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Post by robberbaron on Jul 5, 2017 12:41:27 GMT
The way I understand it Lendy makes money in two ways: - It earns the spread between the interest paid by borrowers and the interest received by lenders.
- It earns the interest on loans for sale on the secondary market
However both are earned upfront since borrowers pay interest upfront. This means that Lendy has a financial interest in both an illiquid and bloated secondary market and not chasing "defaulted" loans since its capital is not at risk, it has already received its spread and interest to investors stop being paid out. To play devil's advocate the ideal scenario for Lendy would be a loan that is fully subscribed then fully put on the secondary market then defaults and stays defaulted forever. In this scenario Lendy would keep the entire interest payment, not pay a single dime to investors while never having it's capital at risk at any point. One way to realign Lendy financial interests with those of investors would be that it would stop receiving interest from loans on the secondary market and it would also have to keep a certain percentage of all outstanding loans. |
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Post by mrg on Jul 5, 2017 13:22:45 GMT
The only problem with that is its short sighted. Make a fast buck now at the expense of making stable money in the future. No one would invest if they did this.
Just found this message from LY on trust pilot:
"Since the platform launched in 2012 the average time taken to sell a loan part was around 24 hours. However, there has been periods for when it has taken longer than 24 hours, for example when there has been a number of loan parts put up for sale by investors. The Lendy Platform still has a very efficient secondary market. However, over recent weeks it has slowed as a large number of new loans have gone live, therefore promoting investors to sell older loan parts, as a result making the secondary market less liquid. We expect the average time now to sell a loan part to be reduced in time."
They seem to realise the liquidity issues are killing investment. To be fair they tried to solve an issue: there were not enough loans for everyone to invest in. So they created more loans, but that killed liquidity, which meant people weren't as comfortable investing. Unfortunately you cant have your cake and eat it. Solution is to not list anymore pipeline loans until SM is is tighter. Two ways of doing that: find more investors, or get loans to payback. Based on the recent sponsorship and increased referral incentives its disappointing to see LY efforts are on the former (poor move in my opinion)
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Post by Paul64 on Jul 5, 2017 13:30:35 GMT
The only problem with that is its short sighted. Make a fast buck now at the expense of making stable money in the future. No one would invest if they did this. Just found this message from LY on trust pilot: "Since the platform launched in 2012 the average time taken to sell a loan part was around 24 hours. However, there has been periods for when it has taken longer than 24 hours, for example when there has been a number of loan parts put up for sale by investors. The Lendy Platform still has a very efficient secondary market. However, over recent weeks it has slowed as a large number of new loans have gone live, therefore promoting investors to sell older loan parts, as a result making the secondary market less liquid. We expect the average time now to sell a loan part to be reduced in time." They seem to realise the liquidity issues are killing investment. To be fair they tried to solve an issue: there were not enough loans for everyone to invest in. So they created more loans, but that killed liquidity, which meant people weren't as comfortable investing. Unfortunately you cant have your cake and eat it. Solution is to not list anymore pipeline loans until SM is is tighter. Two ways of doing that: find more investors, or get loans to payback. Based on the recent sponsorship and increased referral incentives its disappointing to see LY efforts are on the former (poor move in my opinion) Hi mrg In reality you need to do both, which is what we are doing. Paul Lendy Support
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Post by robberbaron on Jul 5, 2017 14:23:34 GMT
The only problem with that is its short sighted. Make a fast buck now at the expense of making stable money in the future. No one would invest if they did this. Except it's already the case whether intentionally or unintentionally. Just look at the SM and default loans pages. A decade ago the crisis showed that short term profits can sometimes trump long term stable development. They seem to realise the liquidity issues are killing investment. To be fair they tried to solve an issue: there were not enough loans for everyone to invest in. So they created more loans, but that killed liquidity, which meant people weren't as comfortable investing. Unfortunately you cant have your cake and eat it. Solution is to not list anymore pipeline loans until SM is is tighter. Two ways of doing that: find more investors, or get loans to payback. Based on the recent sponsorship and increased referral incentives its disappointing to see LY efforts are on the former (poor move in my opinion) You will never have a SM in equilibrium without discounts and premia (e.g FundingSecure). An alternative to this is to have the unpaid interest on the SM accrue which would solve at least the demand side of the equation.
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SteveT
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Post by SteveT on Jul 5, 2017 14:23:53 GMT
For as long as Lendy loans can only be traded at par, it's inevitable there will either be too much available (feast mode, with long SM queues, as now) or else too little (famine mode, with scraps fought over, FFF wins). The only way to balance supply and demand is a variable-priced SM, as per Ablrate, Funding Circle, Funding Secure and others. Those platforms aren't perfect (!) but you don't hear their lenders complaining there's nothing available to buy, nor that they can't sell in a reasonable time-frame.
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Post by robberbaron on Jul 5, 2017 14:37:13 GMT
Overall, Lendy gets more money from writing new business than it does from anything else. It can only write new business if it has sufficient lenders - whether that be retail, underwriters or bonds. This is somehow contradicted by the FAQ. According to this Lendy profits from writing new business AND paying as little interest as possible to investor (i.e. the spread). A fixed fee would be very different in terms of incentives. There is a certain amount of cost associated with running an SM, so I have no problem with Lendy retaining the interest. I personally have a problem with a platform which directly benefits from investments languishing on the SM or in default. None of the other platforms I use do this. This wasn't much of a problem when the SM was small and few loans were in default now it is.
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Post by dualinvestor on Jul 5, 2017 15:17:45 GMT
The way I understand it Lendy makes money in two ways:
- It earns the spread between the interest paid by borrowers and the interest received by lenders.
- It earns the interest on loans for sale on the secondary market
----------------------- They also make money from fees, some front ended (arrangement) some back ended (exit). There is no imperative for them to make the SM more active in the short term; however a stagnant market would (and does) damage medium and long term confidence. But to keep it in perspective the current SM is c.4% of the current loan book which is around the same as the total of arrangement and exit fees. The question is does the size of the SM affect lender confidence and the ability of the platform to fund new (and further tranches of DFLs) loans?
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twoheads
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Post by twoheads on Jul 5, 2017 15:44:01 GMT
The question is does the size of the SM affect lender confidence and the ability of the platform to fund new (and further tranches of DFLs) loans? Lender confidence is most certainly low at this time. It is difficult to tell whether the current stagnation of the SM is (in part) the cause or effect. It is probably a bit of both, leading to a viscous circle.
I don't think there is a particular problem for PBLs. These may take longer to fund and the borrower may have to wait for longer than planned to get started with a project. Once funded, the borrower is effectively disconnected from the Lendy until term.
Where I think there is a big problem is with DFL tranches: * One recent one was seriously reduced from £1.1M to £378k (DFL019 tranche 1, June 26th) presumably the prefunding dried up. * Yesterdays planned DFL012 tranche 9 came out a day late and £181k short on prefunding (35% of the £523k requested).
It is not going to be possible in the current climate to raise the necessary funds in a timely manner in order to keep the DFLs going. Especially these two in particular which are huge projects. Slowing or stalling DFLs due to insufficient funding would not be in anyone's interest. This would mean extending the loan term, eating greedily into the bottom line: money required to repay the loan.
My question is: how are Lendy going to ensure that tranches for DFLs are properly funded and funded on time?
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Post by robberbaron on Jul 5, 2017 16:05:34 GMT
They also make money from fees, some front ended (arrangement) some back ended (exit). There is no imperative for them to make the SM more active in the short term; however a stagnant market would (and does) damage medium and long term confidence. But to keep it in perspective the current SM is c.4% of the current loan book which is around the same as the total of arrangement and exit fees. The question is does the size of the SM affect lender confidence and the ability of the platform to fund new (and further tranches of DFLs) loans? Don't forget the burgeoning default loans. One of them celebrated its 1 year delinquency anniversary yesterday and the average is 263 days. It seem the incentive to be able to pretend that no investor has ever lost money on the platform is much stronger than the incentive (or lack thereof) to aggressively repossess and liquidate them.
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Post by dan1 on Jul 5, 2017 16:40:39 GMT
I do have fears for the future of Lendy because of the way they've tried to position themselves in the P2P market. In comparison to the likes of MT and FS they like to appear more mainstream, perhaps equivalent to a property investment RS or Z, enticing disillusioned savers with a simple offering and a high headline rate. I also suspect there's a lower proportion of Lendy investors who frequent this forum than comparable platforms.
It's these type of investors who are more likely to react to external factors such as brexit, the most recent general election, and talk of BoE rate hikes. Put this in context of the drive for rapid growth in the loan book, lower rates, and stagnant SM and it doesn't smell good.
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Post by martin44 on Jul 5, 2017 20:45:50 GMT
12 months ago Lendy had a solid plan... Only take on loans where the lender can achieve 12% p/a return, and lendy get  ? (whatever). They were never going to get the majority of business, but they were always going to get the business that attracted the lenders, hence a permanent SM liquidity and all loans filled in minut.....no... secs. At the moment, like many others, i do not like the lendy model... it's just too risky. |
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stevio
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Post by stevio on Jul 5, 2017 20:56:01 GMT
I do have fears for the future of Lendy because of the way they've tried to position themselves in the P2P market. In comparison to the likes of MT and FS they like to appear more mainstream, perhaps equivalent to a property investment RS or Z, enticing disillusioned savers with a simple offering and a high headline rate. I also suspect there's a lower proportion of Lendy investors who frequent this forum than comparable platforms. It's these type of investors who are more likely to react to external factors such as brexit, the most recent general election, and talk of BoE rate hikes. Put this in context of the drive for rapid growth in the loan book, lower rates, and stagnant SM and it doesn't smell good. In terms of amount lent, they are in a different league
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Post by martin44 on Jul 5, 2017 21:07:06 GMT
I do have fears for the future of Lendy because of the way they've tried to position themselves in the P2P market. In comparison to the likes of MT and FS they like to appear more mainstream, perhaps equivalent to a property investment RS or Z, enticing disillusioned savers with a simple offering and a high headline rate. I also suspect there's a lower proportion of Lendy investors who frequent this forum than comparable platforms.It's these type of investors who are more likely to react to external factors such as brexit, the most recent general election, and talk of BoE rate hikes. Put this in context of the drive for rapid growth in the loan book, lower rates, and stagnant SM and it doesn't smell good. my bold... That's a surprising analysis... Lendy's thread consistently has a higher proportion of viewers than any other thread.
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Post by dan1 on Jul 5, 2017 21:24:12 GMT
I do have fears for the future of Lendy because of the way they've tried to position themselves in the P2P market. In comparison to the likes of MT and FS they like to appear more mainstream, perhaps equivalent to a property investment RS or Z, enticing disillusioned savers with a simple offering and a high headline rate. I also suspect there's a lower proportion of Lendy investors who frequent this forum than comparable platforms.It's these type of investors who are more likely to react to external factors such as brexit, the most recent general election, and talk of BoE rate hikes. Put this in context of the drive for rapid growth in the loan book, lower rates, and stagnant SM and it doesn't smell good. my bold... That's a surprising analysis... Lendy's thread consistently has a higher proportion of viewers than any other thread. It wasn't so much an analysis as a gut feeling! Page views from the quarterly forum usage stats ( link) and number of registered investors from the respective platforms: Platform Page Views Investors Views per InvestorLendy 559,744 16,564 34MT 180,099 3,645 49FS 112,730 ~6,000 19EDIT: Number of FS investors from this post Not particularly scientific I admit... make of it what you will!
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Post by martin44 on Jul 5, 2017 21:49:55 GMT
my bold... That's a surprising analysis... Lendy's thread consistently has a higher proportion of viewers than any other thread. It wasn't so much an analysis as a gut feeling! Page views from the quarterly forum usage stats ( link) and number of registered investors from the respective platforms: Platform Page Views Investors Views per InvestorLendy 559,744 16,564 34MT 180,099 3,645 49FS 112,730 ?I can't find the FS figure Not particularly scientific I admit... make of it what you will! .. good info.. and correct.. nice to see MT on the up .  
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? (whatever).
