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Post by Deleted on May 13, 2015 8:13:37 GMT
Not sure if you can see behind this firewall but I've just read www.economist.com/news/special-report/21650289-will-financial-democracy-work-downturn-people-peopleI was especially interested in their thoughts on what happens when interest rates start to rise, it is suggested that non-retail lenders (us) will stick around but the likes of Private Equity and Corporates will skitter away leaving P2P with less money to lend. There is also a crowdfunding section in the same paper (might be worth buying the paper copy for the week and keeping). Just think of all the comments we had during the A C equity launch about the need for retaining retail lenders in their mix. Since, at the same time, taking out loans to pay off loans (aargh) might also start rising at the same time, it opens up issues of multiple defaults, ie more demand, less supply and hence a short term spike in rates to people who may not be able to pay off. Taking that logic further suggests that if interests rates do take off (even a little) take extra care to whom you lend. Interesting times.... |
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Post by davee39 on May 13, 2015 8:42:23 GMT
It is NEVER worth buying a paper copy of the Economist.
The piece is largely academic and rooted in the US market.
My shorter suggestion for a downturn might involve eggs and baskets and avoiding fads (following the herd into high risks for apparent high returns).
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bugs4me
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Post by bugs4me on May 13, 2015 9:24:33 GMT
Interesting article and it's inevitable that institutions will be attracted to P2P lending especially with Gilts, etc offering such low returns. The problem for the P2P companies is how to make sure everything remains in balance and not alienate their existing retail lending base.
It's undoubtedly more convenient and cost effective to deal with just one investor mopping up the loan offers rather than dealing with retail lenders asking questions here there and everywhere. Little doubt in my mind that many loans do not even get a mention on the platforms as they are underwritten by an institution and are never listed although this is just a hunch on my part without any evidence. If that is the case then it's understandable where some of the cream offerings are going but that is just me being cynical.
Institutional investors can be a fickle bunch and what is fashionable today quickly goes out of the window tomorrow and if/when that happens then the platform may find that many of their retail lenders have walked. Getting them back into the fold is another matter - just look at Tesco who now have a devil's own challenge luring their old lost customers back into the stores.
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Post by Deleted on May 14, 2015 8:41:45 GMT
It is NEVER worth buying a paper copy of the Economist. The piece is largely academic and rooted in the US market. My shorter suggestion for a downturn might involve eggs and baskets and avoiding fads (following the herd into high risks for apparent high returns). Not sure if you are right, in this case the article covers both US and UK markets (and I believe that it is probably too UK market orientated) and is anything but academic, what is useful is their attempt at looking forward. For example they point out some interesting issues on FC's strategy. From this I conclude that FC: 1) Need retail (us) more than retail need FC 2) That FC's growth rate actually allows it to dilute its default rate (if you are growing at 100% a year then 10% defaults last year look like 5% this year!). Note that P2P is generally growing at 100% every 9 months. 3) That FC will have to move into yet more property deals to keep the growth going 4) It also shows how having a UK bent is helping FC's attack in the US market (which may also be opening it up to more challenges in future) It also offers views on Invoice Factoring which will be useful when AC finally gets that product offered. For any equity owner in AC I would think this is a "must have" document
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bugs4me
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Post by bugs4me on May 14, 2015 9:14:36 GMT
It is NEVER worth buying a paper copy of the Economist. The piece is largely academic and rooted in the US market. My shorter suggestion for a downturn might involve eggs and baskets and avoiding fads (following the herd into high risks for apparent high returns). Not sure if you are right, in this case the article covers both US and UK markets (and I believe that it is probably too UK market orientated) and is anything but academic, what is useful is their attempt at looking forward. For example they point out some interesting issues on FC's strategy. From this I conclude that FC: 1) Need retail (us) more than retail need FC 2) That FC's growth rate actually allows it to dilute its default rate (if you are growing at 100% a year then 10% defaults last year look like 5% this year!). Note that P2P is generally growing at 100% every 9 months. 3) That FC will have to more into yet more property deals to keep the growth going 4) It also shows how having a UK bent is helping FC's attack in the US market (which may also be opening it up to more challenges in future) It also offers views on Invoice Factoring which will be useful when AC finally gets that product offered. For any equity owner in AC I would think this is a "must have" document Agree with your thoughts but I'm not convinced that the platforms fully appreciate the need to keep us small fry happy. It's obviously far easier dealing with one investor putting in say £50m rather than hundreds of smaller investors and if I was putting that amount into a platform I would expect, or indeed demand preferential treatment and definitely the cream. Problem for the platform is that one day that £50m may find another home and then the platform will be scratching around looking for the retail lenders who will or may have moved on. Very short-sighted IMO but that seems to be the way the financial services sector operates.
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Post by oldnick on May 14, 2015 9:55:08 GMT
I think growth momentum is vital if a platform is going to be able to sell shares in itself, and a large institutional contribution may be a necessary evil.
Much as the platform MDs must relish their communication with small investors (half ironic) the share sale is the thing - not one of them has registered as a charity!
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bigfoot12
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Post by bigfoot12 on May 14, 2015 10:49:36 GMT
I think that the article was worth the read. There wasn't much in it that most of the memebers here wouldn't have known, but filling in a few details was useful.
Anyone who has lent to businesses (via P2B or otherwise) will have come across a few businesses with too much reliance on one customer. When that customer went away (went bust, changed supplier, changed directeion....) the business got into dificulty. Institutions might like P2P now, but that could change so easily. There is a lot to be said for the large number of annoying customers. There is time to react if some start drifting away. When a platform loses one if its institutions there could be a significant liquidity event on that platform which would impact the individual lenders as well as the platform.
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james
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Post by james on May 14, 2015 12:33:55 GMT
The only thing there that surprised me was "Zopa tracks the applicants it has turned down for loans to see if they turned out to be good credit risks when they found another willing lender". I doubt that any applicants expect that.
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Post by oldnick on May 14, 2015 13:10:55 GMT
The only thing there that surprised me was "Zopa tracks the applicants it has turned down for loans to see if they turned out to be good credit risks when they found another willing lender". I doubt that any applicants expect that. How do you suppose that ZOPA could do that - legally?
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Post by Deleted on May 14, 2015 13:19:51 GMT
I certainly spot things that were offered on FC and then taken to AC. Not sure if the Data protection Act would protect them.
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am
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Post by am on May 14, 2015 15:20:42 GMT
The only thing there that surprised me was "Zopa tracks the applicants it has turned down for loans to see if they turned out to be good credit risks when they found another willing lender". I doubt that any applicants expect that. How do you suppose that ZOPA could do that - legally? Buy a credit report on the applicant at specified intervals?
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Post by oldnick on May 14, 2015 18:43:02 GMT
How do you suppose that ZOPA could do that - legally? Buy a credit report on the applicant at specified intervals? Seems like a lot of trouble to go to just confirm whether they were right in rejecting the borrower?
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Vero
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Post by Vero on May 14, 2015 18:53:01 GMT
Buy a credit report on the applicant at specified intervals? Seems like a lot of trouble to go to just confirm whether they were right in rejecting the borrower? When applying for a loan it is usual for the borrower applicant to sign away data protection rights to the lender for 'credit checking' etc. Perhaps it is this permission that allows Zopa to follow up on the failed applicant?
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am
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Post by am on May 14, 2015 18:59:12 GMT
Buy a credit report on the applicant at specified intervals? Seems like a lot of trouble to go to just confirm whether they were right in rejecting the borrower? They don't want to confirm that they were right in rejecting the borrower. They want to find out when they were wrong in rejecting borrowers. Zopa want their credit evaluation algorithms to minimize false positives (loans accepted that go bad) and false negatives (creditworthy borrowers rejected). They get feedback on the false positives automatically when the loans go bad. They have to go looking for evidence of false negatives. The question is whether the costs outweigh the benefits of improved algorithms. They don't have to follow every rejected applicant - they could follow a representative sample.
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mikes1531
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Post by mikes1531 on May 14, 2015 20:21:04 GMT
They don't have to follow every rejected applicant - they could follow a representative sample. And they make so many credit report requests that their agreements with the agencies providing them probably means that the marginal cost of asking for more reports probably is minimal.
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