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And now Blackstone: the Big Guns are entering Online Lending

And now Blackstone: the Big Guns are entering Online Lending | Disruptive Finance and Fintech | Scoop.it

"The start-ups that have come to dominate the online-lending industry will now have to compete with the world’s largest private-equity firm.

B2R Holdings, a portfolio company of a Blackstone Group fund, said on Thursday that it was getting into the business of providing loans for consumer purchases of big-ticket items as well as small-businesses loans."

Huy Nguyen Trieu's insight:

I previously wrote about a game changer in Fintech, when Goldman Sachs announced the launch of an online lending business for their SME clients (and very proud that you read about it in Disruptive Finance one month before the FT and the WSJ!). To my knowledge, this initiative is still moving ahead, and GS is hiring people from Lending Club / Prosper to develop the platform. 

At that time, I also said that "it will be fascinating to see what happens over the next few months, and if other banks will follow suit", and they have! Most recently, ING, Santander and Scotiabank have invested in Kabbage (a data-driven lender, and one of my favourite Fintech startups) and ING and Kabbage will launch an online lending business in Spain. In my opinion, there is no doubt that online (data-driven) lending will be the norm, and banks will move towards that model, whether through internal development, partnership or acquisition. We are therefore likely to see more news of this type in the future. 

When we think of finance, let's not forget however that private equity firms are also very massive. It was therefore extremely interesting to see Blackstone is launching an online lending platform, Lending.com.  Which means that after startups doing online lending, banks doing online lending, we now have shadow banking doing online lending. Whereas banks are very aware of the potential disruption from startups, does it mean they also need to watch the competition from private equity firms? What is clear, is that technology is currently reshuffling the financial sector, and disruption might come from players we don't suspect. 


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SoFi: a Fintech that uses Techniques from Traditional Investment Banks

SoFi: a Fintech that uses Techniques from Traditional Investment Banks | Disruptive Finance and Fintech | Scoop.it

"SoFi, a marketplace lender, announced it has priced a securitization of $417.6 million in refinanced student loans. It also announced SoFi was considered the first fintech company to receive an “AAA” rating from DBRS and an “AA2″ from Moody’s for the senior notes, which equaled $387.3 million."

Huy Nguyen Trieu's insight:

SoFi is one of the most interesting p2p lenders in my opinion. Although they are less well known that Lending Club or Prosper, they are perhaps the best to combine traditional finance to online lending.


They were the first to use securitization for their loans, then the first to get a rating from S&P, and now to get a AAA rating (arguably from DBRS, not S&P or Moody's).


They mention that 2/3 of all securitizations in online lending are made by SoFi. They are definitely a company to follow, because they are a good example of how online lending could be a part of traditional investment banking in the future.


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First P2P Lender to Fold in Europe: What Next?

First P2P Lender to Fold in Europe: What Next? | Disruptive Finance and Fintech | Scoop.it

"In an unsettling about face TrustBuddy, a peer to peer lending platform based in Stockholm, has shut down.  The home page has transitioned from lending platform into a public statement (republished below) in both Swedish and English explaining a series of alleged misconduct"

Huy Nguyen Trieu's insight:

A very good summary from Crowdfund Insider on what's happening with TrustBuddy

This is the first major p2p lender to fold in Europe, and there is much to learn from it. In a few words:

  • Trusbuddy was an average-size p2p lender (EUR200m deployed), but one of the few to be listed (EUR 100m market cap last year)
  • New management (ex Klarna) joined 2 months ago
  • Have now discovered that there were frauds, all some of the money was not invested

My (cynical?) view is that this kind of behaviour will happen in any new and unregulated industries. Remember that we saw the same in China with thousand of p2p platforms folding or the $400m that disappeared with Mt Gox. But the fact that will happen doesn't mean that it won't have repercussions on the p2p industry. 

  • There will some pressure for more regulation on p2p lending. I don't know the regulatory framework for p2p lending in Sweden, but there is already a decent one in the UK
  • I don't think that more regulation will help for p2p lending. For example, ban king is highly regulated, but fraud still happens. At the same time, heavy regulation for startups is certain to kill the development of that industry
  • There is much to do for the industry themselves in terms of a chart of conduct and ethics - and which shouldn't be about mere marketing, but what the industry really believes in
  • In general, it feels that p2p lenders should do much more effort in terms of education - and show the potential risks of p2p lending. There are clearly risk warnings on their websites, but more could be done IMO.
  • Perhaps also some good business models for startups to rate and do due diligence on p2p platforms? In the same way that there are rating of online retailers - in that case from consumers themselves - I'm sure someone can think of smart ways to rate the p2p lenders themselves


I think that these kinds of events are bound to happen in any new industry. Actually, it also happens in old industries, but the difference is that it could create a credibility problem for the whole p2p industry. In my opinion, it is not life-threatening, on the contrary it could be the opportunity for the good platforms to differentiate. 

Any nascent industry will go through these stages where some black sheep will compromise the credibility of the whole sector. But if the value proposition is strong enough, consumers will look past through it and go towards the most reputable companies. Remember the example of Pere-Noel.fr in France (yes it means Father Christmas!) in the early 2000. Thousands of people ordered on their site, didn't receive any goods, and it was a huge scandal. This didn't prevent however people from continuing to buy on the Internet, and there was a premium for the more reputable e-tailers. 


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