Future of Peer to Peer Lending
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The Peer to Peer Lending or marketplace lending sector is booming, portraying an almost too good to be true story. Many expect some disruption to this good news story. We explore what the future holds for peer to peer lending. More importantly, we examine the characteristics of future leaders in the peer to peer lending sector. We also take a look at possible regulatory developments in this sector and how they will impact peer to peer lenders. Get video presentation by clicking this link http://vedanvi.com/future-of-peer-to-peer-lending/
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Future of Peer to Peer Lending
- 1. The Future of P2P Does it look bright? 1
- 2. • Should we invest P2P loans? • Should we invest in a platform? • Should we launch our own platform? • Will this growth continue? • Will yields be as good in future? • Is this a bubble? • What about risks in this market? • What regulation and compliance? Your Questions 2
- 5. Europe 5
- 6. ` Drivers of Exponential Growth • Banks de-leverage • Huge un-met demand • Government Drive • Regulation? (Unbelievable!) • Technology • Millennials & Changing Consumers • Low interest rates 6
- 8. • Specialised Niches • Align to attract • “Co-opetition” with Traditional Players • Cooperation with Non-Financial Services Giants • P2P Networks YES With Re- Alignment 8
- 9. Innovat ion Further Disrupt Disruption • Big Data lead to better decision • Innovation in collateral management • Portfolio analytics – lead to greater risk transfer (beware!) • Payment Systems Outside Banks (Bitcoin?) • Cross border transactions • “RegTech” & automated compliance 9
- 11. • Increasing complexity • No “through the cycle” stress test • Interest rate rise • Dealing with Tsunami of inflows • Is a market correction over-due? • Platform failure & contagion risk? • Fraud • Cost pressure – squeeze margins Market Pressures 11
- 12. • Transition from light touch regulation • Nervous regulator • 2016 regulatory review • Tightening regulatory landscape • Systemic Implications Regulatory Pressures 12
- 13. Shadow banks, “can pose the same key vulnerabilities as banks, including high leverage, excessive maturity transformation, and complexity, all of which can lead to financial instability,” Stanley Fischer Vice Chair of US Federal Reserve Board of Governors 13
- 14. • “Basel III” type regulation for P2P? • Increased prudential capital requirements • Risk based prudential requirements • Greater need for risk measurement and management Regulatory Pressures 14
- 15. • Future looks bright….. However…….. • Growing pains to maturity • More risks • More regulation Conclusion 15
- 16. “What new technology does is create new opportunities to do a job that customers want done.” Tim O'Reilly 16
- 17. 17
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Editor's Notes
- REBS Linkage FCA Authorisation Process Early – Principal Embedding Risk Management Framewrok / Compliance Manual Board empowerment
- Audience Do want Venture Capital - Invest with full knowledge Asset Managers - Pursue the right platform / investment Banking (Commercial) - Banks – Know the implication Payments / Service Providers - Invest at right time Accountants Don’t want Solicitors - Get caught up with heard Questions - Lack of full understanding Have we missed the boat - Go in without knowing + and - Valuations too high - Back wrong horse Platform failures What you get - Calrity / Direction - Know what to look out for
- Every-one is taking notice – especially of P2P and more widely of Fintech & Disruption in Financial Services Market has momentum – seems unstoppable Regulators taking note Many new entrants Including unscrupulous players – so tread carefully
- Growth is undisputed and well evidenced Attracting VC capital into platforms – Accenture research Global investment in Fintech grew by 201% to $12.21 billion in 2014 (£4.05bn in 2013) Compared to 63% growth in overall venture capital Expectations for new start-ups continue to rise – amount of money going into first stage funding grew by 48% Better faster cheaper services
- VC Investment in platforms UK & Ireland dominate Fintech 42% of European investments in UK & Ireland Europe is attracting VC investment fast Fintech investment in Europe grew more than twice as fast compared to UK & Ireland Nordic countries - $345 million Netherlands $306 million Germany $82 million
- Banks de- leverage Financial crisis / Basel III / Regulatory Capital Lack of access to finance Government ISA Loan referral Legislation British business bank – but can skew market competition Millenials Grew up without banks / now cant get access to banks – student loans / Porperty Socially connected world
- Too good to be true? Asked - Is this a bubble?
- Niche Real estate Wine Hospitality industry Non FS Players Amazon – loans to SMEs $1000 to $600k – Working Capital 5.9% + 1% arrangement fee Some banks fear P2P – Wells Fargo – employee rending Club 270% more efficient than Wells Fargo Operating expense ratio – 5.63% vs 2.08% Why cant banks start their own – cost will be same / culture http://www.lendingmemo.com/wells-fargo-peer-to-peer-lending/
- Xero – Real time data / Loan adjust accordingly WEF The future of financial services Virtual FS providers – account management Standardise APIs so they can pull in alternative lenders, payment providers, banks etc Collateral management – Improved underwriting and collections Wine database Hospitality Industry
- Consolidation & M&A Costs Regulation Marketing Cost of funding / Competition for borrowers
- Regulation – light touch Consumer protection Capital adequacy - Light / Living Will Client asset management Fraud No requirements for Risk Management Contrast to Regulatory review process Changes – Big platforms get bogged down Platforms voluntarily go out of business
- Regulation – light touch Consumer protection Capital adequacy - Light / Living Will Client asset management Fraud No requirements for Risk Management Contrast to Regulatory review process Changes – Big platforms get bogged down Platforms voluntarily go out of business
- Regulation – light touch Consumer protection Capital adequacy - Light / Living Will Client asset management Fraud No requirements for Risk Management Contrast to Regulatory review process Changes – Big platforms get bogged down Platforms voluntarily go out of business