adrianc
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Post by adrianc on Jan 26, 2016 8:54:10 GMT
.. what's the single biggest risk factor to platforms? Simple - global economic conditions. And they're going to hit everybody, large and small, PF or no PF. Am I wrong in this...? (Show your working) Doesn't the same logic apply to shares? The advice is always to diversify. If for no other reason they are not all going to collapse at the same time so after a first loss you might have time to liquidate the others. Isn't that more akin to diversifying in loans, though, than in platforms?
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jaswells
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Post by jaswells on Jan 29, 2016 4:46:42 GMT
Looking at company records, all the main players in the P2P market appear to be making losses, HUGE losses. How are we as individuals participating in this sunrise industry meant to know each companies access to liquidity and willingness to invest enormous time and energy into a potentially unlimited loss making enterprise.
Its complicated and impossible to estimate in my book but sometime/ somewhere one of them will likely go pop.
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james
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Post by james on Jan 29, 2016 6:17:24 GMT
Is there a lot of point in diversifying to reduce platform risk...? Excluding TrustBuddy-style fraud and the odd too-small-to-thrive platform, what's the single biggest risk factor to platforms? Simple - global economic conditions. And they're going to hit everybody, large and small, PF or no PF. Am I wrong in this...? (Show your working) Market-specific conditions are probably more of an issue than global economic issues. Think oil as a niche while it's helping the global economy but hurting shares because sovereign wealth funds are selling shares. Similarly UK housing policy could hurt home builders while having no effect on cars or aircraft purchasing and pawn might positively glow with health during a UK but not global recession. So yes, there's a point in diversifying between platforms because even if you exclude fraud you still reduce sector-specific risks based on which sectors the various platforms lend to.
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SteveT
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Post by SteveT on Jan 29, 2016 7:45:10 GMT
Looking at company records, all the main players in the P2P market appear to be making losses, HUGE losses. How are we as individuals participating in this sunrise industry meant to know each companies access to liquidity and willingness to invest enormous time and energy into a potentially unlimited loss making enterprise. Its complicated and impossible to estimate in my book but sometime/ somewhere one of them will likely go pop. Saving Stream or, rather, Lendy Ltd was profitable last year. Memorably they reckoned on their being the most profitable P2P firm in the known universe! (see p2pindependentforum.com/post/66654/thread)I suspect that MoneyThing will already be profitable too, given that it operates on a similar model to SS, has a small team and hasn't needed to market itself (word of mouth on here being enough).
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jaswells
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Post by jaswells on Jan 29, 2016 10:14:38 GMT
Fair enough and I am willing and hope this is true. I can only read the P and L statements as I see them from companies house which show large losses by all the big firms. I am willing to accept that this is a complex business structure though and financial statements are unlikely to be easy to digest or particularly transparent.
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jaswells
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Post by jaswells on Jan 29, 2016 10:44:57 GMT
How is saving stream's business model so different than say, zopa? I am just wondering how and why their revenue stream is more secure or buoyant?
On that note Zopa has been around nearly a decade and still making eye watering yearly losses (as sown on the P and L account).
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SteveT
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Post by SteveT on Jan 29, 2016 10:59:10 GMT
How is saving stream's business model so different than say, zopa? I am just wondering how and why their revenue stream is more secure or buoyant? On that note Zopa has been around nearly a decade and still making eye watering yearly losses (as sown on the P and L account). Saving Stream (Lendy) make a large % margin on a small number of big loans (lending at say 18%pa, borrowing from us at 12%). They charge their borrowers loan arrangement fees that cover most / all of their upfront costs. They subcontract most of the professional services to trusted valuers / lawyers / etc so only have a small in-house team. And they spend very little on marketing, relying on the strength of their proposition to bring in more new lenders as they can cope with. I've never lent with Zopa but I imagine much of the above is reversed, ie. small % margin on lots of very small loans, lots of systems investment, high marketing costs, etc.
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Post by wiseclerk on Jan 29, 2016 11:00:25 GMT
Higher margin per loan amount
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Post by wiseclerk on Jan 29, 2016 11:44:08 GMT
I had a conversation with a partner at a major VC firm that specializes in FinTech regarding P2P a few months ago. His observation was that P2P platforms are scaling really poorly on the cost side vs. their expectations. They would hope for 10x revenues with 2x costs but they are getting 10x revenues with 10x costs! In particular, he thought, that P2P platforms were weak on delivering scalable technology and were seemingly unable (or unwilling) to lever off products/skill-sets already available in the financial services industry. Also operationally they were rather inefficient with a tendency to solve bottlenecks by hiring too many low-skilled/quality staff. Hmm, a McKinsey study came to different conclusions: www.p2p-banking.com/services/lendingclub-lending-club-cost-advantage-over-banks/Also one of the reasons that the p2p lending startups are very highly valued at funding rounds is that many VC have interest to invest into this sector.
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Post by Financial Thing on Jan 29, 2016 15:03:29 GMT
Looking at company records, all the main players in the P2P market appear to be making losses, HUGE losses. How are we as individuals participating in this sunrise industry meant to know each companies access to liquidity and willingness to invest enormous time and energy into a potentially unlimited loss making enterprise. Its complicated and impossible to estimate in my book but sometime/ somewhere one of them will likely go pop. ^^ This... I'm surprised more people aren't worried about the information on file at Companies House. Some of the platforms are heavily in debt and having to borrow more to float through the losses. For those who love evaluating business on AC and TC, maybe it would be prudent to do the same evaluation on the platforms and whether they can reach profitability anytime soon. Maybe running a p2p platform isn't as profitable as one might think. westonkevRS said it perfectly "...my #1 concern 1) Platform failure due to operational losses (i.e. never getting to profitability and running out of cash) is for me the biggest danger. And this will be exasperated in a recession with less lending and lender-led liquidity reduction. "
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Post by Financial Thing on Jan 29, 2016 15:08:44 GMT
For example, MorganStanley made this point in a Dec15 report on US securitized marketplace lending.. Believing anything Morgan Stanley writes is foolish. They have a long record of writing reports that are merely fluff.
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Post by Deleted on Jan 29, 2016 15:42:03 GMT
I do worry about portals who keep developing their IT, basically a front end that should have little development work. After all we see here that the most attractive portals are those that pay a fair wack and offer a stream of new loans. IT development is just a cost that the model should not support.
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Steerpike
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Post by Steerpike on Jan 29, 2016 16:11:02 GMT
I do worry about portals who keep developing their IT, basically a front end that should have little development work. After all we see here that the most attractive portals are those that pay a fair wack and offer a stream of new loans. IT development is just a cost that the model should not support. I think that the best thought out and well designed sites, AC and FK in my opinion, will remain fit for purpose, be beneficial in the longer term and be better systems than those that are developed piecemeal. In my opinion, investment in proper IT for P2P is justified.
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Post by wiseclerk on Jan 29, 2016 16:18:17 GMT
I do worry about portals who keep developing their IT, basically a front end that should have little development work. After all we see here that the most attractive portals are those that pay a fair wack and offer a stream of new loans. IT development is just a cost that the model should not support. I think that the best thought out and well designed sites, AC and FK in my opinion, will remain fit for purpose, be beneficial in the longer term and be better systems than those that are developed piecemeal. In my opinion, investment in proper IT for P2P is justified. I second that. I dislike platforms that screw up accounting.
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Post by Deleted on Jan 29, 2016 16:26:16 GMT
I too like it when accounting adds up
I just feel that developing in lots of different directions can be the alternative to quality thinking.
Over the years I've taken part in other cutting edge technology changes and everytime the IT guys start saying "yes we can" without the full understanding of the bosses you see waste. I can see at least one portal doing too much and for little advantage to the customer.
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