The securitization market in marketplace lending continues to strengthen as more lenders utilize this capital route; the LendIt USA 2017 panel on securitization talked through the market conditions and what it takes to do a deal; the panel went through the challenges faced in 2016 and how the industry has come back looking stronger; the industry has gotten back to the fundamentals which are a cornerstone of securitization deals; the vast majority of deals are made up of unsecured consumer loans, but other asset classes including mortgages, student loans and auto have been coming to market; topics touched upon also included barriers to success, vertical versus horizontal interests and the effects of risk retention on the overall market. Source
Online Lending
One of the promises of fintech is to expand access to credit to those who have previously been excluded. At LendIt USA 2016 we featured many of the leading companies in the space who are making real progress here.
LendUp and Oportun are both helping underserved consumers in the USA. ZestFinance is providing the underwriting engine that enables lenders throughout the world to expand their customer base and China Rapid Finance is helping the emerging middle class access credit in China.
In the USA there are 53 million people who do not have a credit file with the major bureaus. Oportun creates proprietary risk models that score those people that most of the industry finds unscoreable. The Hispanic community, where they focus, has unique challenges that Oportun is addressing directly.
Zane Wang from China Rapid Finance introduced us to the concept of "EMMAs" - emerging middle-class mobile active users. There are about 500 million people who have quality jobs but do not have credit access - they call these people EMMAs - they are not really underserved, they are in fact completely untapped.
ZestFinance is all about data. They use traditional data sources as well as their own unique sources. They use tens of thousands of data points that enable them to far more accurately underwrite those customers. They provide this technology to platforms in the USA and China.
Sasha Orloff from LendUp works on helping their customers improve their financial situation through their LendUp Ladder, a payday alternative. They do this through education and helping their customers get out of the payday debt traps. They reward their customers when they educate themselves on finance and provide help and support along the way.
Currently the student loan debt market is at approximately $1.4 trillion; market share from government lenders has been on the rise under the Obama administration with federal student loans accounting for approximately 93% of the market versus 88% in 2008; in the Trump administration it is likely that private lenders will take a larger share as Republicans favor more financing options from private sector participants; since the November 8 election, shares of private lender Sallie Mae have increased 55%; marketplace lenders are also likely to take part in a market shift towards private student lending, specifically as their student loan offerings continue to expand. Source
