The largest P2P marketplace on Earth – Lending Club – is currently worth $7 billion and has seen it loan volume grow 20 percent per month every quarter of 2015 so far. And while LendingClub is the biggest – it is finding itself in an increasingly crowded marketplace .
Analysts say that by the end of 2015, person-to-person lending will drive roughly $77 billion in loan volume — 15 times more than the $5 billion it drove in 2012, Bloomberg reports And while that growth rate is astonishing, P2P lending growth overall is a mere .08 percent drop in a $96 trillion total lending bucket worldwide
The rapid growth of the P2P lending world is of concern to some .
Michael Tarkan, an equities analyst at Compass Point Research & Trading in Washington who covers P2P companies said in an interview that while P2P so far looks high promising – the model is still under development.
“This may prove to be a superior model, but we just don’t know because it hasn’t been tested yet through a full credit cycle.”
But with trepidations aside – innovators and investors alike worldwide are responding to the siren song of a $96 trillion waiting to be loaned out more efficiently — and hopefully profitably.
At first glance, BLender might not look like a differentiated player in the field. In fact, the Israeli-based P2P lender looks very like everyone else: BLender connects borrowers to lenders, borrowers get better rates or otherwise more favorable terms for loans, lenders net high returns in form of interest on their loans.
But it’s the second glance where BLender throws a few extra ingredients into making its P2P loan smoothies (we promise that will be the last blender-related pun), starting with how it evaluates creditworthiness on the platform. Borrowers are reviewed and scored on BLender’s proprietary Rating 2.0 system which CEO Dr. Gal Aviv described a “hybrid” that creates and ranks lender profiles based on financial, social, and demographic data.
Aviv is an interesting figure — and probably the only person working in P2P lending today who holds a PhD in nanophysics.
The platform launched in November 2014 with some angel funding and whole lot of bootstrapping. In that relatively short time, BLender has extended $2.5 million in loans, with the average loan value ranging between $3,750- $5,000. All loans are made within Israel.
This month, however, that changed. BLender got a $5 million infusion of funding from Blumberg Capital – an American VC firm.
And with that cash infusion, Aviv said, BLender can pursue its bigger vision of operating multinationally, particularly in developing markets where standardized credit rating systems are not the norm.
“We saw that there is a very strong credit market where there is FICO scoring like there is in the U.S.,” Aviv said. “But if you look at different territories with no effective credit bureaus, the access to credit is quite low and the pricing is quite high. A lot of that high cost in efficiency, which we correct for as a digital platform. But the bigger issue is that there’s no standard way credit data is reported, collected or ranked – so lenders are often assigning a high price and hoping for the best.”
And, he noted, even when cost of credit doesn’t deter borrowers, desperate for capital — physical access often does.
But in a world where digital transactions are increasingly common in all corners, it isn’t necessary or even necessarily useful to use past interaction with traditional FIs – particularly when there are much richer and more indicative data streams out there. That includes traditional stuff — commerce history for example — but also some of the sort of out-of-the-box stuff that is less expected – like using browsing history to build a psychological profile that tells us if a customer is more or less likely to pay.
With its new funding in hand, BLender will now be officially exporting its efforts to Columbia and Brazil.
Aviv also noted the company will be rolling out a few more products in the fall, though he remained mum on the full details.