Trends for Peer to Peer Lending in 2012 and 2013
The growth rate of the two largest peer-to-peer lending companies in the United States has increased significantly in 2012. Lending Club is originating more than $50 million in loans each month and Prosper is originating more than $13.6 million each month. Both companies are growing month-over-month, adding anywhere between $500,000 and $3 million to their monthly loan origination amount each month.
One of the major trends for 2012 has been making peer-to-peer lending more accessible for all types of investors. When peer-to-peer lending first became an option for investors, it was generally people that chose individual loans to invest in. During the last couple of years, Prosper and Lending Club added automation features and worked to lure institutional investors. This trend has continued in 2012 with Prosper launching its Prosper Premiere service, which allows individuals to set a loan origination strategy and have the company execute their strategy for them.
Another big event for peer-to-peer lending in 2012 has been the resignation of longtime Prosper CEO Chris Larsen. Larsen left Prosper to work on other projects. This isn’t the first significant resignation from either Prosper or Lending Club. Both companies have had a good amount of turnover during the last five years as most startup companies do.
A trend that we anticipate during the second half of 2012 and into 2013 is that we expect there to be a number of new competitors in the peer-to-peer lending industry. There are already two smaller peer-to-peer lenders, Peerform and National Family Mortgage. As Prosper and Lending Club get more established as profitable financial institutions, it should be no surprise to anyone that new companies will form to compete with them. Two more that are still in their launch phases are SoMoLend and LendStreet, which aims to help those who have bad credit and may have used services such as foreclosure assistance.
Finally, we expect that the commercial move of the crowd-funding fad of 2012 will slow down significantly. Kickstarter and its competitors are riding high and funding many projects right now, but the reality is that many of the projects that are getting funded currently won’t meet the expectations of those giving them the money. Once the initial wave of projects funded in 2011 and 2012 materialize or don’t materialize, the reality of the difficulty of business ventures will become keenly aware to those funding projects on KickStarter and other services.