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11 DECEMBER 2017
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Wednesday, 22 July 2015 12:37
Two clear trends for payments opportunity - not centred on retail
P2P lending and mobile money transfers hit new highs

It is often all too easy to miss the obvious when looking for a business opportunity. Take payments. Here we are struggling to convince consumers that they really need to use mobile for retail payments - to tap with their phones rather than use a cash or card to make a purchase. And what do they do? Pour with enthusiasm instead into P2P  lending  and mobile money transfers.

Peer to peer breaks records
New figures from the Peer to Peer Finance Association in the UK (P2PFA) show the industry lent more than £459 million in the first quarter of 2015, taking cumulative lending to more than £2.6 billion.  The data also shows an increase in lending on the previous quarter (Q4 2014) by almost a third (32.7%) with net lending flow exceeding £255 million.  These figures follow data by the P2PFA showing its members lent over £1.2 billion alone in 2014.

Commenting on the figures, Christine Farnish, Chair of the P2PFA said:
“These numbers are excellent and reflect the strong industry growth into 2015. We are continuing to see strong appetite in the consumer market and a significant increase in lending flow to businesses too.”


The chart contains data from Card & Payments World and courtesy of the Asian Banker Magazine. It is by no means conclusive but demonstrates the extent of the P2P lending environment of 'shadow banking' disintermediators.

Goldman Sachs is one of the most recent entrants into P2P lending (what it calls Shadow Banking), arguing that with an estimate $11bn+ (7%) of annual profit could be at risk from non-bank disintermediation over the next 5+ years it is better to be one of the disintermediators. It is the first bank to take on the established P2P disintermediators, and will have to compete with names such as Lending Club and Prosper. The Goldman P2P operation is to be run by Harit Talwar, a former executive at Discover, who they have brought on as a partner.

Goldman Sachs states ‘We see the largest risk of disintermediation by non-traditional players in: 1) consumer lending, 2) small business lending, 3) leveraged lending (i.e., loans to non-investment grade businesses), 4) mortgage banking (both origination and servicing), 5) commercial real estate and 6) student lending. In all, [US] banks earned ~$150bn in 2014, and we estimate $11bn+ (7%) of annual profit could be at risk from non-bank disintermediation over the next 5+ years.‘

There is plenty of proof that this is a fair estimation.

One of the first peer-to-peer lenders in the UK was Zopa. They are growing year-on-year by doubling their enabled lending.  Zopa is expected to lend over £1 billion this year, following ten years of growth. UK P2P markets are the most active in the world with over £450 million lent in the first quarter of this year alone.

Shadow banking potential
Goldman Sachs says that total 'shadow banking' loans potenial is US$4 trillion. They argue: " A new class of shadow banks are emerging – new entrants such as Lending Club, Prosper, Kabbage that are changing the face of traditional activities, while other players who were historically users of credit – private equity firms in particular are “leveraging” new regulations to play a bigger role in lending, a trend we expect to continue. These 'new' shadow banks are standalone businesses, including peer-to-peer lenders, BDCs and commercial mortgage REITs, among others, that have several advantages (including some temporary) vs. traditional players."


About the P2PFA:
The Peer-to-Peer Finance Association is a UK trade body that maintains Rules and Operating Principles that must be followed by all Member organisations to protect the interests of all their consumer and small business customers. The P2PFA publishes quarterly figures showing industry data and the cumulative lending. On April 1 2014, peer-to-peer lending became regulated by the Financial Conduct Authority.

The P2PFA’s current membership includes: Funding Circle, Landbay, Lending Works, LendInvest, Madiston LendLoanInvest, MarketInvoice, RateSetter, ThinCats and Zopa.


Mobile money transfers expected to increase 150%  in 2015
A new report from Juniper Research has found that the number of mobile money transfers is expected to increase by nearly 150% in 2015 to more than 13 billion with several social media firms already seeing a dramatic rise in service use.

The new research, "Mobile Money Transfer & Remittances: Domestic & International Markets 2015–2020," observed that with US social payment service Venmo (owned by PayPal) now experiencing traffic worth nearly US$1 billion per quarter, leading social media companies are now introducing their own services.

Snapchat has partnered with Square to deliver a P2P offering, while Facebook launched a US-wide service last month, according to the report.

Meanwhile, the research found that in China, both WeChat and Alipay saw astonishing spikes in P2P traffic during February 2015. This was the result of result of 'red envelope' P2P gifting activity when WeChat users engaged in more than 3.3 billion P2P transactions in just six days over the Chinese New Year period, according to the report.

Following BBVA which argued at The Mobile World Congress that it was reinventing itself as a technology company rather than a bank, the Goldman CEO, Lloyd Blankfein, recently described Goldman as a tech company with 9,000 developers.


 
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