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LendIt Europe: Day one, part 1

Oktober 20, 2015

Here we go. The day starts. Many people in the room and quite a few journalists are here to cover the event.

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All keynotes will be available later for watching on the LendIt Youtube channel

First keynote speaker: Samir Desai – CEO and Co-Founder Funding Circle

Samir just disclosed that Funding Circle launches across Europe through a deal for Rocket Internet-backed Zencap and expands into Germany, Spain and the Netherlands.

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Samir then wants to elaborate more on what is the true value of market places like Funding Circle (or Lendify). Such a company does not have any “substance”, does not have any inventory (like Alibaba, Uber or AirBnB), but they bring participants into a network and enable credit granting to become much more capital efficient compared to regular banks. The cost structure and mostly the fact that there is no balance sheet risk derived from credit risk enable the market places to operate with much lesser capital intensity.
In addition, customer service and customer experience is often regarded as one of the most important factor for the market places, whereas banks have a hard time with these questions.

Another benefit of peer-2-peer lending market places is that governments can directly lend money to SMEs instead of incentivizing banks in order to keep momentum in the economy and this is particularly true during downtimes. Moreover, “bank-run” cannot happen.

However, one of the key component, according to Samir, is transparency. Making public loan by loan details, investor net return, default rates by risk ranges, etc. creates trust in the platform. The peer to peer lending business does not exist if there is no confidence in the platform nor understanding of the performance of each asset class.

To wrap-up, peer-2-peer market places are faster, better and cheaper and this efficiency will drive the development of the bank of the future, i.e. banks will solely focus on deposit and invest into loans originated through market places.

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