The online lending sector has been hammered by the ongoing COVID-19 health crisis as consumers struggled to pay personal loans and SMEs backed away from debt. Many Fintech lenders worked diligently with borrowers to mitigate the impact of the pandemic with loan extensions and deferred payments. Data indicates this has paid off for both platforms and borrowers.
Smart Lenders AM, a firm that invests in marketplace loans, has distributed an end of year letter to investors that strikes a positive note for the sector of Fintech.
Erich Bonnet, Chairman of Smart Lenders, says that 2020 has been a challenging year and shares some lessons learned from online marketplace lending investments. Bonnet states:
“The resilience of our portfolios in the event of a shock is proven: the draw-down observed in March validates the quality of the risk/return profile of our asset class. The nature of our portfolio with its short duration (amortizing loans) and its ultra-granular composition explains, as we had always thought it would (but not yet experienced), the strong resilience of our portfolios to shocks.”
Bonnet says the quality of their process has been effective as “there has been no bankruptcy or disruption in the quality of the service delivered.” Transparency has been a steadfast foundation.
“We have never communicated so much with our clients than during this challenging period to explain our performance, justify our decisions, and provide the information necessary to understand them.”
Regarding 2021, things are looking better. Bonnet predicts a new cycle of economic growth in the US that will be amplified by a stimulus next year.
“Our borrowers, both individuals and small businesses, will benefit from its support and the recovery in activity.
Consumers are entering 2021 with a much-reduced debt load – this, combined with a vaccine, should cause the negative impact to the economy to disappear.
Bonnet ends:
“From our point of view, most indicators are now positive, and we, therefore, anticipate a year 2021 during which we should meet or even exceed our performance objectives. It is therefore an optimistic message that we wish to convey to you.”