P2P-Banking.com

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

A recent Bankrate.com article gives an update on the development of p2p lending in the US.

Chris Larsen of Prosper.com sees the current financial situation as a chance for p2p lenders:

Home equity used to be the cash management tool for the credit-worthy borrower, and that has really, really dried up. In many ways, Prosper's three-year, 25,000 US$ loan is a pretty good proxy for what people were using home equity for — improving their home, starting a sole proprietorship, college costs and certainly for replacing credit card debt.

Javelin Strategy & Research is quoted that credit card debt is the main reason people want to use p2p lending:

We're forecasting that P2P lending specifically for credit card balances will grow from 38 billion US$ in 2007 to 159 billion US$ by 2012

The final advice of the article is:

Prospective borrowers and lenders would do well to thoroughly research P2P companies before jumping at the chance for a lower rate on a loan or a higher return on an investment. …

Zopa plans to launch a student loan feature in July. Students can already use peer-to-peer lending sites to apply for a personal loan. At Prosper.com, education loans account for less then 2% of its 135 million US$ in loans. (Sources: Smartmoney,  WSJ)

Zopa UK has announced that it will remove the options to lend for 12, 24 or 48 months and concentrate on lending terms of 36 and 60 months. The changes apply only to money lend through Zopa markets not to Zopa listings.

Why are we making these changes?
- Since Zopa began more than three years ago, more than 95% of your loans have been taken for a period of 3 years or less.
- The popularity of larger loans repaid over 5 years is increasing, particularly since we introduced the new fixed borrower fee.
- Almost half of our new lenders who sign up to Zopa do not become active and our hypothesis is that it is just too time consuming for them to make offers to all of our markets.
- This allows us to simplify the marketplace considerably, while still allowing borrowers to repay their loan early with no penalty.
- Because listings still enables all loan terms from 1 to 5 years, Zopa will continue to offer a wide variety of borrowing and lending options.
- By structuring repayments over at least 36 months, we aim to encourage fewer borrowers to repay their loan early, maximising the interest you earn from each loan and reducing the period your money might spend in your holding account. This is because the loans that have been repaid early to date were mostly taken for 12 and 24 months in the first instance, so that borrowers had paid back a good proportion of their loan after just a few months.
- We’re not envisaging that there will be any significant financial impact for Zopa from these changes. At most, we would earn 0.5% of the outstanding capital for a little longer if we can dissuade early repayment, but since we would hope that lenders would relend any funds repaid early anyway, we’re unlikely to earn anything more significant. These changes are purely aimed at simplifying our offer.

Lender reactions in the forums (19 pages of comments) are mostly negative.
Some lenders speculate that this move is a necessary result of the new flat fee which was introduced earlier. Borrowers pay 94.25 GBP of the loan amount. For short term loans the impact of this fee on the APR is higher then for long term loans. 

As there is no Zopa loan statistics site, it is not possible to track the Zopa growth daily. You have to wait for the instances where Zopa announces milestones.

Today Zopa - in an announcement to celebrate it's third birthday, said:

Since we launched in March 2005, £20 million in unsecured personal loans have been arranged at Zopa in the UK. More recently growth has been boosted by the global credit crunch which is driving unprecedented demand for P2P personal loans as banks become less competitive and tighten their lending criteria. All of this has also pushed up returns to Zopa lenders to an all time high.

At the current exchange rate that is approx. 40 million US$.

P2P lending service Zopa - already present in the US, the UK and Italy announced it will launch in Japan.

Zopa Japan will be led by Chairman Takashi Yoneda and Managing Director Tatsuya Kuboi, both highly experienced and distinguished technology-based financial services professionals. Zopa Japan further strengthens Zopa´s position as the leader in its field. Zopa will continue its track record of firsts, as it will be the first social finance offering in Japan.

Takashi Yoneda, Zopa Japan´s Chairman, says: "We are very pleased to be part of the expanding Zopa worldwide operations, and we look forward to offering innovative financial solutions for the Japanese market. We will draw from the Zopa´s experience across the globe and introduce a social lending platform that is tailored for the Japanese culture and regulatory environment

Zopa tomorrow celebrates it's third birthday - it launched in March 2005 in the UK market. 

Other sources: Techcrunch UK

Some news from p2p lending in Asian markets:

Chinese PPdai.com (see earlier coverage) says it has received a first round of funding from Essentia Private equity. The amount was not disclosed.

On February 27th, Zopa's managing director Giles Andrews mentioned in a webchat "I have also been spending time in Asia and hope that we will launch in 2 very significant markets there in 2008, one of which we may even announce shortly….".
In the webchat Giles Andrews also said regarding the US market: "@Tealer We also think that our "competitors" over there are illegal, and I don't want to go to jail!".
Furthermore Zopa said it plans to launch an (optional) capital guarantee product in the UK market.

See earlier coverage of P2P-Banking.com on the p2p lending markets in Corea, China, India or Japan.

More and more p2p lending services are launching, each catering to different markets and different target audiences. Some derive more features from "ancestors" Prosper or Zopa, some less.

All follow the aim to allow lenders to directly lend money to borrowers without a bank acting as intermediary. This aim is sometimes not pursued strictly to the point. Smava actually partnered with a bank to comply with regulation, Zopa US partnered with credit unions, but nevertheless it serves as comprehensive definition.

Dividing p2p lending services in categories could follow several possible factors:

• price building mechanism (auction/non-auction; interest set by platform/by borrower/by lender)
• purpose of loan (private/business/both)
• social lending vs. lending for profit

I think the last factor is most useful for the definition of categories. It affects all parts of the service from marketing to operations. The differentiation is in the objective the majority of the lenders had when selecting the platform. Were they attracted by the motivation to help an individual through a loan or by the motivation to earn interest? (more…)

In an email newsletter Zopa Italy encouraged its member to spread the word about Zopa to friends and relatives. Zopa says it is for 'a good reason': Zopa Italy pledges to lend $1 on Kiva for each new member that registers at Zopa Italy before January 15th.
Everybody can monitor how much Zopa invested on this lender page at Kiva.

I am sure that Kiva will highly appreciate this promotion, a target audience that is already interested in p2p lending gets introduced to Kiva's concept. But I am not sure if that is a good marketing campaign for Zopa. Should the lenders decide Kiva is an interesting concept they might lend their money at Kiva instead of at Zopa. Maybe Zopa speculates lenders will invest in both. Or Zopa wants the added social angle to increase chances of press coverage.

What do you think? Discuss this at the Zopa forum. 

(Source: Email newsletter from Zopa Italy, Dec. 27th)

2007 was an exciting and eventful year in the development of peer to peer lending. Looking back these were the highlights:

• February: Boober.nl launches the first p2p lending service in the Netherlands.
  Prosper.com raises required borrower credit score to 520 and introduces other major changes
• March: Smava.de launches German p2p lending service
• April: Fairrates.dk offers person to person lending in Denmark
• May: Lendingclub.com launch in the US, initially limited to Facebook members
• June: Prosper raises another 20M US$ VC. PPdai p2p lending launch in China
• July: Globefunder raises 1.5M US$ VC 
• August: Boober is temporarily forced to stop lending by financial authorities. MyC4, which allows lenders to fund microloans to African entrepreneurs, grows steadily while still in private beta 
• September: Kiva sold out after extensive media coverage.
• October: Microplace launches with microlending. Microplace is an Ebay company. Australia gets peer to peer lending through iGrin. Zopa UK launches 'Zopa Listings'. Prosper portfolio plans introduced. A Prosper SEC filing is the first step towards a secondary market for Prosper loans
• November: Boober and Zopa launch in Italy. Prosper reaches 100 million US$ loan volume.
• December: Zopa US launch. Lendingclub goes nationwide. Canadian Communitylend receives 2.5M VC. In Sweden Loanland is the first p2p lending service.

I will write another article on which trends to expect in p2p lending in 2008.