2017 ROUND-UP IBS Journal December 2017 29 You’ve got a lend in me
Lending is undergoing a revolution, if you ask the right people. With challengers and new techniques disrupting a traditionally static sector, 2017 was a big year
Senior reporter Alex Hamilton
M
any predicted that 2017 would be the year that a sea- change occurs within the lending industry. This was especially the case when it came to the UK, which
has one of the world’s oldest and largest marketplace lending sectors.
P2P lending has grown over the past year, though it’s not exactly clear why. With so many new actors appearing on the lending stage, there have been some claims that the market is becoming oversaturated. UK firms LandBay and Zopa have seen lowered demand and a decrease in originations. Traditional players, though, which are more used to weathering the peaks and troughs of market instability, have been better equipped to handle fluctuation.
Alternative lending has seen its fair share of boons over 2017, and it’s a section of the industry which the big lenders have left all but untouched. “If you look at how they work,” says Frederic Nze, CEO and founder of Oakam. “These firms used to have thousands of self-employed agents, and these people were getting paid on commissions based on collections. In the last ten years, they’ve tried to adopt new technology.”
If you take your average commission-earning agent, he adds, and put a smartphone in their hands with the latest technology, they’ll begin to wonder where their job will be in ten years’ time. Or worse, they’ll start to worry about their commissions. “Some of these firms had close to 80% of the market share,” says Nze. “They have a return on equity close to 37%, double that of Goldman Sachs.” When there are such profits to be had, there isn’t any pressure to radically change your business model, no matter how new or exciting the latest technologies might be.
Regulation has become a dirty word these days, and it seems that
the watchdogs are gunning hard for the lending business. The UK’s Financial Conduct Authority published a stern review into the sector in December 2016, and has taken measures to tighten belts and clamp down on risky strategies. When IBS Journal spoke with Cassopae earlier this year, however, the firm was keen to stress that regulation is now part and parcel of a lender’s daily life.
Nicolas Ullmo, product marketing director at Cassiopae, reckons that despite a turbulent year, there won’t be much more to come from lending in the future. At least, not yet. “Leasing and lending is a long-term business. Therefore, we do not expect major changes in the markets, except those initiated by the central banks. However, this does not mean that significant trends do not happen.”
A hot topic is the potential market entry of GAFA – Google, Amazon, Facebook and Apple. Amazon Loans extends short-term credit to small and micro business selling on its marketplace. The retailer has piles of data on how its sellers are acting, which means it can choose borrowers as it pleases.
The opportunities are there for the other digital giants to make a lending play, too. It’s not too far-fetched to imagine Apple lending to its app creators or Google pushing cash into independent YouTubers. For now, patchy regulation for digital bigwigs is keeping them at bay. Perhaps that will change in 2018.
“ Innovative products and
intuitive service offerings in the payments domain have an instant customer appeal
www.ibsintelligence.com
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