The Bankwatch

Tracking the consumer evolution of financial services

P2P Lending is in trouble

P2P Lending held out as a great opportunity to disrupt banking … back in 2006. I was with CommunityLend then, and the opportunity seemed endless. Since then the Canadian regulation stopped P2P lending in Canada.

Meanwhile in the rest of the world the market moved from P2P to “Institutional Lender”2P. Now the Institutional Lender market seems to have dried up. The fact that Lending Club, the most successful P2P lender is increasing their rates in order to attract lenders has a sense of desparation.

This from Finextra.

Prosper slashes workforce as online lenders feel the heat

With Citi recently deciding to stop buying debt from Prosper, the online lender is cutting its workforce by 28%, shutting its office in Utah and slashing jobs in San Francisco and Phoenix, affecting 171 people, according to Bloomberg.

The firm’s CEO, Aaron Vermut, who is reportedly not taking his salary this year, told Bloomberg: “Over the past year we invested for growth, but with the recent tightening of the capital markets we are refocusing on our core consumer loans business and building more resiliency into the company.”

Rival OnDeck Capital is having similar problems. This week it reported that first quarter losses have more than doubled to $13.14 million, sending its stock price plummeting by a third.

The poor numbers are related to an inability to sell off the loans it makes to third parties. In Q1, just 26% of loans were sold to investors, down from 40% in the previous quarter, while the price received for loans also fell.


Next up is Lending Club, which reports first quarter results next week. The firm has seen its share price fall by more than a third so far this year, taking another hit this week as news of its rivals’ travails made the news. Last month it said that it would raise rates on loans in an effort to attract investors – the third time it has done this in six months.

Written by Colin Henderson

May 4, 2016 at 18:15

Posted in Uncategorized

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