P2P-Banking.com

German p2p lending service Smava has sent its lenders an email asking them to produce short videos telling their personal experiences using Smava. Smava offers 50 Euro (approx. 75 US$) for each user generated video that is sent to Smava and published.

Three (older) videos by Smava lenders can be viewed here.

Zopa UK has raised fees for new lenders to 1% (annual of capital outstanding). Old lenders continue to be served at the 0.5% fee.

Following through on the announcement (read: Zopa UK plans Young Market to target young borrower) Zopa has launched this market segment. Zopa says, it will help young adults, aged 20 to 25 obtain a loan, which otherwise would have difficulties - not because they have a bad credit history but because they have little or no credit history.

Zopa lenders can choose to make offers to these young applicants, with the added attraction of being able to charge a higher rate of interest because of the higher risk that these as yet unproven younger borrowers represent. So whereas the safest borrowers coming to Zopa can typically get a 5000 GBP loan over 3 years at around 8.5%, Young Market borrowers will be able to get the same loan at around 12.5%.

Lendingclub.com has in a new release some new account management features for lenders.
Lendingclub is currently not open for registration of new lenders.

Zopa UK said it will introduce 'Young Markets' (Young36 and Young60) specifically for borrowers aged 20 to 25. The need for this arises from the fact that currently many applications are turned down - not because the borrowers have any negative marks on their credit history - rather they don't have sufficient history of debt.

Zopa will still check borrowers in this age group (identity, fraud, affordability, adress and employment). As long as they have no history of bad debt they will be approved for borrowing on the Young Market. 

The new young market segment will allow Zopa to advertise the service focussed on young borrowers, which are internet savvy and open to the p2p lending concept.

Source

On June 20th, Lendingclub.com filed a registration statement with the SEC to issue up to 600 million US$ in Member Payment Dependent Notes. The notes will be backed by loans and sold to lenders. The process for lenders remains pretty much the same as before the quiet period, only the legal setup will change to comply with regulation.

Link to SEC filing of Lending Club

Press release by Lendingclub regarding the SEC filing

Netbanker extracted some interesting data from the 100+ page Lendingclub filing. 

Globefunder's site got a new layout. It looks more structured and professional now.

Also it seems that Globefunder will open its d2c lending (d2c="direct to consumer") to individual lenders. Only in May an announcement of Globefunder sounded like under dtc lending the company would on the lender site be open only to institutional investors.

Now there are "Coming soon Lend Money to make money" signs on the new site. But it's not available yet. Clicking on them displays the message

We're sorry, that option isn't available yet at GlobeFunder.com. Please check back again soon, as we continue to make improvements to the site.

Fynanz announced a lending bonus.

We're excited to announce that we're giving you and other lenders who lend $3,000 or more, a 3% Lending Bonus. That's on top of the great rates that you're already earning as a lender through the Fynanz Student Loan Marketplace …

Lending Bonus is earned on the aggregate amount you lend across all the loans you make, provided you have lent at least $3,000 in loans between May 15th and September 15, 2008 up to a maximum of $50,000 in aggregate loans

Lenders can earn an additional 2%, if they refer at least 5 new lenders, which each lend 50 US$ minimum.

In a recent "Tips for Borrowers" post, Fynanz says it added 700 more approved schools whose students may apply for a Fynanz loan.

The Prosper study I featured yesterday lists the Prosper fees. While it does not attempt to calculate the revenues of Prosper.com it gives some indications regarding the operating costs:

According to Mendelson (2006), the primary costs of Prosper consist of …, (2) a $4 fee for identity authentication, credit pulling, and bank-account setup per active borrower, (3) customer service at the average rate of four interactions per loan and $2 per interaction, and (4) a fixed overhead cost of approximately $3 million per year. …

Given these estimates, it is difficult to measure Prosper accounting in precision. However, there is no doubt that Prosper’s revenue does not cover its full cost (as of February 2008). The difference is met by a large stock of venture capital.

Regarding the Prosper revenues, Mike did a calculation estimating the November 2007 revenues at 114,000 US$. If this is correct, it did not even cover fixed overhead.

Prosper changed fees since that last calculation.

The new study "Dynamic Learning and Selection: The Early Years of Prosper.com" by Seth Freedman and Ginger Zhe Jin, both at the Department of Economics, University of Maryland analyses Prosper data in a time frame from April 19th 2006 to December 31st 2007.

The study analyses the development of the Prosper.com marketplace and how lenders refined their strategies as a result to own experiences and changed settings.

They write:

Overall, we conclude that Prosper is evolving from a comprehensive market to a market that primarily serves the borrowers who have access to traditional credit. This implies that Prosper will compete head-to-head with the traditional banks rather than pick up a missing market. Assuming away any cost in information processing, we estimate that the average rate of return of a Prosper loan is 6% if Prosper loans continue to perform according to what we have predicted from their existing performance. From the lenders point of view, this number compares favorably to 6-month certificate of deposit and 3-year Treasury bill, but less favorably to the rate of return implied by the S&P 500 in the same time period.

Other findings are that high interest loans yield lower returns due to high default rates and that the probability for defaults of Prosper loans peak at month 10 and the edge down.

The main uses of Prosper loans are:

33% of all previous Prosper listings have mentioned credit card consolidation, which is higher than the mention of business (23%), mortgage (15%), education (22%), and family purposes (20%) such as weddings.  

Cited from the conclusion chapter of the study:

The first two years of Prosper has enlivened the concept of P2P lending, but the road towards success is full of challenge. While it is tempting to expect P2P lending to alleviate credit rationing for near- or sub-prime risks, we find Prosper evolving from a comprehensive market toward a market that primarily serves borrowers who have access to traditional credit. This implies that Prosper will compete head-to-head with the traditional banks, rather than pick up a missing market. This pattern is not unique to Prosper. …

How can Prosper compete with traditional banks? Our study suggests that the microfinance approach, as implemented through Prosper groups, has failed to select good risks or enhance loan performance. But on the up side, lenders are learning fast about the pitfalls of P2P lending thanks to the transparency of Prosper. Our calculation suggests that, if the loans continue to perform as what we have predicted from the market performance, Prosper loans could yield an average return of 6%.

See related post on the Prosper blog.