Customer participation at the heart of P2P Finance

February 8th, 2013

Why suggestions from you are the key to constant improvement.

Back in November, I wrote a post about how P2P finance fits into the model of collaborative consumption – otherwise known as the sharing economy.

I made the point that collaborative finance didn’t necessarily need to equal ethical finance, social lending or any other type of ‘do-gooding’. Whilst some of the by-products of crowdlending might very well be good for the wider world (local lending for instance), most investors are in it for the returns, for the chance to make their cash work harder than it would do left in a straightforward deposit account. And that’s absolutely fine.

That doesn’t, however, break the link between P2P finance and the sharing economy. One thing that unites most of the new peer industries that have popped up over the last few years is participation. Peer based businesses need people to participate, whether that’s using someone else’s couch as a bed for the night, sharing a car or borrowing a Boris bike or participating in P2P finance.

By participating, I mean more than simply transacting. After all, transactions happen 24/7 in banks around the world. Participation is about contributing something more to the project, connecting with fellow users or participants and actively trying to make the overall experience more efficient and rewarding for everyone involved.

You see that at work in the forums that exist at Zopa or Funding Circle, you see it at work on this website which provides a great independent source of comparison, and you see it in action on all of the other online threads dedicated to educating new investors or sharing investment strategies.

Last week, I saw it in action from a FundingKnight investor who took the time to suggest some improvements to the lending platform.

Steve Lee, MD of Jumbocruiser, a luxury sleeper coach operator, is an active P2P investor. He uses a variety of P2P / P2B platforms to invest funds on behalf of himself, his company, the Jumbocruiser Retirement Benefits Scheme (where allowed) and Spenion Unlimited. (If you’d like to know more, you can read all about his thoughts on peer finance in this Q&A on the FundingKnight blog.)

On the 19th January, Steve got in touch with FundingKnight to suggest a change to the way that loans were listed on the FundingKnight website. Rather than a simple tick in the “bid made” column to show that a bid had been made, Steve wanted to see the actual amount that he’d bid.

Having exchanged emails over the weekend (and done some development and testing work), the change went live on Monday 21st January – which got me thinking about the responsiveness of small P2P lenders vs. large, global banks.

Having worked in a large bank in a previous life, I know that “change requests” are more likely to take years than days to implement. It’s not necessarily a reflection on the willingness of a bank to listen to customer feedback – although it’s often a struggle to get feedback through to the person who counts – but rather the obvious consequence of behemoth IT systems that have been adapted and added to over decades and now take significant work to change even the tiniest detail.

For peer to peer lenders, however, the agility of modern, responsive systems means that it’s often far easier to respond to customer suggestions and it’s exactly that type of participation that can keep this industry going from strength to strength and keep customers – both lenders and borrowers – at the heart of it.

By listening – and acting on – customer feedback, we can grow an alternative finance sector that avoids the “them and us” mentality that hampers banks. We can provide service that’s genuinely focused on the end customer and we can provide products, and platforms, that are fit for purpose and easy to use.

Steve himself said, “I was really grateful (my suggestions) were considered and I got a personal reply”. Let’s hope that investors continue submitting their suggestions and that P2P platforms do their best to respond… then together, we can build something that really does offer the best for everyone.

What are your experiences? Have you suggested a change to a P2P website? How was it handled? Do you think that P2P platforms are more responsive than big banks? Leave us a comment below.

P2P companies show an increase in late payments

January 28th, 2013

The Christmas and new year period has given rise to a small but noticeable increase in late payments in the P2P companies that we are tracking.  Zopa and RateSetter showed a very small increase, bringing their overall late payments to 0.64% and 0.14% respectively.  Funding Circle, which currently are the best performing P2P company against their bad debt statistics, have shown a modest increase to 1.70%.

Encash (YES-secure) currently have late payments in excess of 7.41% as they only publish figures for loans that are more than 2 months late, as this is four times the rate of their nearest rival.  The figures for Encash (YES-secure) are broken down into pre and post rebranding as their underwriting apparently was significantly improved.  While the bad debt rates under the Encash brand are significantly better than under the YES-secure brand they are still more than twice the rate any of their competitors.

We should also not forget that bad debt rates for all of the companies, except YES-secure, are significantly better than estimates, and lenders with RateSetter have not suffered any loss due to the protection of the provision fund.

RateSetter break £50million barrier

January 21st, 2013
RateSetter

RateSetter have broken the £50million barrier, in terms of the loans they have arranged.  This is a fantastic achievement for a peer-to-peer company.  January and February are typically very busy months for personal loans, so expect to see this figure increase still further.

Well done to everyone at RateSetter, and their borrowers and lenders.

Funding Circle fills £1M loans in hours

January 18th, 2013
Funding Circle

Lenders of Funding Circle have managed to fill over £1million of new loan requests within a matter of hours, including one loan for £200k.  There was a time when loans would only be filled within the last few days of an auction, whereas now they are filled within the first few hours of a 1 week or 2 week listing period.  This is good news for borrowers as currently borrowing demand is less than the supply from lenders, but as the rate of borrowing increases I would expect this to move towards more of an equilibrium.

P2P companies allows lenders to sell early

January 18th, 2013
RateSetter

RateSetter has added new functionality that allows lenders to cash-in individual or multiple micro-loans early.  Also this month ThinCats introduced a similar feature.  This brings these two P2P companies into line with Zopa, Funding Circle and Encash (YES-secure) who already allow lenders to cash-in early.

RateSetter have taken a slightly different approach by reducing the interest rate to what the lender would have received if they lent on a shorter market.  An example would be if a lender invested their funds over 5 years, but wanted to cash-in after 3 years, their rate would be reduced to what they would have recieved if they had only lent the money for 3 years.  There is also a fixed 0.25% fee, which is the same as ThinCats and Funding Circle, but less than Zopa (1%) and Encash (1%/2%).  As RateSetter use a market based model the sell will be instant, as Zopa, while ThinCats use an auction model, along with Funding Circle and Encash.

This is another positive development in the peer-to-peer arena, and should help encourage new lenders to join.

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