the peer-to-peer landscape - cuna councils€¦ · the peer-to-peer landscape presented by:...

The Peer-to-Peer LandscapePresented by:

SimplyCredit Inc

Karthik Sethuraman, CEO Alan Bahr SVP, Business Development

September 15, 2016

Agenda

Peer-to-Peer (P2P) Lending Defined

Performance of Key P2P Platforms

Signs of Disruption

Recent Developments

Strategies for Credit Unions

Q&A

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Peer-to-Peer (P2P) Lending Defined

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A Short QuizPeer-to-peer (P2P) platforms crowdsource funds primarily from individuals who have cash and

lend to individuals who need cash

True

FalseWhich of the following is NOT a characteristic of P2P platforms?

A. Online Loan Origination

B. Capacity to Portfolio Loans

C. Automated UnderwritingD. Loan Servicing

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FALSE

B

The Term Peer-to-Peer is a Misnomer

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80% - 90%

10% - 20%

Source: PwC, Feb 2015

P2P Shareholders and Investors

Institutional investors are banks, hedge funds, or other business entities… Approximately 40 different funds have committed to purchase assets from P2P platforms, with at least 12 different funds committing $200 million or more

PwC, Feb 2015

Board members at the largest P2P platforms include executives at some of the largest banks in the world including Morgan Stanley and Citigroup... WellsFargo, through its venture capital arm, is the largest investor in LendingClub

Forbes, Oct 2014

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Summary: What is P2P Lending?Increasingly referred to as Marketplace Lending

Borrower transactions are consummated online, leading to lowered transactional costs

Institutional investors dictate underwriting requirements

Most loans are unsecured, but platforms are expanding into other lending types

The P2P platform generally services the loan

There is no common bond between borrowers and investors—P2P platforms intermediate cash flows

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Performance of Key P2P Platforms

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A Short Quiz

P2P lending is growing, but it’s still a niche business

True

FalseP2P platforms encroach on credit union core businesses

TrueFalse

P2P platforms are only interested in low credit-quality tiers

TrueFalse

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FALSE

TRUE

FALSE

P2P Volume Outpaces Other Lenders

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Top P2P Lenders Worldwide

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P2P Touches on Many Borrowing Needs

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P2P Fills the Entire Credit Spectrum

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Similar Platforms—Different Strategies

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Type

of L

endi

ngBusiness

Student

SecuredConsumer

UnsecuredConsumer

Investor Warehouse Deposits Lending Partners

Liquidity Source

SimplyCreditGoldman

Sachs

SoFi

Common Bond

Prosper

OnDeck

Kabbage

LendKey

Lending-Club

LendingHome

Avant

LendStreet

Signs of Disruption

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FinTech Versus Bundled Services

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P2P Strategies Revolve Around:Use of an Online / Mobile

PlatformEmploys Sophisticated AnalyticsTarget MarketingProprietary U/W and Pricing

ModelsDisseminates Superior ContentConsumer EducationElectronic Delivery

Focuses on User ExperienceSimplified Application ProcessManagement Tools and Reporting

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OnlinePlatform

and Social Media

Analytics

Focus on User

Experience

SuperiorContent

Do You Hear These Warnings?

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Someone else seems to know what I need, when I need it.

Hmmm…I can get all kinds of financial services and support online today.

Why can’t I get the information from you?

But I might have to go elsewhere for my other services.

I received a great loan offer through email. Can you match it?Can’t I just apply and get what I need online?

There’s a great website where I get all the financial information I need.

Don’t worry, I’ll keep my checking account with you.

What is happening with your average products per member metric?

Recent Developments

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The Market Leader is Ailing

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What Caused Originations to Fall?

21Source: LendingClub, Aug, 2016

A Short Quiz

Which of the following is the primary reason for LendingClub’s decrease in originations?

A. Falling consumer demandB. An increase in targeted credit quality

C. A computer glitchD. A drop in investor demand

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No, apps doubledNo, quality was stableNo, systems were fine

Fewer Apps are Being Approved

23Source: LendingClub, Aug, 2016

Implication of Wall Street Reliance

P2P platforms are heavily reliant on Wall Street liquidityWhen their liquidity diminishes, P2P platforms suffer

The platforms offer terms approved by hedge funds and other institutional investors

For the benefit of investors, loans are pooled and packaged into notes, similar to mortgage pass-through securities

P2P platforms do not introduce borrowers to their investor partners

For credit unions, traditional P2P platforms pose a difficult collaboration problem:Loan growth?Direct member interaction?

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Strategies for Credit Unions

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Credit Union Strategies

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Questions and Answers

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Thank You

Alan Bahr, SVP alan@simplycreditinc.com

Karthik Sethuraman, CEO karthik@simplycreditinc.com

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