Crowdlending Opportunities Event in Barcelona
On July 22nd, Lending Deposit was host to an information event about the emerging crowdlending (peer-to-peer lending) market. Lending Deposit was joined for this event by the consumer lending platform zank and the project finance platform ECrowd!. Find here a summary of the event:
- Definition and opportunities of crowdlending
- Consumer lending: Zank
- Project finance: ECrowd!
- Diversified crowdlending portfolio: Lending Deposit
- Questions and answers
Summary of definitions and opportunities
"Crowdlending", "peer-to-peer lending", "p2p lending" and marketplace lending refer all to the same emerging industry: The direct lending of a group of investors to consumers and small and medium sized companies through the help of online platforms. In contrast to banks, these "crowdlending platforms" do not assume any risks but will also perform risk assessment services, to enable investors to take informed lending decisions.
By directly connecting lenders (investors) and the borrowers without branch networks or high operating legacy costs, lending becomes cheaper for borrowers, while it is at the same time possible to pay higher returns to investors. Thus, win-win situations are created for both parties!
Over the last 10 years, this type of lending, which originally was started by the UK platform "Zopa" has grown rapidly across the world with a special focus on the US and the UK itself. In continental Europe the industry has started to develop with a delay of a few years but is nevertheless now growing at rates of above 100% per year. Still, in 2014, the overall volume of the UK crowdlending market was four times the size of that in all of the Euro-zone.
Summary of Zank
Zank is a consumer lending platform, not unlike it’s big US example Lending Club. On the back of strong anti-fraud measures and a sophisticated rating algorithm, zank allows investors lend money to individual Spanish consumers, who are clasified - based on the riskiness of lending to them - in 4 risk categoies. Gross interest rates are relatively high (usually above 10%), reflecting the fact that a number of loans will default, which makes it important for lenders to invest relatively small sums of money in a relatively large number of loans, i.e. to build a well diversified portfolio of lending assets.
Summary of ECrowd!
ECrowd! is a Spanish online crowdlending marketplace for investments of projects with positive impact. The platform put owners of local investment projects in direct contact with investors that look for smarter ways to invest. By investing in these projects, they contribute directly to the local economy and to a better and more sustainable environment.
Each project undergoes a careful risk assessment process and only approved projects are published on the platform. Apart from a positive impact on the environment or society, projects must of course show a solid income stream. Because of this direct link between project and income stream, which will help to repay loans, risks tend to be modest and therefore gross interest rates also not as high as in the case of consumer lending.
Summary of Lending Deposit
Lending Deposit gives private and institutional investors access to the profitable crowdlending market without the hassle and risk that is normally associated with it. Lending Deposit’s clients lend money in the form of fixed-interest time deposits to financing companies, which protect these funds with their own equity. With their own and the borrowed funds through Lending Deposit, these financing companies build highly diversified portfolios of crowdlending assets.
Thus, Lending Deposit’s clients indirectly benefit from the high interests available in the online lending world without having to go through the trouble of building themselves a diversified portfolio or having to deal with default risks of individual loans.
Question Session After the Presentations
The event concluded with a question & answer session that helped answer some particular concerns or doubts of individual participants.
The event was rounded up by some networking supported by drinks and snacks provided by Lending Deposit.