P2P-Banking.com

Tom of Prosper Lending Review found out that when he tried to request a Zopa loan not only was he rejected, but the Zopa credit inquiry was listed on his credit report. Unlike other p2p lending services in the US Zopa does a hard pull. The Zopa FAQ states:

We think it’s best if you assume that there will be an impact to your credit score. That means you should only get a quote if you really would be interested in a Zopa Loan.

Bad.

After the Loanio launch yesterday, already some more loan listings are up at Loanio.com. Right now I count 8 listings. Probably more are in the making. No bids yet, which is not surprising as the lenders have to sign up and transfer money to Loanio first.
Michael Solomon, the CEO and founder of Loanio had a lucky week according to the Loanio blog - not only did he launch Loanio, but he also won $1,000 in the New York State Lottery.

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Last week I titled ‘Loanio Launch‘. That was a little premature (I was not the only one fooled by the site apparently going live - see Tom’s blog). Well today Loanio.com is really live. And there are 5 listings at the moment (see screenshot). For a list of features see the previous loanio coverage.

Netbanker has a list of states (with max. interest rates), open to Loanio borrowers. You are welcome to discuss your thoughts on Loanio in Wiseclerk’s Loanio Forum.

Zopa.it goes live: 16th January 2008*
Average gross return on money lent-out through Zopa.it: 7.66%
Average annual cost on loans (APR) borrowed through Zopa.it: 9.45%
Registered members of Zopa.it: 23,242
Total loan volume since launch: €2,787,090
Number of loans: 535
Loan volume currently under evaluation process: €336,690
Average loan amount: €5,210
Average loan duration: 31 months
Amount rate late:€6,622.24 (percentage amount late: 1.88%) = 6 loans (this fig. as of end of Aug.)
Demographic characteristics of the Zopa users:
Female:     15%
Male:         85%
18 – 24 years old:      5%
25 – 34 years old:     32%
35 – 44 years old:     35%
45 – 54 years old:     19%
55 – 64 years old:      7%
65+  years old:     2%
First 3 regions by number of registered members: Lombardia (18%), Lazio(13%), Campania(9%)
The most popular uses for the money borrowed from lenders through Zopa.it:
Home improvement /furniture: 28%
Debt consolidation / pay off loan from relatives: 26%
Car / motor bike: 12%
Unexpected expenses / Repairs: 9%
Family events (wedding, school fees, medical expenses…): 7%

All data as of Sep. 3rd, 2008 (Source: Zopa Italy management, Zopa blog)

*public launch; there was a 2 month period before, that was open by invitation only since Nov. 14th

Eight months* after the launch of Zopa Italy the p2p lending service says it is the fastest growing in Europe (2.79 million Euro = approx 4.075 million US$ cumulative loan volume as of Sept. 3rd).

And Zopa Italy is the first social lending service with an active secondary market, called Rientro Rapido (fast-track withdrawal).

Rientro Rapido offers the lenders - who have a sudden need of liquidity -  the possibility of recovering their funds instantly by transferring loans made to borrowers to other active lenders in the community.
It is the Zopa market who determines the possibility to transfer a loan to other lenders: in order to withdraw money, there has to be in the market at least one offer from a different lender with compatible  rating, interest rate and duration.
“We are very proud to be the first Social Lending world-wide to launch a service such as RientroRapido, but we have not done this for the sake of establishing a record – Maurizio Sella, CEO of Zopa Italy, declares - . Since we opened our market, several lenders have asked for a tool that would allow them to withdraw rapidly the cash lent-out through Zopa. And with this new service we fulfill their desire. This is the value of Zopa: we are a community that grows, evolves and improves especially thank to the pro-active participation of its members.”

Lenders who sell their loans through Zopa to other lenders pay 0.8% of the loan value plus 15 Euro commission to Zopa. Only loans that have never been late may be sold.

Since June borrowers can select optional payment protection insurance (Rata Protetta) against unemployment, illness or injury. Zopa states that 57% of borrowers bought the insurance (69% in September). The insurance covers the total amount of the loan.

(Source: Zopa Italy management)

*counted from the public launch on January 16th, 2008, there was a 2 month period before, that was open by invitation only.

Updated: Just after I wrote this, access to the Loanio website has been restricted again.

Finally! After more than a year of anticipation and announcements Loanio has entered the p2p lending stage. When I looked there were no loan listings yet, so let’s have a look on the concept in the meantime.

Borrowers

US residents with a VantageScore (Experian) of 569 or with a Co-Borrower with a higher score can borrow at Loanio, provided Loanio is licensed in their state. Currently this is not the case everywhere (e.g. when I looked today, it was not available to California or Florida borrowers). The maximum loan amount is dependant on the state limits (e.g. 25.000 US$ in New York).
Terms are 36, 48 or 60 months. Borrowers can repay the loan early without penalties.
Borrowers pay a origination fee of 1 to 4% of the loan amount (dependant on credit grade). Borrowers can opt for platinum verification which costs 35-45 US$. If chosen, Loanio verifies photo identification, proof of income, bank account, employment, salary, postal address and homeownership.

Second loans are possible if the first loan has been paid at least 6 months on time.

The initial interest rate is set by the borrower. If the listing ends with less then 100% but more then 35% funding, the borrower can elect to accept a loan for the funded amount (partial funding).

Lenders

All US residents can lend. Lenders are charged a 1.25% annual servicing fee. Lenders bid at the interest rate they want, lowering the interest of fully funded loans in an auction based style.

Co-Borrowers

Co-Borrowers have so far not been used often in peer to peer lending.  To make loans to users with lower credit grades more secure for lenders Loanio introduced this feature, which might be used by close relatives or friends of the borrower.

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The study “What’s in a Picture? Evidence of Discrimination from Prosper.com” by the economic professors Devin Pope and Justin Sydnor finds:

We analyze discrimination in a new type of credit market known as peer-to-peer lending. Specifically, we examine how lenders in this online market respond to signals of characteristics such as race, age, and gender that are conveyed via pictures and text. We find evidence of significant racial disparities; loan listings with blacks in the attached picture are 25 to 35 percent less likely to receive funding than those of whites with similar credit profiles.  conditional on receiving a loan, the interest rate paid by blacks is 60 to 80 basis points higher than that paid by comparable whites. Though less significant than the effects for race, we find
that the market also discriminates somewhat against the elderly and the overweight, but in favor of women and those that signal military involvement.
Despite the higher average interest rates charged to blacks, lenders making such loans earn a lower net return compared to loans made to whites with similar credit profiles because blacks have higher relative default rates. This pattern of net returns is inconsistent with theories of accurate statistical discrimination (equal net returns) or costly taste-based preferences against
loaning money to black borrowers (higher net returns for blacks). It is instead consistent with partial tastebased preferences by lenders in favor of blacks over whites or with systematic underestimation by lenders of relative default rates between blacks and whites.

Their conclusion:

Yet the data tell a very different story that suggests that this peer-to-peer lending market actually treats the races more equally than would be expected in a market with accurate statistical discrimination.

I would interpret this conclusion as a negation of p2p lending leading to racial discrimination. However Ron Shevlin at MarketingROI comes to different conclusions.

Zopa reached 25 million pounds in loans. Zopa states cash depositers received an average 8.3% return after charges at a default rate of 0.04 percent. (Sources: Zopa, Financial Times)

Short news update on Prosper.com developments:

• Changes at the Prosper management team: John Witchel (former CTO) and Tom Pigoski are no longer listed as part of the management team. A comment on this blog post indicates that John Witchel has left the company while Tom Pigoski is on family leave. Chris Denend is now CTO.
• Prosper says it will enable faster listings for qualified borrowers. In a streamlined process some borrowers may post loan listings without adding a title, description or picture.
• Reading statistics published by Prosper? Have a good look on the definitions! In the market survey results, published on Aug. 12th, it looks like on some parameters the year to date figures for 2008 are rising compared to 2007. However looking in the definitions, Prosper compares 7 months in 2008 to 6 months in 2007. (quote:
  2008 Year-to-Date: January 1, 2008 through July 31, 2008.
  2007 Year-to-Date: January 1, 2007 through June 30, 2007.)

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.