Peer-to-peer lending, where money is lent to individuals without going through a traditional financial intermediary such as a bank, is a sector which is taking off around the world.
This week the loan marketplace LendingClub IPO in the US was a solid example of how these types of companies can soar.
It was expected to list on the New York Stock Exchange at $15 a share. On its first day of trade it was up a hefty 60% to $25.44 before closing up 56% at $23.42 a share. The closing price gave LendingClub a valuation of about $8.5 billion.
It’s investors raised almost $900 million through the sale of more than 50 million shares, making it one of the largest US tech IPOs this year.
Lending Club’s strong IPO is a signal for global markets, including in Australia where companies such as Society One are starting to gain traction, attracting significant backers including James Packer and News Corp.
Another player jostling for position in the Australian market is MoneyPlace. Founded by a team of former senior bankers it aims to become the Lending Club of Australia, company CEO Stuart Stoyan said.
“Lending Club is a bellwether for P2P’s growing importance, and it’s success in the US market is matched by opportunities in other geographies, including Australia,” he said.
P2P lending has the potential to disrupt banks and traditional lenders, essentially crowdfunding the process by matching borrowers and investors.
“Combined with a recent high profile investment locally, this demonstrates that P2P lending is very real, and that there is an opportunity to disrupt the banks and empower Australian borrowers and investors,” he said.
MoneyPlace is in the process of gaining regulatory approval and expects to launch in early 2015. Stoyan was one of the top executives at NAB before leaving to start MoneyPlace with several high profile big four bank executives.
“We operate an online marketplace that connects credit worthy borrowers with investors, providing fairer, more affordable loans for borrowers, and the opportunity to earn higher fixed income returns for investors,” Stoyan said.
The findings of a year-long inquiry into Australia’s finance system were released earlier this week and threw support behind internet financing and crowdfunding outfits.
Regulations getting in the way of crowdfunding in Australia need to be removed to give startups more finance options and to increase competition, the inquiry headed by former Commonwealth Bank CEO David Murray recommended.