LFP103 – Online Lending/Borrowing (Formerly P2P), Past, Present, Future with Christian Faes CEO Lendinvest

Once upon a time P2P was a simple thing. Now it’s more accurate to see it as online lending and borrowing. Models vary, regulation varies, the most successful platform was started by a bank, direct lenders have wholesale flows in funding retail or corporate outflows, others have just retail funds and others mixed.

Quite a complex state of affairs and in this episode Christian Faes joins us for a wide-ranging conversation about where this all came from, where it is and where it is going.

Lendinvest itself is no longer a P2P in the current definition but an online investment platform which is itself only one of their many channels.

Topics discussed include:

  • some grown-up conversations around socially pertinent topics
  • reviewing the Nicky Morgan gender attack/PR stunt on Fintech in February; the challenge of numeric target in a world when most stay at home parents are women; gender uneveness of outcome higher in more gender equal societies like Sweden
  • the racism of the anti-racists – Heritage England, an £88m taxpayer-funded government body’s apprenticeships for non-white people only (:-!)
  • identity politics being weaponised and emphasised by politicians for short term advantage whilst weakening society
  • Lendinvest’s challenges of hiring talent and having work visas rejected for talented folks they’d like to hire
  • this related to the immigration topic – perhaps ~600k gross and 200-300k net people immigrating per annum; mystification around the clearly poor criteria for decisions (as many immigrants remain unemployed whilst one’s who would have an immediate job can’t get visas?!)
  • cricket!
  • P2P past – expectations/ hopes/misunderstandings; theses, VC perspectives
  • P2P present – brand expansion for the likes of Lendit, AltFi  reflecting the excitement moving on elsewhere
  • “now we see its not that easy to eat a bank’s lunch”
  • Marcus – Goldman Sachs platform in the US having done ~$3bn in its first year
  • mortgages moving online
  • “Fintech is just Finance”
  • “a lot more reality has set across the sector now”
  • “when you look at all the platforms out there no two are the same, they all have different quirks”
  • Lendinvest are not in regulatory terms a P2P – but rather an online investment platform (the main reason being they pre-fund deals) which is in itself only one of their channels
  • Lendinvest’s journey with their platform
  • tube ads and mainstream marketing as an expensive way of acquiring retail investors
  • how much do retail investors really understand what they are investing in?
  • P2Ps as being pure platform, capital-light model
  • Lendinvest skin in the game
  • the commercial differences in valuation and profitability between the two models
  • “originate to distribute” models and the need to scale; winner takes all
  • balance sheet lenders
  • what is P2P+ here for in 2018?
    • borrowers – have a convenient online experience – relevance varying across sectors (eg consumer loan market is saturated with lenders/offers/online/app offers)
    • lenders – social aspect of lending to people unintermediated by a bank and so getting a better return
  • Lendinvest do one month to 30yr mortgages online for buy-to-let
  • relative returns and value across lending verticals
  • deciding to invest in P2P+ now rather than in the past
  • “it’s not easy for people looking at this now to understand what the nuanced differences are”
  • financial literacy
  • the value and not of “capital at risk”
  • app banks as having had a lead in the past but banks catching up
  • commodity businesses across sectors
  • valuations in that sector as relating to the sell-out value to a bank as a customer acquisition strategy
  • “for us becoming a bank is just giving up”
  • challenges of having to turn into a bank
  • the Bank of England’s attitude to new banks has changed
  • a shakeout in the next few years time into survivors and a graveyard of those who never achieved profitability and ran out of investors
  • Lendinvest for borrowers – “a one stop-shop for property entrepreneurs”
    • short-term bridging finance – the original and still dominant product; the average mortgage in the UK takes 3mts Lendinvest can do it in 14 days
    • development finance
    • buy-to-let product
  • Lendinvest for lenders/investors
    • funds as in fund management managed out of Luxembourg
    • online investment platform for sophisticated investors
    • mainstream institutional funding lines
    • London Stock Exchange retail bond program for retail investors
  • explanation of the retail bond structure (£500m program, tranche 1 £50m, tranche 2 £40m so far)
  • Lendinvest’s recruitment, opportunities and aims

And much much more 🙂

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