working with the Macquarie team as we expand our product range with longer term loans that are attractive to them and other capital markets investors. This warehousing line will assist us as we move towards being able to securitise our assets for institutional investors.</p><p>Securitisation is where financial institutions cut up and sell on loans they've sold - essentially selling the future income from loans. Funding Circle, another peer-to-peer lending platform, are doing this with their loans.</p><p>LendInvest plays in the short-term, or bridging, mortgage market. This is generally for property developers who buy a place, do it up over say 6 months, and then flip it for a profit. It's a fairly specialised market and one that LendInvest, which traces its roots back to 2008, already has a 10% share off.</p><p>The fintech startup last year lent £300 million over its online platform and has lent over £620 million since July 2013. CEO Faes told BI earlier this year that <a href="http://uk.businessinsider.com/lendinvest-atomico-series-b-fundraise-2016-3">the platform is now looking to move into the buy-to-let market.</a></p><p>The company<a href="http://uk.businessinsider.com/p2p-mortgage-lender-lendinvest-raised-the-biggest-series-a-round-in-uk-fintech-so-far-2015-6"> raised £22 million from Chinese technology company Beijing Kunlun last June</a> and <a href="http://uk.businessinsider.com/lendinvest-atomico-series-b-fundraise-2016-3">bagged a further £17 million from </a><a href="http://uk.businessinsider.com/lendinvest-atomico-series-b-fundraise-2016-3">venture capital firm Atomico in March</a>.</p><p class="tagline"><div id="categorypromo"><p></p></div></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/terrorists-groups-isis-make-money-billion-dollars-oil-2016-4">How ISIS makes over $1 billion a year</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="R0N2JleTqvRC6uEEi5Ey6TouNvj_gHDb" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

A big investment bank just signed up to lend over &#163;40 million on mortgage funding platform LendInvest

Mumbai, Jun 24 () To make digital lending more transparent, the Reserve Bank on Wednesday directed banks, NBFCs and digital lending platforms to disclose full information upfront on their websites to customers. <p>The direction comes against the backdrop of several complaints relating to exorbitant interest rates and harsh recovery measures, among others, against lending platforms. </p><p>While the banks and non-banking finance companies (NBFCs) are being directed to disclose the names of agents engaged by on their websites, digital lending platforms have been asked to tell their customers upfront the names of the bank/ NBFC on whose behalf they are disbursing loans. </p><p>"…outsourcing of any activity by banks/ NBFCs does not diminish their obligations, as the onus of compliance with regulatory instructions rests solely with them," the RBI said in a communication to the scheduled commercial banks and NBFCs. </p><p>The RBI further said that immediately after sanction of loan, a letter must be issued to the borrower on the letter head of the bank/ NBFC concerned. </p><p>"A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement shall be furnished to all borrowers at the time of sanction/ disbursement of loans," the RBI said, and also asked the banks and NBFCs to create awareness about the grievance redressal mechanism. </p><p>Issuing these guidelines, the RBI said that often digital lending platforms tend to portray themselves as lenders without disclosing the name of the bank/ NBFC at the backend, as a consequence of which, customers are not able to access grievance redressal avenues available under the regulatory framework. </p><p>Also it added, several complaints have come to notice against the lending platforms relating primarily to exorbitant interest rates, non-transparent methods to calculate interest, harsh recovery measures, unauthorised use of personal data and bad behavior. </p><p>Although digital delivery in credit intermediation is a welcome development, the RBI said, concerns emanate from non-transparency of transactions and violation of the guidelines on outsourcing of financial services and Fair Practices Code of banks and NBFCs. </p><p>The banks and NBFCs, RBI said, "irrespective of whether they lend through their own digital lending platform or through an outsourced lending platform, must adhere to the Fair Practices Code guidelines in letter and spirit." </p><p>Besides, it added, the banks and NBFCs must also meticulously follow regulatory instructions on outsourcing of financial services and IT services. </p>The RBI also said any violation by banks and NBFCs (including NBFCs registered to operate on 'digital-only' or on digital and brick-mortar channels of delivery of credit) will be viewed seriously. NKD CS MR

RBI asks banks, NBFCs to disclose digital lending agents upfront

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span><a href="http://www.gettyimages.co.uk/license/155109676">Dan Kitwood/Getty Images</a></span></p><p class="caption">Some platforms are investing in loans originated on rival platforms.</p></div><p></p></div></div>LONDON - Britain's Financial Conduct Authority (FCA) has found some peer-to-peer (P2P) lending platforms are using customer money to buy loans on rival platforms, rather than fund loans over their own platforms.</p><p>The FCA's CEO Andrew Bailey told Business Insider: "What we've seen in a couple of firms in authorisations and supervisions is where one platform doesn't have enough loans at present, they may take investors money and invest that in loans on another platform."</p><p>No platforms involved in the practice were named and Bailey said: "I don't think it's very common, I think it's quite an early spot from us.</p><p>"But there are a number of risks there. On the one hand, operationally, if there's too much cross investment you've got a split cap investment trust issues. If one fails it could have knock-on effects throughout the other players. And then also investors may not understand the risks they are getting into because if they've chosen one platform because they like it they might find they're exposed to other platforms."</p><p>The FCA released a new report on regulation of P2P lenders and crowdfunding platforms on Friday <a href="http://uk.businessinsider.com/fca-new-peer-to-peer-lending-crowdfunding-rules-strengthen-investor-protection-2016-12">suggesting tighter regulation of the P2P lending sector</a> amid concerns that growing complexity is leading to risks that investors may not understand.</p><p>Bailey flagged the platform cross-selling risk as one of the regulator's key concerns. The FCA said in Friday's paper that one of the new rules it was proposing for the industry is "additional requirements or restrictions on cross-platform investment."</p><p>P2P lending, also known as marketplace lending, was invented by British company Zopa in 2005. At its simplest, it is people using online platforms to lend directly to either other people or businesses, cutting out banks who normally sit in the middle. Investors get good rates of return and borrowers get quick access to cash.</p><p>Over £8.7 billion has been lent by P2P platforms in the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> since inception, <a href="http://www.altfi.com/data">according to AltFi data</a>, with £3.4 billion of that in this year alone. Britain's three biggest platforms - Zopa, Funding Circle, and RateSetter - have all lent over £1 billion each. But business models have become increasingly complex as the industry has evolved and the FCA is concerned that consumers are no longer fully aware of all the potential risks.</p><p>Disclosure has become a major issue in the industry <a href="http://uk.businessinsider.com/lendingclub-faces-doj-and-sec-investigations-could-buy-more-of-its-loans-2016-5">after the CEO of LendingClub, Renaud Laplanche, was forced out in May</a>, in part due to failure to properly flag his own investments in the platform.</p><p>Laplanche failed to disclose a personal interest in a fund that LendingClub was considering investing in and <a href="http://www.wsj.com/articles/lendingclubs-ties-to-fund-under-fire-1463011193">The Wall Street Journal reported</a> he had invested millions in that fund so it could buy LendingClub's loans, effectively to boost demand. The vehicle, <a href="http://www.bloomberg.com/news/articles/2016-05-09/mack-invested-with-former-lendingclub-ceo-in-loan-buying-venture">which Bloomberg named as Cirrix Capital</a>, bought $114.5 million worth of LendingClub loans in the first quarter of the year, <a href="http://uk.businessinsider.com/lendingclub-faces-doj-and-sec-investigations-could-buy-more-of-its-loans-2016-5">according to a company filing</a>.</p><p>Bailey told Business Insider in an interview on Friday that the "fast-moving, evolving" peer-to-peer lending industry <a href="http://uk.businessinsider.com/fca-andrew-bailey-interview-peer-to-peer-lending-fintech-regulation-fairness-transparency-crowdfunding-2016-12">poses "some quite big challenges in terms of transparency and fairness."</a></p><p><a href="http://uk.businessinsider.com/fca-andrew-bailey-interview-peer-to-peer-lending-fintech-regulation-fairness-transparency-crowdfunding-2016-12">You can read the full interview here.</a></p><p class="tagline"><div id="categorypromo"><p><h2><span>Learn more:</span></h2><ul><li><a href="http://read.bi/pay1">Credit Card Industry and Market</a></li><li><a href="http://read.bi/pay2">Mobile Payment Technologies</a></li><li><a href="http://read.bi/pay3">Mobile Payments Industry</a></li><li><a href="http://read.bi/pay4">Mobile Payment Market, Trends and Adoption</a></li><li><a href="http://read.bi/pay5">Credit Card Processing Industry</a></li><li><a href="http://read.bi/pay6">List of Credit Card Processing Companies</a></li><li><a href="http://read.bi/pay7">List of Credit Card Processing Networks</a></li><li><a href="http://read.bi/pay8">List of Payment Gateway Providers</a></li><li><a href="http://read.bi/pay9">M-Commerce: Mobile Shopping Trends</a></li><li><a href="http://read.bi/pay10">E-Commerce Payment Technologies and Trends</a></li></ul></p></div></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/former-goldman-sachs-banker-trader-steve-mnuchin-donald-trump-treasury-secretary-hollywood-2016-11">Here's everything we know about former Goldman Sachs banker Steve Mnuchin - Trump's pick for Treasury Secretary</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="drbmx4NzE6Dznp9J5rzMFR-3oXD2KWu2" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Some UK peer-to-peer lenders are buying each other's loans and the watchdog is worried

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Funding Circle</span></p><p class="caption">Funding Circle's founders.</p></div><p></p></div></div>LONDON - Britain's peer-to-peer lending industry enjoyed its best quarter of the year in the final three months of 2016, led by big volumes at Funding Circle.</p><p>New figures from industry body the Peer-to-peer Finance Association (P2PFA) show its eight members, which include Britain's three biggest platforms, collectively lent £843.9 million in the final quarter of 2016.</p><p>That's over £100 million more than in the first quarter, the next best period of the year, and takes the total lent over peer-to-peer platforms to £2.9 billion.</p><p>Peer-to-peer lenders are platforms that connect investors with either businesses or consumers looking to borrow money. These platforms cut out banks and other middlemen who often sit in the borrowing process and offer high returns to investors.</p><p>The P2PFA figures point to a sustained recovery from jitters surrounding last year's Brexit vote. Lending volumes declined between the first and second quarters of 2016 as uncertainty before and directly after the vote to leave the European Union put off investors.</p><p>Robert Pettigrew, director of the P2PFA, says in an emailed statement: "Whilst uncertainties in the broader economy attract much comment, it is clear from the robust growth in levels of peer-to-peer lending that P2PFA platforms and their investors are positive about the future."</p><p>James Meekings, Funding Circle's <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> MD and cofounder, <a href="http://uk.businessinsider.com/funding-circle-raises-100-million-accel-chancellor-philip-hammond-fintech-2017-1">told Business Insider during an interview last week:</a> "There was a period following the vote where both on the investor side and the business side uncertainty was challenging. But what we've seen since then is a huge amount of growth in origination.</p><p>"Quarter four in the UK was actually 90% up on the year before. What we're hearing from our borrowers now is that they're more certain that uncertainty will continue for longer, and therefore they are continuing with their investment decisions."</p><p>The strong year-end for the sector was largely driven by Funding Circle, which accounted for £305.9 million of the £843.9 million lent in the third quarter, or 35% of all lending.</p><p>The strong performance means Funding Circle is close to overtaking Zopa, the platform credited with inventing peer-to-peer lending in 2005, in terms of lifetime loan value. Funding Circle, which lends to small businesses, has lent £1.83 billion since launch in 2010. Zopa, which lends to consumers, has lent £1.92 billion since launch.</p><p>Pettigrew says: "Levels of lending to businesses through P2PFA platforms has gained considerable momentum over the course of recent quarters, and as investors focus on what might emerge from the post-referendum uncertainty, the position of peer-to-peer lending as a major part of the solution in a post-Brexit world is unquestionable."</p><p>While the P2PFA's figures show strong growth for most members, property lending platform Landbay continued to see just a trickle of investment on its platform. Business Insider highlighted that its lending volume <a href="http://uk.businessinsider.com/p2pfa-figures-show-95-fall-in-mortgage-lending-for-landbay-2016-10">fell from £5.3 million in the second quarter of 2016 to just £283,000 in the third.</a> That slowed to £194,119 in the fourth quarter.</p><p>That slowed to £194,119 in the fourth quarter. Landbay was <a href="http://www.p2pfinancenews.co.uk/2017/01/16/landbay-isa-manager-hmrc/">this week approved as an ISA manager by HMRC</a>, paving the way for the platform to launch an "Innovative Finance ISA" for its peer-to-peer mortgage products.</p><p class="tagline"><div id="categorypromo"><p><h2><span>Learn more:</span></h2><ul><li><a href="http://read.bi/pay1">Credit Card Industry and Market</a></li><li><a href="http://read.bi/pay2">Mobile Payment Technologies</a></li><li><a href="http://read.bi/pay3">Mobile Payments Industry</a></li><li><a href="http://read.bi/pay4">Mobile Payment Market, Trends and Adoption</a></li><li><a href="http://read.bi/pay5">Credit Card Processing Industry</a></li><li><a href="http://read.bi/pay6">List of Credit Card Processing Companies</a></li><li><a href="http://read.bi/pay7">List of Credit Card Processing Networks</a></li><li><a href="http://read.bi/pay8">List of Payment Gateway Providers</a></li><li><a href="http://read.bi/pay9">M-Commerce: Mobile Shopping Trends</a></li><li><a href="http://read.bi/pay10">E-Commerce Payment Technologies and Trends</a></li></ul></p></div></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/property-brothers-what-tricky-real-estate-code-words-really-mean-2016-12">The Property Brothers teach the actual meaning of tricky real estate 'code words'</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="pwMHIzMzE6ScSRLxmN5b0zjEe3_Nvmgy" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Funding Circle is absolutely dominating Britain's peer-to-peer lending industry

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>REUTERS/Ali Hashisho</span></p><p class="caption">Deloitte is not impressed.</p></div><p></p></div></div>Deloitte just trashed the hype around the online lending industry.</p><p>The accountancy and consultancy practice has done a deep dive on the online lending industry and its conclusions should make for devastating reading for anyone connected to the sector.</p><p>Deloitte concludes that marketplace lenders, more commonly called peer-to-peer lenders here in the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>, "are unlikely to pose a threat to banks in the mass market," according to Head of UK Banking Neil Tomlinson. The report concludes that the platforms "will not be significant players in terms of overall volume or share."</p><p>This is a pretty devastating brush off. Marketplace lenders have big ambitions - <a href="http://uk.businessinsider.com/interview-with-funding-circles-samir-desai-and-sam-hodges-2015-10">Funding Circle CEO Samir Desai told us it wants to be lending $100 billion a year over its platform one day.</a></p><p>But the 44-page Deloitte report proceeds to ruthlessly set out why marketplace lenders haven't reinvented the wheel when it comes to lending, why they will struggle to grow much bigger than they already are, and why banks not only have a pricing advantage over them but could copy what they're doing pretty quickly if they chose to.</p><p>The most basic summary of the report is that marketplace lenders can enjoy a profitable, if modest existence targeting specialist, niche segments of the market where their knowledge can be a competitive advantage. But if they target more mass market offerings their destiny is not in their own hands. The success or failure of these platforms will be down to interest rates and banks.</p><h2>A $180 billion industry</h2><p>For those not up to speed, marketplace lending is where online platforms connect people who want to borrow money with people who want to lend cash at an attractive rate. Normally a bank would sit in between these two parties, taking the risk but also the bulk of the return.</p><p>Deloitte has this helpful graphic explaining how it all works:<div class="KonaFilter image-container display-table"><div><div class="image"><p class="source"><span><a href="http://www2.deloitte.com/uk/en/pages/financial-services/articles/marketplace-lending.html">Deloitte</a></span></p></div><p></p></div></div>These types of platforms, or some variation of them, have become hugely popular in the US and Europe since the financial crisis, with big players including Prosper, Funding Circle, and <a href="http://uk.zopa.com/" target="_blank" title="" class="skimwords-link" data-skimwords-id="1010020" data-skimlinks-editor="0" data-skimwords-word="zopa" data-group-id="0" data-skim-creative="300001" data-skim-product="1010020" data-skim-node-id="387:Thesetypesofplatform_1">Zopa</a>. For investors, they offer great returns when interest rates are at rock-bottom levels. For borrowers like small businesses and consumers, they offered credit when other lines were drying up.</p><p>Cormac Leech, an analyst at boutique investment bank Liberum who looks at the space, <a href="http://uk.businessinsider.com/liberums-cormac-leech-on-online-direct-lending-2015-10">estimates the market is worth $180 billion globally</a>. Marketplace lending represented 0.96% of the UK consumer lending market last year and 0.51% of business lending market, according to Deloitte.</p><p>The conventional wisdom is that these platforms are profiting from the misfortune of banks. Hamstrung by new, post-financial crisis regulation banks are having to beef up capital requirements and as a result cut back on lending. Marketplace lending platforms are stepping in to mop up.</p><p>For lenders, the marketplace model offers great returns at a time when interest rates are at historic lows and the UK stock market has been either volatile or insipid. The below Deloitte graph shows returns in the sector average around 7%.<div class="KonaFilter image-container display-table"><div><div class="image"><p class="source"><span><a href="http://www2.deloitte.com/uk/en/pages/financial-services/articles/marketplace-lending.html">Deloitte</a></span></p></div><p></p></div></div>Marketplace lending platforms also like to shout about low default rates, innovative approaches to risk scoring, and lower operating costs in comparison to banks, which means a better deal for borrowers and lenders alike.</p><h2>Marketplace lenders 'do not have a sufficiently material source of competitive advantage'</h2><p>Deloitte agrees that, yes, banks are having a tough time and marketplace lenders are taking advantage. Interest rates are also key to their success.</p><p>But marketplace lenders have not reinvented the wheel when it comes to costs, risk, and speed, Deloitte says. They're profiting from a macroeconomic fluke that likely won't last.</p><p>The report says that these new platforms "do not have a sufficiently material source of competitive advantage to threaten banks' mainstream retail and commercial lending and deposit-gathering businesses."</p><p>Let's look at the marketplace lender's apparent advantages in turn:</p><ol><li><strong>Cost:</strong> Marketplace lenders currently have low operating costs and relatively low customer acquisition costs due to the low interest rate environment. But once interest rates normalize, Deloitte predicts this will quickly be eroded. The report predicts an advertising "arms race" similar to what we've seen in the price comparison website industry. Meanwhile, banks will continue to enjoy cheap capital - it gets all its funds through deposits that keep flowing in. As for operating costs, while they are low now, Deloitte thinks that "when MPLs' [marketplace lenders] loan portfolios are likely to more closely resemble those of the market as a whole, MPLs will have no material source of cost advantage over banks relating to collections and recoveries."</li><li><strong>Risk:</strong> Deloitte says its research "gives us limited grounds to believe that MPLs will systematically price risk better in areas where banks have an appetite to play." While novel new approaches to data have been taken by many platforms - such as using social media data for small businesses to measure customer engagement - "the consensus was that this was unlikely to be the result of a systematic advantage of the MPL model; rather, it would be a specific, model-agnostic, innovation. In other words, banks could exploit the same algorithmic innovations."While default and loss rates are currently low in the industry, Deloitte says "the majority of UK MPLs are yet to go through a credit cycle, and it therefore remains to be seen if there will be an increase in default rates in the event of an economic downturn."</li><li><strong>Speed:</strong> Deloitte says: "Although borrowers currently value the benefits of speed and convenience offered by MPLs, these are likely to prove temporary as banks replicate successful innovation in this area. In addition, Deloitte believes that borrowers who are willing to pay a material premium to access loans quickly are in the minority."</li></ol><p>In short, when it comes to the mass market, marketplace lenders aren't doing anything that the banks can't do better. That's not to say Deloitte doesn't think these platforms have their strengths. The consultancy predicts that marketplace lenders will do best by servicing profitable, specialised niches. By building up specific expertise in areas like, say, asset finance or invoice financing, they can develop an advantage over the banks.</p><p>Deloitte's Tomlinson says: "In the medium term, however, MPLs are likely to find a series of profitable niches to exploit, such as borrowing which falls outside banks' risk appetite and segments that value speed and convenience enough to pay a premium (for example SMEs, particularly in invoice financing, or high-risk retail borrowers)."</p><p>But, by their nature, niches are niche. They're small scale and unlikely to drive the current phenomenal growth we've seen in the marketplace lending sector at quite the same rate.</p><p>Ultimately, Deloitte thinks the growth of the marketplace lending sector will be down to factors beyond the control of the companies - whether banks decide to compete with them or not and whether interest rates rise. This pretty crushing graph shows just how big an impact it thinks both of those factors will have:<div class="KonaFilter image-container display-table"><div><div class="image"><p class="source"><span><a href="http://www2.deloitte.com/uk/en/pages/financial-services/articles/marketplace-lending.html">Deloitte</a></span></p></div><p></p></div></div>If interest rates remain at record lows and banks continue to do nothing, marketplace lenders could have 6% of the UK lending market by 2020. If interest rates rise and banks compete, Deloitte forecasts a market share of less than 1%. That's pretty stark.</p><h2>'Not significant players in terms of overall volume or share'</h2><p>As a result of all of the above, Deloitte concludes:</p><p style="padding-left: 30px;">We believe that MPLs will not be significant players in terms of overall volume or share. We do not believe that marketplace lending will fundamentally disrupt or displace banks' core function as lenders in the mass market. That is not to belittle MPLs' undoubted achievements or the innovation they have brought to the market. But we see them as a sustaining innovation, likely to be limited to serving profitable, underserved segments that are currently overlooked by incumbent banks.</p><p>This conclusion is of course assuming interest rates do return to normal at some point. There's some debate as to whether low interest rates are in fact the new normal. And it also assumes at least some degree of competition from the banks, something that has been up until now relatively pegged back because they've been focused on sorting out regulation and profitability in the current climate. (Deloitte recommends banks partner with online lenders in some way to take advantage of their various specialisms.)</p><p>But even still, the conclusion is a pretty sobering one if you're in marketplace lending. Almost all of these businesses are backed by venture capitalists who invested on the assumption of growth rates continuing unfettered. These investors dream of 10x returns, not gradual growth in niche markets.</p><p>A spokesperson for the P2PFA, the UK industry body for marketplace lending, says in an emailed statement to Business Insider in response to the report:</p><p style="padding-left: 30px;">The growth of peer-to-peer lending in the UK has been consistently impressive, with more than £5 billion lent since 2010. This has been driven by the competitive prospectus for investors and borrowers offered by peer-to-peer lending platforms unencumbered by the legacy systems and costly infrastructure of banks, combined with excellent levels of customer service.</p><p style="padding-left: 30px;">Many of the conclusions in the Deloitte report depend on assumptions which do not reflect the development of peer-to-peer lending to date. Peer-to-peer lending platforms have already established a permanent presence in the mainstream financial services' sector, and the experience of the last economic downturn was favourable: not a single investor lost their capital, and platform performance was positive compared with the operation of the banking sector.</p><p>Online lenders have had a tough time since the start of the year. Lord Adair Turner, the former banking regulator between 2008 and 2013, said in February that: <a href="http://uk.businessinsider.com/ex-fsa-chief-adair-turner-fintech-p2p-lending-interest-rates-2016-2">"The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses."</a></p><p>More recently LendingClub, the poster child of online lending in the US, has <a href="http://uk.businessinsider.com/lendingclub-faces-doj-and-sec-investigations-could-buy-more-of-its-loans-2016-5">been engulfed in a scandal over disclosure and minor doctoring of loans that has led to the ousting of its CEO and founder.</a></p><p class="tagline"><div id="categorypromo"><p></p></div></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/alibaba-jack-mas-secrets-to-success-2016-5">REVEALED: Alibaba founder Jack Ma's secrets to success</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="htYmNtMzE6dD7eBpI_wAtO8n2X-00eMe" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Deloitte just trashed the hype around a $180 billion fintech market

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>YouTube</span></p><p class="caption">It's the wild west out there.</p></div><p></p></div></div>China's online peer-to-peer lending sector - where savers lend out money directly to businesses and consumers over the web - is by far the biggest in the world, but it's also one of the most unregulated.</p><p>Henry Yin, managing director of CreditEase, <span>one of China's biggest platforms,</span> gave an idea of just how big and dangerous it is by outlining how huge losses have been so far.</p><p>Speaking at the LendIt Europe conference in London last week, Yin said Chinese investors, the majority of them unsophisticated individuals playing with savings, have lost an estimated $1.2 billion (£780 million) putting money into Chinese peer-to-peer lending platforms, largely over the last 18 months.</p><p><a href="http://qz.com/419494/nearly-a-quarter-of-chinese-peer-to-peer-lenders-have-already-failed/">A Morgan Stanley report quoted by Quartz</a> claims there were around 1 million P2P investors in China by December last year, up from 200,000 in the same month a year earlier - it's growing fast.</p><p>If ordinary investors were losing hundreds of millions in the US or the UK there would be uproar - but in China, the story has gone largely under the radar.</p><p>What's more, most of the money lost has not been due to bad loans made on these platforms, but dodgy platforms themselves.</p><p>Yin said over 700 online lenders have gone bust in China <em>this year alone</em>. The majority go sour for two main reasons:</p><ul><li>'Run away platforms': People set up dodgy platforms, take deposits, then just shut up shop and disappear.</li><li>'Self-funding': Where platform owners fabricate loan flow and instead use deposits to fund their own personal projects.</li></ul><p>Rhydian Lewis, CEO of UK peer-to-peer lender RateSetter, visited China last year and <a href="http://uk.businessinsider.com/china-regulate-peer-to-peer-and-internet-finance-2015-8">told Business Insider earlier this year</a> that the market was going through "a Darwinian process on steroids."</p><p>Peer-to-peer lending in China is like the wild west right now - an unregulated free for all where scam artists are as welcome as genuine entrepreneurs.</p><p>Most of the malpractice happens on a small scale at the bottom of the market, which partly explains why it has failed to generate big headlines.</p><p>Despite the huge number of platforms going bust, there are still an estimated 2,000 online lenders in China and just 50 represent about 50% of the market. And online lending remains a tiny fraction of China's financial services overall too.</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Oscar Williams-Grut/Business Insider</span></p><p class="caption">A slide from Yin's presentation shows just how small a fraction peer-to-peer is of the overall market.</p></div><p></p></div></div></p><p>A bigger story in China has been the <a href="http://uk.businessinsider.com/statistics-on-chinese-invested-in-stock-market-crash-2015-7">losses ordinary people have had playing the stock market</a>, which <a href="http://uk.businessinsider.com/chinese-stocks-are-getting-hammered-again-2015-8">crashed spectacularly from July onwards</a>.</p><p>But regulators are <a href="http://uk.businessinsider.com/china-regulate-peer-to-peer-and-internet-finance-2015-8">now beginning to get a handle on the online lending sector</a>. The first official principles for how the market should operate were outlined by the government in July and concrete rules are expected imminently.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/ceo-raised-the-price-of-a-pill-5000-percent-is-doubling-down-2015-9">The CEO who raised the price of a life-saving pill 5,000% is doubling down</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="4xZm9udzobolP_ZeZXG2IBoQ3LWSOQUU" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Chinese investors have lost $1.2 billion in the country's wild west online lending industry

<h3><strong><div class="KonaFilter image-container float_right click-to-enlarge"><div class="image on-image"><a title_source="BII" title_caption="" class="zoomin" href="https://static-ssl.businessinsider.com/image/55565a9f6bb3f72b52806afc-960/peer-to-peercover.jpg"><span class="sprites click-to-enlarge-icon" title="Click to enlarge"></span></a><p class="source"><span>BII</span></p></div><p></p></div></strong></h3><p>Banks have historically handled most consumer and small business lending because they have the resources to assess a borrower's creditworthiness, and the regulatory approval to fund loans. However, this model has some key inefficiencies - interest rates are not individualized, the costs of underwriting loans are high, loan decisions can take months, and small businesses in particular have been shut out of the process.</p><p>This has left room for the growth of online lending marketplaces - dubbed peer-to-peer (P2P) lenders - that leverage the internet to give both borrowers and investors a better deal. </p><p><span style="line-height: 1.5em;">P2P lenders solve the banking model's inefficiencies by developing online marketplaces that use complex algorithms to match borrowers with investors according to each party's specifications. </span></p><p><span style="line-height: 1.5em;">In new <strong><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;">research</a></strong> from <strong><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;">BI Intelligence</a></strong>, we look at the mechanics of P2P lending platforms and how they are using online marketplaces to lower rates, increase returns, and expand opportunities for borrowers and investors. We also provide a <strong><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-MARKET-REPORT/p/50470451" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;">companion report on the top markets for P2P lending</a></strong> and the next major countries where growth will take off.</span></p><p><span style="line-height: 1.5em;">Here are some of the key takeaways:</span></p><ul><li><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;"><strong>Peer-to-peer (P2P) lending platforms offer loan opportunities outside of traditional lending institutions.</strong></a> P2P platforms leverage metrics such as credit scores and social media activity to link borrowers and lenders at favorable interest rates. Platforms have lower regulatory burdens because they are merely acting as intermediaries between borrower, lender, and partner bank, and thus can keep fees and rates low.</li><li><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;"><strong>The P2P lending industry is seeing significant growth, especially in developed countries with strong financial markets.</strong></a> P2P lenders in the US generated $6.6 billion in loans last year, up 128%. <strong><br /></strong></li><li><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;"><strong>P2P borrowers are often individuals seeking to refinance debt at reasonable rates or small businesses that have trouble getting low-value loans from traditional institutions.</strong></a> </li><li><strong><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;">Lenders are typically individuals seeking a higher rate of return than can be garnered from other interest-bearing accounts.</a></strong> In addition, larger financial institutions, like hedge funds, have begun buying up pools of P2P loans. </li></ul><p><span style="line-height: 22.5px;"><strong><a href="http://www.businessinsider.com/intelligence/research-store?IR=T#!/THE-PEER-TO-PEER-LENDING-EXPLAINER/p/50470446" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;">Purchase the full report.</a></strong><span><br /></span></span></p><div style="margin: 20px auto; text-align: center !important;"><div class="KonaFilter image-container display-table"><div><div class="image"><a href="&lt;a href=" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;"></a></div></div></div> <span style="font-size: 20px; font-family: tahoma, geneva, verdana, sans-serif; color: #1e2c38; display: block; padding-top: 5px; padding-bottom: 7px;">THE PEER-TO-PEER LENDING EXPLAINER</span> <span style="font-size: 20px; font-family: tahoma, geneva, verdana, sans-serif; color: #a20505;">$395.00</span><div style="margin: 6px auto 0px auto; width: 168px; height: 39px; background-color: #599fda; overflow: hidden;"><div class="KonaFilter image-container display-table"><div><div class="image"><a href="&lt;a href=" target="_blank" onclick="this.href = this.protocol + '//' + this.hostname +  this.pathname + this.search + '&amp;' +  window.location.search.substr(1)+ this.hash;"></a></div></div></div></div></div>

PEER-TO-PEER LENDING: How digital lending marketplaces are disrupting the predominant banking model

<ul class="summary-list"><li>Business Insider Intelligence is launching its brand new Banking coverage in early September.</li><li>To obtain a free preview of our Banking Briefing, please <a href="https://www.businessinsider.com/intelligence/banking?IR=T&amp;itm_source=businessinsider&amp;itm_medium=content_marketing&amp;itm_campaign=report_teaser&amp;itm_content=learn_more_text&amp;itm_term=bundle_subscription_text_link-alternative-lending-nonbank-industry">click here.</a></li></ul><p>Nonbanks and alternative lending institutions are making their way into the banking industry - posing a major threat to incumbent banks. Alt lenders' ability to utilize technology and provide efficient and effective lending services to underserved businesses and individuals is allowing them to penetrate the market and find success. <div class="KonaFilter image-container display-table float_right no-rightrail"><div><div class="image"></div></div></div></p><p>Below we break down what alternative lending is, list the top alt lenders in the industry, and detail how alternative financial institutions are threatening the dominance of incumbent banks.</p><h2>What is alternative lending?</h2><p>Small businesses typically struggle when attempting to receive financing, so oftentimes they turn to alternative lending - where funds are provided outside of traditional banking. Nonbanks - financial institutions that do not have a full banking license - also offer different lending options to smaller businesses. </p><p>Nonbanks can engage in typical bank-related services like credit card operations and various lending services, such as mortgage lending. These lenders provide users with easier access to obtaining loans - especially for consumers who may not have the best credit.</p><h2>Nonbank and Alternative lending industry trends</h2><p>The presence of alternative lenders and digitally advanced nonbanks is continuing to grow in the banking industry - pressuring traditional financial institutions to digitize their own lending options. <div class="KonaFilter image-container display-table float_right no-rightrail"><div><div class="image"></div></div></div></p><p>According to Oracle's Digital Demand in Retail Banking study of 5,200 consumers from 13 countries, over 40% of customers surveyed think nonbanks can better assist them with personal money management and investment needs, and 30% of respondents who haven't tried a nonbank platform said they're open to trying one.</p><p>Alt lenders are also garnering attention, particularly from small- and medium-businesses (SMBs). According to data reported by <a href="https://www.smefinanceforum.org/data-sites/msme-finance-gap">SME Finance Forum</a>, in 2018 there was funding gap of $5 trillion between the financing needs of SMBs and the institution-based financing available to them - causing SMBs to seek alternative funding options. </p><p>Alt lenders use technology like artificial intelligence and machine learning to gather data and onboard customers, and Business Insider Intelligence's <a href="https://www.businessinsider.com/smb-lending-report">SMB Lending Report</a> explains that if incumbents don't explore technology advancements, alt lenders could begin taking a larger share of the market.</p><h2>Types of nonbank alternative loans</h2><p>Nonbanks offer customers and businesses a variety of loan options including: mortgage loans, small business alternative loans, and peer-to-peer loans. </p><h3>Nonbank mortgage loan</h3><p>Due to the regulation of mortgages, it can be difficult for incumbents to digitize the lending process, and the inability of traditional banks to adapt to the digital landscape has lead to an increase in alt lenders supplying mortgage loans to consumers. </p><p>Business Insider Intelligence's <a href="https://www.businessinsider.com/the-online-mortgage-lending-report-2019-7">Online Mortgage Lending Report</a> found that the top five US banks - Wells Fargo, Bank of America, and JPMorgan Chase, US Bancorp, and Citigroup - only accounted for 21% of total mortgage originations, which is a huge decline from their 50% combined market share in 2011.</p><p>Alt lenders are a threat to incumbents because they can provide traditional financial products, like mortgage loans, to consumers at a lower cost with more relaxed eligibility criteria. This combined with their technological offerings allows alt lenders to provide mortgage loans in a more attractive way. </p><h3>Small business alternative loan</h3><p>Loan applications from microbusinesses and small businesses are commonly rejected by traditional financial institutions. Due to the looser regulations for alt lenders, they can capitalize on the high demand of smaller businesses. </p><p>According to a <a href="https://www.richmondfed.org/-/media/richmondfedorg/community_development/resource_centers/small_business/pdf/credit_survey/sbcs-2015-report.pdf">survey</a> from the Federal Reserve Bank of Richmond, in 2016 only 58% of loan requests from small businesses were approved by incumbent banks, compared to 71% approved by alt lenders that same year. </p><p>Alt lenders have the ability to leverage a broad set of data and machine learning - allowing them to reach further into the small business lending market than incumbent banks. </p><h3>Peer-to-Peer (P2P) loan</h3><p>Peer-to-Peer loans - one of the most popular forms of alternative lending - bring together a borrower, an investor, and a partner bank through an online platform. Leveraging metrics, like credit scores and social media activity, P2P platforms can link borrowers to lenders at suitable interest rates. <div class="KonaFilter image-container display-table float_right no-rightrail"><div><div class="image"></div></div></div></p><p>P2P lending platforms facilitate interactions without actually owning the loans - allowing them to keep costs low. This quality is particularly attractive to customers looking to refinance existing debt at the lowest rate possible. </p><h2>Top nonbank and alternative lenders</h2><ul><li style="font-weight: 400;"><strong>SoFi: </strong>This startup initially focused on student loan refinancing, but has expanded to include mortgage loan refinancing, mortgages, and personal loans. In 2019 SoFi closed a $500 million funding round led by Qatar Investment Authority - posing a threat to incumbent banks. <div class="KonaFilter image-container display-table float_right no-rightrail"><div><div class="image"></div></div></div></li><li style="font-weight: 400;"><strong>Quicken Loans: </strong>This established nonbank is known for its Rocket Mortgage, an online mortgage application that takes less than10 minutes to complete. In Q4 2017, Quicken Loans became the largest US residential mortgage originator by volume - even beating out Wells Fargo.</li><li style="font-weight: 400;"><strong>Kabbage: </strong>This was one of the first online lending platforms and uses third-party data to avoid SMBs submitting wrong information. The startup offers business-to-business operations, and in July 2019 it secured $200 million revolving credit facility after already receiving a $700 million securitization agreement three months prior. </li><li style="font-weight: 400;"><strong>PayPal:</strong> PayPal is a popular P2P lending service poised to grow at a 42.7% five-year compound annual growth rate to hit $574 billion by 2023. PayPal also owns Venmo, a P2P lending app commonly used by millennials, and is on pace to drive $100 billion in volume in 2019.</li></ul><h2>Alternative lending market</h2><p>Even though traditional banks still hold the largest market share for business lending, growth has continued to slow - suggesting an increased demand for alt lending platforms. Through technology that uses AI and machine learning, alt lenders are able to efficiently onboard customers.</p><p>According to Business Insider Inteligence's SMB Lending Report, SMBs make up nearly all of private sector businesses in the US and employ 60% of all workers in the country. However, SMBs usually have trouble when applying for loans at incumbent banks and instead turn to alternative lending platforms. </p><p>Due to the massive SMB market size, alternative lending companies are positioned to threaten to incumbent banks, and unless traditional banking institutions update their lending practices, alt lending technologies could potentially overhaul legacy processes and gain a greater percent of the overall market share.</p><h1>Banking Industry Analysis</h1><p>With the integration of digital technology, so many facets of the banking industry are undergoing constant change, and it's critical for top decision makers to stay informed on the rise of alternative lending trends. That's why Business Insider Intelligence is launching Banking, our latest research coverage area that will keep you up to date on how nonbanks and alternative lending are impacting the banking industry.</p><h3><a href="https://www.businessinsider.com/intelligence/banking?IR=T&amp;itm_source=businessinsider&amp;itm_medium=content_marketing&amp;itm_campaign=report_teaser&amp;itm_content=learn_more_text&amp;itm_term=bundle_subscription_text_link-alternative-lending-nonbank-industry">Click here to obtain an exclusive FREE preview of Banking!</a></h3><p class="tagline"><a href="https://www.businessinsider.com/intelligence/banking?IR=T&amp;itm_source=businessinsider&amp;itm_medium=ctgr_bii&amp;itm_term=ctgr_leadgen&amp;itm_content=banking&amp;itm_campaign=banking"></a>Read the <a href="/banking">latest banking industry news </a> &amp; featured articles:<ul><li><a href="/banking-industry-trends">Banking Industry Trends 2019</a></li><li><a href="/future-of-banking-technology">Future of Banking Technology</a></li><li><a href="/mobile-banking-market-trends">Mobile Banking Market in 2019</a></li><li><a href="/banking-as-a-service-industry">Banking as a Service Explained</a></li><li><a href="/largest-banks-us-list">Largest Banks in the US</a></li></ul></p>

You Searched For "lending platforms" and got 13 results

Institutional investors are flocking to these alternative lending platforms

Evan Bakker

AI lending platform Upstart lays off 7% of employees

IANS

Crypto trading and lending platform Vauld stops customer withdrawals, trading, and deposits

IANS

Cryptocurrency lending platform Celsius lays off a quarter of its workforce

IANS

Another crypto lending platform is freezing withdrawals as the industry's downward spiral continues

Katie Canales

A big investment bank just signed up to lend over £40 million on mortgage funding platform LendInvest

Oscar Williams-Grut

RBI asks banks, NBFCs to disclose digital lending agents upfront

PTI

Some UK peer-to-peer lenders are buying each other's loans and the watchdog is worried

Oscar Williams-Grut

Funding Circle is absolutely dominating Britain's peer-to-peer lending industry

Oscar Williams-Grut

Deloitte just trashed the hype around a $180 billion fintech market

Oscar Williams-Grut

Chinese investors have lost $1.2 billion in the country's wild west online lending industry

Oscar Williams-Grut

PEER-TO-PEER LENDING: How digital lending marketplaces are disrupting the predominant banking model

Evan Bakker

A look at the nonbank and alternative lending industry in 2019

Alicia Phaneuf

Popular Keywords

Buying Guides

You Searched For "lending platforms" and got 13 results

Institutional investors are flocking to these alternative lending platforms

Evan Bakker

AI lending platform Upstart lays off 7% of employees

IANS

Crypto trading and lending platform Vauld stops customer withdrawals, trading, and deposits

IANS

Cryptocurrency lending platform Celsius lays off a quarter of its workforce

IANS

Another crypto lending platform is freezing withdrawals as the industry's downward spiral continues

Katie Canales

A big investment bank just signed up to lend over &#163;40 million on mortgage funding platform LendInvest

Oscar Williams-Grut

RBI asks banks, NBFCs to disclose digital lending agents upfront

PTI

Some UK peer-to-peer lenders are buying each other's loans and the watchdog is worried

Oscar Williams-Grut

Funding Circle is absolutely dominating Britain's peer-to-peer lending industry

Oscar Williams-Grut

Deloitte just trashed the hype around a $180 billion fintech market

Oscar Williams-Grut

Chinese investors have lost $1.2 billion in the country's wild west online lending industry

Oscar Williams-Grut

PEER-TO-PEER LENDING: How digital lending marketplaces are disrupting the predominant banking model

Evan Bakker

A look at the nonbank and alternative lending industry in 2019

Alicia Phaneuf

Popular Keywords

Buying Guides

A big investment bank just signed up to lend over £40 million on mortgage funding platform LendInvest