The Many Faces of Marketplace Lending : Auxmoney, Funding Circle, FundingXChange & CrossLend 

Euros Money 200

 

Execfintech, the German fintech event that took place March 8 in Frankfurt dedicated a couple of panel presentations to marketplace lending. The companies represented included the two most successful lending platforms in Germany, P2P lending site Auxmoney and P2B lending marketplace Funding Circle, along with loan comparison site FundingXchange and loan securitization marketplace CrossLend. This panel clearly reflected the vast diversity of business models that can fit under the umbrella of marketplace lending.

Auxmoney, the German P2P lending success story

Andreas BarthelmessAndreas Barthelmess, the Chief Communication Officer of German P2P lender Auxmoney gave a short presentation of his company’s strategy. Auxmoney has set many records. It originated €99.9 million worth of consumer loans in the year 2015, a 202% increase from the €33 million originated in 2014. The company also set a record among European FinTech startups by raising more than €200 million in venture capital, including €150 million from Dutch insurance company Aegon in 2015 and this year an unknown amount from Seven Ventures.

Andreas presented Auxmoney as “opening the gates of credit to segments of borrowers who could not get a loan before.” To prove this point, an impact study done by Auxmoney showed that an estimated 1/3 of borrowers on the P2P platform had been rejected by traditional lenders. On Auxmoney these borrowers got a credit at a risk-adjusted price, in full transparency. Auxmoney wants to be very transparent about its scoring model. Its strategy is to create a new customer experience and a new brand to go with it. “What we’re doing for people is bringing transparency to the market that had very little of it. We break the taboo of credit.  We come to the market with a completely different and refreshed brand image that stresses that we want to do things differently and simply be more human.”

Marie Louise Seelig, Katrin Herrling, Devie Mohan, Matthias Knecht, Sylwester Janik

Funding Circle, the global P2Business lender

Matthias KnechtAuxmoney’s focus on customer experience and transparency is definitely shared by Matthias Knecht, the MD of Funding Circle Continental European business. To stress how fast the crowdfunding landscape changes, Matthias reminded the audience of the fact that he participated in the previous edition of Execfintech as the cofounder and CEO of German business lending marketplace Zencap which he cofounded in 2013. Since then, Zencap has merged into Funding Circle, creating a global crowdlender with a presence in the UK, the US, Germany, Spain and the Netherlands. Funding Circle has originated more than €2 billion worth of loans to SMBs.

Pressed by the moderator Devie Mohan to share his view about how marketplace lending is changing, Matthias Knecht said that 2015 had seen a huge uptake of lending among borrowers and lenders in Europe. However the number of platforms is plateauing.  “I believe that we looking at a pretty difficult 18 months in terms of starting new platforms.

Sylwester Janik, Partner and Vice-President of the Board at Private Equity Managers at MCI Group confirmed that, at this stage, his company would only invest in category leaders. After several years of constant increase and crazy valuations, VC funding of fintechs has shown signs of decline in Q4 2015. “Everybody is raising funds to be ready for the drying up in 2017-2018” he said.

FundingXchange, the loan supermarket/comparison site

Kathryn Herrling, CEO Funding Xchange, argued that there was still a lot of room for innovation in marketplace lending, as can be seen through the rapid rise of companies like Marketinvoice. FundingXchange itself is a marketplace more akin to a loan supermarket or a loan comparison site in that it allows businesses owners looking for a loan to request a quotation from more than 200 lenders. Compare funding options in one place gives them the best chance of getting their business funded and at the best interest rate.

CrossLend makes consumer loans liquid

Marie Louise SeeligRecent innovation in marketplace lending was best exemplified by CrossLend which opened for business not even 2 months ago. CrossLend was founded last summer by Marie Louise Seelig and two former executives from Kreditech, Oliver Schimek, and Daniel Schlotter. Registered in Luxemburg, CrossLend is a cross-border marketplace lending platform. Its business consists in sourcing directly or purchasing consumer loans from traditional consumer lenders, scoring them using their original scoring model, and securitizing them by issuing a series of €25 notes which are then sold to international retail and institutional investors across Europe.

CrossLend differs from other marketplaces that market to international investors loans originated by consumer lenders, such as Latvian Mintos or Twino, in that CrossLend is a fully regulated securitization company, licensed in the Luxemburg under the Securitization Law 2004. Obtaining this license was a very tough process. CrossLend now prides itself in counting among the small set of 32 companies who own one.

Marketplace Lending peer to peerThe very specific form securitization elected by CrossLend has the benefit of creating fully tradable securities (each note has its own ISIN number) while keeping the traceability to the risk of each single original loan, identified through the notes series. The risk of individual loans is not blurred through the securitization process. This transparency allows investors to build a portfolio that meets their risk preferences.  Last but not least, the tradability of the notes allows CrossLend to create a secondary market.

In conclusion, this panel illustrated well the continuing vitality and diversity of the young marketplace lending sector. The leaders who have emerged in some earlier forms of marketplace lending such as generalist P2P lending and SME lending are tackling the challenges of internationalization while new entrants continue to create interesting competition through innovation in product, processes and market segmentation.

 


 

Therese TorrisTherese Torris is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.