P2P News – All The Latest Updates
Hi guys and welcome to our August P2P news blog round-up, as usual we will be giving you five of the latest stories from the P2P world. Today we start our round-up by looking at credit card giants Visa and MasterCard who are diving head first into P2P payments to focusing on UK SMEs who are flocking to P2P. Missed our last P2P News round-up? If so, catch up here.
Visa and MasterCard dive head first into P2P
A new partnership with Visa and Mastercard will help grow the reach of the clearXchange network, which allows customers at its member banks to make no-fee peer-to-peer (P2P) transfers.
This is for users who have a US-issued debit card, they will be able to use Visa Direct and Mastercard Send respectively to transfer funds in real time from holders of accounts at clearXchange’s member banks, which include Bank of America, JPMorgan Chase, US Bank, and Wells Fargo.
For major credit card networks this is a huge push to go digital. Both credit card titans have been working on their API platforms as well as rebranding their services. The Visa-Mastercard partnership gives clearXchange another string to its bow as it tries to grab digital P2P market share.
These partnerships should open up the world of P2P payments to an entirely new segment of the U.S. population, it can be inferred that it should in turn spur more payments of this type. A U.S. consumer survey revealed that 59% would use P2P payments due to convenience. In addition, 29% of those surveyed said they would use P2P payments for incentives.
Samsung Pay takes on PayPal in P2P payment
Sticking with payment giants, Samsung is also said to be planning to add a person-to-person, or P2P, transaction function to the mobile payment solution this year and will compete with PayPal’s P2P service Venmo which has gained popularity in The States and Japan respectively.
PayPal recently said the Venmo service saw the amount of transactions processed through the app increase 140 percent on-year to $4 billion in the second quarter. (The Investor, August 2016)
In Samsung’s native South Korea, Kakao, operator of mobile messenger KakaoTalk are spearheading the mobile P2P payment sector.
Commentators have mentioned that no single company is currently leading the mobile payment solution market, the adoption of a P2P function, if deployed, could give a boost to the mobile phone giant in increasing its presence in the market.
P2P in China: Why Firms Need Better Risk Controls
This is one P2P issue that has had appeared regularly this year and something we have covered in a previous P2P news blog. P2P in China has become a controversial subject due to fraudulent activity taking place which resulted in a number of arrests.
Since 2015, many P2P platforms including Ezubao, the Dada Group, the Kuailu Group, the Zhongjin Group and others have been charged with illegal fundraising, involving tens of billions of yuan. (Wharton, University of Pennsylvania, August 2016)
However, this has not only happened in China, back in May the U.S. Treasury Department released a report criticising the peer-to-peer (P2P) lending business and recommended it be more tightly regulated (like it is here in the UK).
By the end of May this year, China’s P2P industry reached 2.036 trillion yuan (about $300 billion in transaction volumes).
Kaixindai‘s Zhihan Zhou was interviewed by the University of Pennsylvania and mentioned that the challenge for the industry in China goes from small to big. Many P2P platforms start from the lowest end (individual consumption credit) without gradual evolution. This causes trouble subsequently.
He uses U.S. based company Lending Club as an example – It originally hoped to evaluate personal risk based on data extracted from Facebook, Twitter and other social platforms. That is in America, which has much more sophisticated credit investigation and personal data systems than in China. So you can imagine a large amount of P2P business based on personal credit in China will meet trouble in operation if there is no appropriate risk control system in place. (Wharton, University of Pennsylvania, August 2016)
In addition he was asked about why do many P2P companies in China fail, Zhou said it could be linked to expanding too quickly, e.g. their operational capabilities including data accumulation and risk-control models haven’t caught up. He stresses that the industry requires the practitioner to understand both the internet and finance. People from traditional banks tend to stress more on risk control, but less on USX, especially on Internet-user experience. It’s all about balance.
Interested in both P2P and China? Read the full interview here.
How Brexit Has Impacted P2P Lending
Managing director and founder of Funding Circle, James Meekings recently spoke to Bloomberg about Brexit and P2P Lending.
Bloomberg’s Adam Satariano asked James an array of questions, firstly he asked – “A key part of your business is having access to the European single market, Brexit has caused uncertainties are you thinking of changing your base of operations?”
James mentions that they have various offices in Europe from Berlin to London and have to abide by regulations in every country that they operate in. He also mentioned that the EU referendum doesn’t make a difference to how they behave in different countries.
Another question that was put forward by Mr. Satariano was about Lending Club and how they’ve been going through tumultuous times with its stock collapsing and questions about its internal controls, he asks James how their situation impacts the industry,investors, banks, and hedge funds that they rely on.
James openly admits that is has been a challenging year – from the worries of the Chinese economy, the Lending Club challenges, plus the EU referendum. He says the Lending Club challenges are isolated and are about control issues, in the UK we have a dedicate framework, and for Funding Circle they are seeing institutional investors being more aware and asking more questions about their operational risk framework, which he says is quite right. They have been reassured by the answers that the company has given them.
Watch the full Bloomberg interview here.
UK SMEs Flock to P2P Lending Boosting Jobs and Housebuilding
The p2p and marketplace lending industry is driving small business and economic growth, particularly in areas hit hardest since the financial crisis, a new report suggests. (Altfi, August 2016)
A report by the Centre for Business and Economics Research (CEBR) revealed that SMEs are increasingly using p2p and marketplace lending platforms to meet their financial needs.
The findings showed that the North East of England was using this particular form of the alternative finance the most. In England, it was the region that was most affected by the 2008 financial crisis.
The CBRE’s research which was produced with Funding Circle, examined loans made through the platform to small businesses since 2010. The results found that lending by p2p platforms in the UK to small businesses rose by 50 per cent from the beginning of 2015 compared to the beginning of 2016. In addition, it claims Funding Circle’s loans have boosted the UK economy by £2.7bn since 2010, supporting 40,000 new jobs and helping small house builders to add 2,200 new homes.
CBRE and Funding Circle’s research also revealed that 61 per cent of borrowers saw their revenue increase as a result of taking a loan, while nearly half of the SMEs reported a rise in profits.
What Are Your Thoughts?
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