2012 Predictions For P2P Lending

1. Secondary Market Liquidity Issues

More states will have access to the primary markets that previously did not.  As a result investors that have been forced to use the  secondary market will flock to the primary market for obvious reasons.  The number of buyers on the secondary market will sink and selling notes will become increasingly difficult without higher discounts.

2. Institutional Investors Move In

It will not be uncommon to log in to your account one day and see the number of notes on the primary market drop by 50% from the previous. As institutional investors realize they can exploit the P2P platforms for massive gains, more and more of them will snap up large portions of loans. Lenders will have trouble buying the notes they want at an acceptable rate. If the stock market takes off and / or interest raise rise,  lenders will allocate more money else where due to the time it takes to invest any significant amount of cash in P2P lending.

3. Note Repurchase Program

The platforms offer a new service where notes are guaranteed to be purchased (that are in good standing) at some spread that exceeds 1%. These notes will be repackaged into bonds that are then sold institutional investors to help alleviate prediction one and two. A portfolio can be liquidated in one day as a result of the new repurchase program.

I rank these predictions in the order they are most likely to happen.

Happy New Year

Michael

4 thoughts on “2012 Predictions For P2P Lending

  1. Allow me to add one:

    4. Lending Club removes the $25 minimum for note purchases. How much idle cash is collectively sitting in lenders accounts right now just because individually they don’t meet the arbitrary minimum? If nothing else, it should allow loans to be funded just that little bit faster.

    1. That’s an interesting prediction. You’d need quite a bit invested to buy one note per day to minimize idle cash.  Perhaps this could play with prediction 3 and the repackaged secondary market notes would have different prices. It would almost be like an ETF for P2P notes…

  2. It’s just a prediction that more states will be added which will reduce secondary market liquidity. If people that are forced to use the secondary market are allowed access to the primary the demand for notes on the secondary will drop.

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