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June 1st 2016, Daily News Digest


  • Customer acquisition strategies for online lenders.
  • Shanda’s has 15.7 million call options and 29 mil share for his total of 11.7%.
  • Interesting analysis for seasonality in loan performance.
  • Interesting comparison of unsecured personal vs small business segments.
  • Survey of small businesses’ experience with online lending.

United Kingdom

  • Bankers interested in more securitizations in Europe.


  • A company makes commercial underwriting software available to consumers for loan negociations purposes.


  • Investree raised round A from Kejora.


  • The €1 trillion p2p debt market for renewable energy financing by 2020.


  • Estonia’s E-Residency integrated with online securities platform.


United States

What’s the Trojan Horse distribution strategy for online business lending?,(Daily Fintech), Rated: AAA

More lenders are now fighting for the same customer. The online advertising space is a good example where this battle is played out, with costs usually spiralling upwards. Here, those with the deepest pockets tend to win – think Amazon against the average bookshop as a sector parallel – although it can be costly and unsustainable even for them.

As a point of reference, in Australia, the Cost per Click (CPC) for ‘business loan’, or some keyword variant, is currently around AU$20 -$30. In the U.S. the numbers are a little less friendly – CPC is more likely around the US$50 mark, according to SEMRUSH.cac in australia

Competition means more choice, which ultimately results in discounting to win a customer to maintain sales volumes and growth targets. This is true if your product is non-differentiated. And, I would argue most small business online lenders fall into this category.

So what options do you have as a small business lender to maintain healthy margins?

  1. Make your product its own distribution network – the Trojan Horse strategyThis is probably the hardest to achieve, but probably the most defensible in the long run. In small business lending, the best examples of this strategy in play are the new breed of Merchant Cash Advance lenders: PayPal Working Capital, Square Capital and Shopify Capital.

    These companies start by capturing a more utilitarian and ‘winnable’ section of market – payments.

  2. Find ‘greenfield’ distribution strategies

    I liken this to finding mutual ‘win-win’ opportunities with partners close to a small business lenders target market. If a small business lender can help another business grow by recommending their product without having to pay a commission then this can have a huge impact on lowering CAC.

  3. Tried and tested

    Affiliate programs or business broker referrals.

Tianqiao Chen’s Holdings in Lending Club Include Sizable Call Options, (Crowdfund Insider), Rated: AAA

Today an SEC filing, regarding beneficial ownership of Lending Club, indicates that Tianqiao Chen also owns a good amount of options on Lending Club. Chen controls a whopping 15.7 million in call options at an exercise price of $3 to $4 per share.  The options expire on June 17, 2016.

These options are on top of the 29,047,930 in Lending Club stock he owns.  With the shares trading over $4/share today – these options may end up as a profitable move.

Seasonality in Loan Performance, (Orchard), Rated: AAA

Seasonality in loan performance is a well-established characteristic of mortgages and credit cards. First, delinquency rates tend to rise in the 4th quarter, as consumers increase spending and credit card purchases during the holiday season. Second, delinquency rates tend to fall in the spring, as consumers receive tax returns that can be used to pay off loan obligations.  As mentioned before, these trends are well established in the mortgage and credit card markets; now let’s investigate to see whether these same characteristics hold for the marketplace lending environment.


Here we do see a similar pattern presenting itself in each year: rates fall for the first few months of the year, reaching lows some time between March and April, then rise later in the year, peaking in October or November.

From the lows of March and April to the peak in October, we would expect to see the transition rates in a given year increase by 12bps due to seasonal factors.

We see that from 2013 through late 2014, the overall trend was toward lower transition rates, while through 2015 we saw a trend of rising rates, flattening slightly toward the end of the year.

Consumer Unsecured/Small Business Comparisons, (Orchard), Rated: AAA

Orchard’s Originator Database catalogs 180 different originators across 11 asset classes. In aggregate, these originators have issued over 3 million loans totaling $41 billion dollars lent and estimate to originate $25 billion in 2016.

consumer unsecured small business comparison 1 consumer unsecured small business comparison 2 consumer unsecured small business comparison 3

What Does Main Street Think Of Online Lending?, (Forbes), Rated: AAA

The Electronic Transactions Association (ETA) in March commissioned Edelman Intelligence to conduct an online survey of 592 small business organizations to learn more about their experience with online lenders. The results are quite interesting.

  • 96 percent of those surveyed said that the capital they borrowed online fueled business growth.
  • 91 percent of them said they were likely to take another loan from an online lender in the future.
  • 99 percent of those surveyed expressed overall satisfaction with their online business loan
  • Speed of Funding: 63 percent of respondents indicated this as the top reason they chose an online loan.
  • Easy Application Process:  57 percent of respondents chose an online lender over other options.
  • Affordable Total Cost: This might be counterintuitive to many who read about the high cost of online loans. Total cost of financing is a very important metric for financing growth initiatives or other loan purposes with a defined return on investment (ROI). Depending upon the loan term, it’s possible for a higher-APR loan to carry a lower overall dollar cost.
  • 57 percent of them chose a six-month loan over a nine-month loan (with a lower APR) in order to minimize the total fees and expenses.
  • 67 percent of the businesses surveyed believe they have more options for financing today than they did just five years ago.
  • 94 percent of these business owners see having additional capital access options as a positive.

Domination of Institutional Investors Pose Challenge to P2P Platform : Ken Research, (Open PR), Rated: B

Comment: Report from Ken Research on p2p lending. We have not had access to the report and therefore can not evaluate its contents.

P2P lending platforms have recorded a 400-425 basis point advantage over traditional channels.

Peer-to-Peer Lending Market – Global Industry Analysis, Size, Share, Growth, Trends and Forecast 2016 – 2024, ( Reportlinker), Rated: B

Comment: a second report on the industry. We are also un-able to access the report to evaluate it. 

The report includes an overview of the market strategies, annual revenues, and the recent developments of key companies operating in the market. The key market participants profiled in this study include LendingClub Corporation, Prosper Marketplace, Inc., CommonBond Inc., Upstart Network Inc., Funding Circle Limited, CircleBack Lending, Inc., Peerform, Social Finance Inc., Pave, Inc., and Daric Inc.


United Kingdom

Bankers look to P2P loans for next big securitisation play, (eFinancial News), Rated: AAA

Rob Ford, a partner and fund manager at TwentyFour Asset Management, said: “No one wants a flop and no one wants a failure and no one wants that to happen in the early stages. The reality is it’s still relatively young and still relatively untested, but if banks think they can put a successful deal together then there will be plenty of appetite among banks to do deals.”

In the European market, some practitioners were alarmed by the structure of Funding Circle’s deal. In the wake of the financial crisis, regulators introduced rules that require ABS issuers to retain a portion of the risk, often referred to as skin in the game rules. But while Funding Circle originated the loans and will service the bonds, it holds none of the risk as the loans were sold to KLS Diversified Asset Management, a New York-based hedge fund, which in turn bundled the up and securitised them. Some say this has echoes of the originate-to-distribute model that contributed to the crash.

Moody’s cited this as a concern in its rating of the Funding Circle loan securitisation – known as SBOLT 2016-1 – but added that this was partially mitigated by the fact KLS will retain at least 5% of the portfolio.

Despite concerns, investment bankers are optimistic about the potential for peer-to-peer loan securitisations in Europe.

The European bank DCM head said: “It should become a reasonably important part of the market because larger players such as banks are not issuing so much anymore because of all the central bank liquidity programmes.

Aaron Baker, a credit analyst at BBVA in London, said: “Those banks which have a securitisation presence or who are involved in the provision of warehouse lines are more likely to evaluate the possibility of bringing these transactions to market as soon as they can, not only from a franchise value perspective, but also to assist in refinancing their warehouse lines.”

Funding Circle’s Patel said he was approached by several major banks in the run-up to Funding Circle’s debut deal before it hired Deutsche Bank to manage the transaction. He added that he was hopeful the bond would be the first of many peer-to-peer loan securitisations in Europe.

First QROPS Edging Towards Peer-To-Peer Lending, (Money International), Rated: A

Peer to peer lending platform RateSetter is working with a Qualifying Recognised Overseas Pension Scheme (QROPS) provider.

RateSetter already offers SiPP pension savers in the UK the chance to invest in P2P lending with an average return of 4.58%.

Provider Concept, which runs the Gibraltar Aurora Europa QROPS is in discussions to offer P2P lending as part of their scheme.

What fintech startups can expect from London’s new mayor, (Bobs Guide), Rated: A

“Perhaps the biggest potential issue facing London’s businesses is the prospect of the UK leaving the EU…I believe our interests clearly lie with Britain remaining in Europe and, as mayor, I will do everything I can to persuade Londoners that we are better off staying in.”

He’s made good on that promise, joining prime minister David Cameron to launch a “Remain” battle bus and campaign for voters to vote to stay in Europe. But this is just the most pressing issue facing the sector.

Another key issue facing the sector – and one that anyone that lives, works in and visits London will be familiar with is – the city’s poor broadband and internet connectivity.

Another part of the infrastructure issue facing the UK and London in particular is the availability of affordable office space

Meanwhile, access to the best talent, ideas and entrepreneurs, is essential if London is to sustain its tech and fintech credentials moving forward. A manifesto compiled by Tech London Advocates, Tech UK and think tank Centre For London, published earlier this year cites a study from O2 which suggests the UK will need to fill 766,000 new digital jobs by 2020 and train 2.3m digitally skilled workers. It’s worth noting, of course, that one of the city’s most high-profile FinTech startups, TransferWise, was co-founded by two Estonian entrepreneurs.


Celebrate innovation that puts the customer in charge, (The Sydney Morning Herald), Rated: A

Uno gives consumers access to the software used by mortgage brokers.

This means you’re not looking at the advertised rates you can find on a comparison site, but at true industry rates that take your individual circumstances into account. The more information you enter, the more exact the pricing will be.

The tool’s transparency may also help restore trust. You can be confident you’re not getting a recommendation tainted by commissions because if there’s a better deal, you’ll be able to see it. Uno as a business is funded by commissions, but its expert advisers are on salary and don’t get sales incentives.

Credit cards and personal loans are ridiculously profitable for the banks. Unsecured consumer lending is 3 per cent of all loans by dollar value, but 7 per cent of profit and 11 per cent of risk-adjusted profit, according to JP Morgan and P2P lender MoneyPlace. Consumer finance profit margins are 10 times higher than for mortgages.


Uncertain Landscape for Lufax, (Seeking Alpha), Rated: A

Lufax probably isn’t in urgent need of cash since it just raised $1.2 billion earlier this year, valuing it at $18.5 billion. Lufax has several strong points compared to many of its peers, including the presence of a foreigner with financial background at its helm and also financial services giant Ping An as its major backer.


Indonesia P2P lending startup Investree to raise Series A from Kejora, (Deal Street Asia), Rated: A

Indonesian online peer-to-peer lending marketplace Investree said it has secured a series A funding commitment from a local venture capital firm, Kejora. Details of the amount, however, have not been disclosed.

Before securing the funding commitment, Investree has been bootstrapping for almost a year, raising $500,000 for its initial stage development. Investree and Kejora will officially sign the agreement in June.

As of May, Investree has disbursed 23 loans totaling Rp6.8 billion. Average funding period is five days with 16.7 per cent average return to lenders. Total loans default is still maintained at zero.

Indonesian Financial Services Authority (OJK) has estimated that the actual needs of business financing in the country would be around Rp1,600 trillion. In reality, only Rp600 trillion could be disbursed every year through banking, capital market, and multi finance.


Crowdfunding the European Transition to Renewable Energy, (Plugin Europe), Rated: A

By 2030, the EU wants to be the worldwide leader in renewable energies with 27% of the energy consumed by EU citizens coming from renewable energy sources.

This transition requires huge capital investments estimated at around €70 billion per year, i.e. €1 trillion between now and the year 2030.

Properly vetted renewable energy investments promise to retail investors steady returns at a relatively low level of risk. Debt securities are the preferred instruments to raise funds for these typically long term projects. Interest rates vary along with the risk and the term of the project from 3% to 12%.

Lumo, for example, just launched a crowdfunding campaign that combines a 15-year senior bond with a 3.1% interest rate and a 9-year junior bond that offers 4.5%. “The good thing about investing in a renewable energy power plant is that it brings money in year one. […] Bonds enable us to attract retail investors with a relative secure investment that gives them early returns” says Alex Raguet.

In the UK, crowdfunding platform Abundance offers debentures with a term period of 15 to 20 years. To alleviate its investors’ liquidity risk, the platform provides a bulletin board that enables them to resell their debentures. – See more at: http://plugineurope.com/2016/05/crowdfunding-the-european-transition-to-renewable-energy/#sthash.b2wDAV9y.dpuf


Crowd valley integrates e-residency platform to enable fully digital finance services, (Press Release), Rated: A

Comment : interesting for the e-Residency concept.

Crowd Valley, the digital back office provider for online private securities platforms, announces its collaboration with the Estonian e-Residency program.  Crowd Valley will develop and extend its offerings through its work with e-Residency, a secure digital identity platform. The integration allows those with Estonian e-Residency’s secure digital ID to quickly and securely authenticate themselves or digitally sign in the private securities platforms supported by Crowd Valley.

E-Residency is a transnational digital identity offered by the Republic of Estonia. E-Residency enables everyone, everywhere to securely identify him or herself online, open and run a location independent business, and take advantage of a marketplace of services specifically for e-residents. E-residents receive a smart ID card which provides digital identification and authentication to secure services, digital signing of documents, digital verification of document authenticity and document encryption. Combined with the digital infrastructure that Crowd Valley provides its clients, online platforms can now seamlessly transact in digital finance marketplaces in a purely online fashion.

George Popescu
George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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