Crowdlending from non-banks has gained momentum globally as
banks have increased interest rates or pulled back from lending
to consumers and small businesses. Borrowers submit their
requirements and are matched with pools of investors who are
willing to accept the credit terms.
Now the sector has taken another leap forward with the
one of the biggest names in US banking John Mack,
the former CEO and chairman of Morgan Stanley is to take
a role at one of the leading crowdlending platforms.
With lending supplied by a crowd rather than a bank,
interest rates are lower than those offered at large retail
banks or by credit cards. For lenders the platforms are viewed
as investment opportunities, yielding them many times more than
what bank deposit accounts offer. Lending
Club offers loans in seven credit grades, with net
annualized returns of between 5.84% and 12.44%.
The non-bank sector of crowdlending is yet to be considered
a threat to the big consumer lending businesses of the largest
global banks. The banks will, however, be under pressure as the
rival sectors popularity increases. More consumers are
expected to turn to platforms such as Lending Club for
Mack said of his appointment: Lending Club has created
an innovative platform that provides investors with low-cost
access to high-quality consumer credit assets, and at the same
time makes credit more affordable to consumers. This is a
winning combination and I am truly excited to serve on the
Joe Toms is the CIO of Prosper.com, another crowdlending platform,
established in 2006, that has funded almost $325 million in
personal loans. Toms says that consumers are rethinking their
use of credit cards and looking for lower-cost alternatives for
Prospers loan growth was 178% year on year in loans
originated from 2010 to 2011. Toms adds that lenders are also
being attracted to using platforms like his, and it is not just
retail investors that are looking to lend.
Institutional accounts like family offices, hedge
funds and funds of funds are starting to see this an
opportunity to make higher yields but with good transparency
around credit risk, he says.
A thumbs-up from John Mack certainly seems to support the
positive future for non-traditional lenders.
See the May issue of Euromoney for a larger story on
crowdlending and crowdfunding globally and its impact on