Today was an exciting day as we kicked off LendIt Europe 2016. This is our third London event and for the second year Samir Desai, Co-Founder and CEO of Funding Circle led the day off with his presentation titled “Fintech: Combining the Best of Both Worlds”.
Funding Circle has now facilitated $2.5 billion in SME loans since launching in 2010 to over 20,000 small business borrowers. They have over 50,000 investors and operate in 5 countries including the US, UK, Spain, Germany and Netherlands.
Despite the setbacks for the industry this year, Samir believes we are entering the golden age for the industry.
He cited the three trends that have benefited the industry thus far:
- Banks have pulled back from all types of lending and private funds are moving in. Platforms are taking the place of traditional banking institutions.
- Interest rates are low and real interest rates are negative. Investors have a desire for yield and alternative lending continues to produce high returns with lower volatility.
- P2P lenders are capital light business models that reduce friction and transaction costs.
Samir commented that he doesn’t believe in the hybrid model that some companies have implemented in the online lending industry. He stated that companies should either be a balance sheet or a marketplace and if you’re a balance sheet lender you might as well become a bank. From Samir’s perspective marketplaces create the most efficient intermediation since holding low or no inventory (loans) is the most efficient model.
Samir also discussed some of the benefits online lenders have over banks, the various types of investors in the industry and shared how ‘fin’ and ‘tech’ play a role in the firms in the industry. Samir’s keynote is available to view on the LendIt website.
Following Samir’s presentation we heard from Reinder van Dijk of Oxera. The P2PFA enlisted Oxera to create a report titled “The Economics of Peer-to-Peer Lending.” It is the most comprehensive report ever done on the UK p2p lending industry and includes private data from the top companies in the UK. The full report and summary is available on Lend Academy.
We also heard from both the FCA, the regulating body in the UK as well as Christine Farnish from the P2PFA. Christine shared that it’s important for the FCA to use an evidence based approach to developing a regulatory regime and to keep up with what is going on in the industry. It’s also important to distinguish what p2p lending is, and what p2p lending isn’t. Christine believes the p2p lending industry needs to distance itself from the term crowdfunding as p2p lending is much different.
Neil Rimer, Co-Founder and Partner of Index Ventures provided his thoughts on the current venture capital market. Index Ventures is a prominent investor in fintech companies and has invested in firms such as Funding Circle and auxmoney. When asked about where lending fits into Index Ventures’ overall strategy Neil said in financial services lending is the biggest opportunity. Given that it is a trillion dollar market they have to be interested in it. Investors realize it is a real asset class with consistent returns at a time when yields are scarce. Borrowers are increasingly realizing it is a better way to finance their business in the case of small business lending, but we still have a long way to go as most small businesses are still not aware.
Neil highlighted the challenges of consumer lending across geographies stating that banks are more willing to lend in some countries. He did note the consumer lending space is a crowded market, particularly in the US and it’s important for any new entrants to differentiate themselves. Despite this, he believes we are still in the early innings and there will be entrepreneurs who come up with models we haven’t thought of.
Leading companies Zopa, RateSetter, LendInvest, MarketInvoice and Funding Circle all took part in a panel to discuss Brexit, ISAs and other issues facing the industry today. The companies also shared their differing business models and what makes each company unique.
To round out the morning Cormac Leech, who recently joined Victory Park Capital shared his thoughts on the state of the European marketplace lending industry.The afternoon broke up into three different tracks: New Approaches to Lending, Investor Innovations and Small Business & Property Lending. We also hosted our first ever European PitchIt @ LendIt competition in partnership with Capital One. Tomorrow, we will announce the winner of the inaugural competition and continue our content throughout the day. Morning presentations and various company demos are available on the videos section of the LendIt Europe website.