In an update on their blog today, Italian P2P lender Zopa Italia has announced that the site will not relaunch until October or later. Zopa has been working on the establishment of sub-accounts for lenders as part of an agreement with the Bank of Italy, and is pushing the relaunch date out now that they have more details on the technical integration issues involved.

In today’s announcement, Zopa named banking partner IMEL.EU (European Institute of Electronic Money), specialists in electronic funds transfers, who will hold a separate account for each lender before loans are disbursed to borrowers. The regulatory and technical integration of the parties has turned out to be much more involved than what Zopa initially expected, and the relaunch date is uncertain. Zopa has promised to provide an update by mid-October at the latest.

Zopa Italy borrowers and lenders are understandably upset, wondering whether the cost of the Bank of Italy’s request will require new fees or tariffs. The most biting criticism comes from Mario, still angry at the Bank of Italy’s initial intervention, who wonders how Italian regulators can focus on the straw in Zopa’s eye while the beam of the credit crisis is lodged in their own.

Zopa Italy’s main social lending competitor, Boober Italia, has also suspended new user registrations and has posted a message on their web site stating that they are investigating actions by the Bank of Italy. Boober claims these actions “have nothing to do with P2P lending at Boober.it”, but that is a dubious claim given Boober’s aggressive actions to curtail site activity.

Related posts:

1. Zopa Italy Reaches Agreement with Bank of Italy; Service to Resume in September
2. Zopa Italy’s License Cancelled by the Bank of Italy (Updated)
3. Prestiamoci: P2P Lending The Italian Way, Coming in September

The site  won’t launch until September (see my previous note about Italians doing anything productive in August), but it’s not just the launch date that’s culturally sensitive. Carozzi & co. hope to bring a distinctly Italian character to the site. Unlike their competition at Zopa Italy and Boober Italy, which were both started in other countries (the U.K. and the Netherlands, respectively), Prestiamoci hopes to capture the community spirit that Italians recognize in their daily lives and bring it to “prestiti P2P” (P2P lending). They acknowledge that Italians are less open with each other about financial matters, and will tailor the site to capture these issues in their marketplace.

From a regulatory perspective, however, Prestiamoci has applied for and received the same lending license that Zopa and Boober have: they are now included in the “Albo degli intermediari finanziari” (list of regulated financial entities) at the Bank of Italy. Presumably the Banco d’Italia has improved their screening of peer lending outfits since being indian givers with Zopa’s license.

Prestiamoci is unique from its competitors in that they have built their own technology platform, and are working on improvements to traditional credit scoring. Prestiamoci will use credit scoring from CRIF Perform, but hopes to improve lender underwriting through the integration of other (yet unnamed) factors.

On a “Countdown” section of the site (which, according to the URL, may have originally been named “Manifesto”), Prestiamoci volcalizes their frustrations with traditional banking and credit. This includes the complexity of credit data, the recent crisis of confidence in the world of credit, and even the pitfalls of social networking. On the last point, the site hints at letting borrowers and lenders expose their real names to each other, which would be quite novel (and possibly fraught with danger) in social lending.

Alas, the countdown is only at T minus 6, so we look forward to seeing the full site when it launches in September.

Related posts:

1. Zopa Italy Reaches Agreement with Bank of Italy; Service to Resume in September
2. Corrected: Zopa Italy Relaunch Delayed
3. Zopa Italy’s License Cancelled by the Bank of Italy (Updated)

Zopa’s proposed solution to the “transit lender account” issue is to create an electronic sub-account for each lender individually, in which loan funds would sit until they are actually paid out to borrowers. Apparently the Bank of Italy has accepted this proposal, and Zopa will spend the next month or so doing the technical development required to enable it. This puts a Zopa Italy relaunch sometime in mid-September. In the meantime (and since the shutdown), existing loans will continue being serviced.

A funny cultural detail from Zopa’s email is how often they mention the month. As anyone who’s ever summer backpacked through Europe knows, Italy shuts down in August. And although most countries (even the industrious US) have slow Augusts, taking some time off (or all your time off) in August is sacrosanct in Italy. So Zopa opens the email by patting themselves on the back for working through the holiday: “Even though we are halfway through August, we are working with maximum effort to bring Zopa back.” Now that they have reached agreement with regulators, though, Managing Director Maurizio Sella adds a note that the Zopa offices will be closed for a well-deserved break from 17-23. At least there wasn’t a strike…

All in all, a 2-month shutdown is much better than the 6- and 9-month shutdowns suffered by LendingClub and Prosper, respectively. But it would be nice if regulators would take the time to understand what they are approving before they give the green light. Nothing interrupts the momentum of a startup in a new market segment like a full suspension of their business.

Related posts:

1. Zopa Italy’s License Cancelled by the Bank of Italy (Updated)
2. Corrected: Zopa Italy Relaunch Delayed
3. Prestiamoci: P2P Lending The Italian Way, Coming in September

Zopa entra in standby

In data 10 luglio 2009 è stato notificato a Zopa il decreto del Ministero dell’Economia e delle Finanze che, su indicazione di Banca d’Italia, ha cancellato dall’elenco degli intermediari finanziari ex art. 106 la nostra società. Come conseguenza immediata ci vediamo costretti a sospendere la trattazione di nuovi prestiti e l’ingresso di nuovi Prestatori.

La società sta valutando tutte le iniziative, anche di natura giurisdizionale, per tutelare la propria posizione e la community. Vi terremo informati su tutte le attività che metteremo in atto per salvaguardare un’iniziativa innovativa, etica, sociale e vantaggiosa per tutti i partecipanti.

Which the Zopa UK blog has translated into:

On 10 July 2009 Zopa Italy was notified of the cancellation of its licence to operate as a financial intermediary (106) by the Ministry of Economics and Finance, by indication of the Bank of Italy. As a consequence Zopa Italy has stopped issuing new loans and accepting registration of new lenders. The company is evaluating all initiatives, even at judicial level, in order to protect its position and its community. Zopa Italy will keep you informed on all activities put in place to safeguard an innovative, ethical and social initiative that bring benefits to all participants.

Zopa is not giving any further detail on why their license was revoked (perhaps even they do not know see “Update” below), but the Zopa UK blog post mentions a recent inspection by the Bank of Italy. Apparently the outcome of that inspection was some issues that Zopa should address, but the notice of cancellation arrived “without further discussion”.

Zopa Italy will continue servicing loans during this suspension period. Zopa, who has funded over 7.1 million Euro ($9.9 million USD) in loans since their launch in November 2007, is the leader in “prestiti personali” (P2P lending) in Italy, with about 10x the loan volume of competitor Boober Italia. Boober, which is a subsidiary of Italian financial services provider Centax, and is also regulated under the Bank of Italy, has no indication on its site that there are any issues.

As we have seen in recent years in the US, a lack of government regulation can put an economy in great peril. But misguided and overbearing regulation can be equally damaging of progressive and innovative business models. In the world of P2P lending, we have seen Lending Club, Prosper, Boober (NL), Loanio, and IOU Central all close their businesses (or suspend them, at least) due to the action of government regulators. We hope that Zopa Italy’s suspension doesn’t last long.

Update: A spokesman for Zopa Italy has given us more information about the shutdown order. The Bank of Italy has accused Zopa of operating as a bank without a license. Zopa maintains that they are just intermediating payments between private parties, but the issue hinges on Zopa’s “transit lender account”, where lender money is held before it goes out in loans, and which would qualify Zopa as a banking institution. According to Zopa, the transit lender account does not earn interest, and is not counted among the assets of the corporation. Zopa has proposed an alternate solution to the issue, but apparently the Bank of Italy has decided to shut everything down before proceeding.

This points out yet another problem with government regulators, which is that, in general, they don’t take the time to understand new concepts before greenlighting them in the first place. Zopa had authorization from the Bank of Italy before launching Zopa Italy in the first place, and most likely that “transit lender account” was in place from the beginning. Because regulators failed to fully understand the system before approving it, now they are handicapping Zopa unfairly.

Related posts:

1. Zopa Italy Reaches Agreement with Bank of Italy; Service to Resume in September
2. Corrected: Zopa Italy Relaunch Delayed
3. Prestiamoci: P2P Lending The Italian Way, Coming in September

Vittorio Levi, CEO of Centax S.p.A. and Boober Italy, was kind enough to answer some questions about Boober Italy and the state of prestiti personali in Italia, or P2P lending in Italy.

The most recent news from the Boober brand is that the original Boober site in the Netherlands was shut down earlier this year by Dutch regulators. Can you give us some information about whether Boober has plans to re-open in the Netherlands, and how Boober Italy is related to Boober Netherlands?

Boober.it started in November 2007 as a joint-venture between Boober International and Centax (which is a financial service Italian company mostly focused in check services). Boober Italy acted as a licensee of Boober International which was owner of the brand, the platform and the market rights for all of Europe. In October 2008, Boober International decided to discontinue their activity and Centax decided to buy 50% of Boober Italy, the Boober brand, the website platform, and the right to open sites in all European countries except for the Netherlands. As far as Boober.nl is concerned, we have no visibility of their plans but I believe they will not re-open in the future.

Do you have any plans to open Boober sites in other countries in the near future?

Our plan for expansion in other European countries will target 2010 after consolidation on the Italian market. Priority countries will be for us Spain, Portugal and eastern countries where the internet is growing rapidly as a business instrument (Romania, Hungary, Slovakia, Poland).

How is Boober Italy regulated? Do you have explicit regulatory clearance from Italian officials? Are P2P loans considered securities in Italy as they are now in the US?

Centax is a financial service provider, regulated by the Bank of Italy, and we have submitted the Boober peer-to-peer landing platform which was approved within the present frame of Centax activities. P2P Loans are permitted only between private individuals; this means that loans are not permitted between individuals and companies or between companies. In our business model we don’t issue loan to borrower but we manage the marketplace between lenders and borrowers, promoting the website on the net and providing a certain number of back-office services both to lenders and borrowers, the most important being the risk assestment and evaluation.

Boober.it launched more than a year and a half ago. How much in loans has been issued through Boober to date?

738,000 Euro and 123 borrowers have been funded by more than 300 lenders. We publish these statistics on the Boober.it home page (at the top). Currently our volumes are still too low for producing meaningful statistics month by month or day by day. When we reach higher volumes, more granular statistics will be made available.

What is the aggregate default rate to date on loans issued during your first year of activity (Nov 2007 – Nov 2008)?

The default rate is about 2%, concentrated in only a few loans. Looking at the statistics from Sep 2008 to nowadays, the default rate is 0%.

According to your lender fees page, Boober charges (but is currently waiving) a EUR 9.95 annual subscription fee. Is there a reason you have decided to waive this fee? How long do you plan to continue waiving the subscription fee?

The decision to waive the fee is related to promotional activity and we will keep it at least for the rest of the current year. Maybe it could be extended for the 2010, too.

According to your lender fees page, Boober charges a 10% commission on all accrued interest. Is the fee charged even if the borrower defaults and the interest is unpaid?

No. In the case of a default term, no commission is charged.

How does Boober Italy differentiate itself from Zopa Italy?

We are a direct P2P lending market, while Zopa Italy is an indirect social lending service. Meaning that on Boober.it the relationship between lenders and borrowers is more direct, personal and warmer. The lender chooses his investments request by request, pondering the uniqueness of each borrower. It is not automatic like setting “I will lend money to all the C users rated in 24 months”. In Boober.it all the borrowers are called by name, not only by credit rating, and lenders can talk with the borrowers through the personal forum which is opened under each published request. On the other side, the borrower has the freedom to design his personal loan, setting the amount and  the number of terms and the rate. It means that, once he get the credit rating, he is not forced to accept conditions decided by the system as it goes on indirect social lending websites.

Does the average Italian know that Boober is an option for them to get a loan or invest their money?

Only partially, because our marketing and communication coverage is very limited. We want to move very gradually into the market and the internet users in Italy are a far smaller percentage of the population compared to the other European countries. However, the P2P lending model has had a lot of coverage from the Italian press during the last 12 months because it was seen as a positive alternative to the credit crunch.

What have you learned about Italian borrowers that has surprised you?

The relationship with their banks. Many of them have had a deposit account in the bank next door for years. Nevertheless, when they asked their banks for a loan, it was denied or the bank offered expensive conditions. It sounded so strange.

What have you learned about Italian lenders that has surprised you?

Their expertise. Most of our lenders are used to investing in the stock market, so they know more than we expected about statistics, defaults, risk management, ratings etc. We have a great opportunity to fine-tune Boober.it day by day thanks to their precious suggestions.

Do you have a story of sucess or a bit of feedback that you have received from your users that you’d like to share?

Yes, we have two interesting stories: one about a borrower, the other about a group of lenders. I’ll start with this last one: Booberwatch is the name of the independent forum created by some lenders who wanted to share opinions and information about Boober.it. Their suggestions and also their criticism is precious for Boober’s growth. The second story is about Checoale1, a borrower who got a 10,000 Euro loan to buy solar panels for his house. It’s wonderful to see how ethical living and ethical finance found a synergy through Boober.it.

Based on the activity on the Booberwatch forum, what are the primary complaints that your lenders have? Which are your priorities to address?

There are many complaints but we are really happy about that. This is the potential of web 2.0 and we want to capitalize on our customers’ criticism. Primarily, they would like to have more information about the borrowers, i.e. job, work contract, monthly income, other debits and so on. As I said before, many of them are very expert and would like to evaluate the risk on their own. We are working to give them as much information as we can according to the Italian privacy rules. They also encourage us to be more present on Booberwatch in order to enable more communication between them and Boober.it. We are also hoping to address this issue by improving our social networking area, i.e. setting up an official chat, or an instant message service.  Improving MyBoober, which is the account management system, is also one of our priorities, according to the complains of many users who say it is ‘not user-friendly at all’ and difficult to extract data. The new version has already been designed, we will release it as soon as possible.

What is next for Boober Italy?

As I mentioned, we would like to improve our social networking features to enable users to establish stronger connections with each other: i.e. detailed and customized user profiles, chat, or private messaging. We also think the site could be improved by adding user generated content like a Booberpedia (or a WikiBoober) where the users are invited to write the entries in a social lending encyclopedia.

What is the future of P2P lending in Italy?

We believe there are great opportunities for P2P lending in Italy because the Italian market is well behind other key European markets in term of personal loans, and the credit rates offered by banks and other financial institutions are extremely unattractive. If we accept the forecast of Garner Group in 2013, 10% of retail lending will be done through internet P2P lending, which in the Italian market reflects a credit volume of about 1.5-2 billion Euro in value.

Related posts:

1. Corrected: Zopa Italy Relaunch Delayed
2. Zopa Italy Reaches Agreement with Bank of Italy; Service to Resume in September
3. Zopa Italy’s License Cancelled by the Bank of Italy (Updated)