Keynote: Opening Up Global Pools of Capital
Samir started his speech by showing the audience some impressive statistics about Funding Circle: the company has been growing at 150% per year, having lent nearly $1.5bn to small business globally, which makes Funding Circle a leader in the space.
Samir announced that Funding Circle has acquired Zencap in an effort to move into Europe. The combined entity is a market leader in five countries, employing 450 people globally – more than half of whom work in technology – and lending around $120 million each month. The company itself is well capitalized and perfectly positioned to take advantage of the opportunities that present themselves.
The ecosystem itself has evolved over the years, but the main theme is the same across all internet marketplaces: the value lies in the network between participants. Alibaba does not own any inventory, Uber does not own any cars and Airbnb does not own any real estate. Thus, naturally, marketplaces don’t have the right to exist, they exist because they provide value and that keeps them alive.
In a similar fashion, marketplace lending platforms do not have a balance sheet as traditional lenders do and that makes them more efficient and drives higher returns on equity. The value to the customers lies mainly in the better level of customer experience, which is evident in an exceptionally high net promoter scores of marketplace lending platforms. In a virtuous circle, giving out more loans and therewith getting more data leads to a better underwriting process, which leads to higher acceptance rates, which in turn leads to a lower acquisition cost. The true validation of the concept comes from the fact that marketplaces are forming partnerships with other marketplaces, such as Zopa and Uber or Lending Club and Alibaba.
Transparency and simplicity are among the principles that make marketplace lending platforms successful. Democracy also plays an important role in that both large and small investors get access to the same deals. Higher returns to investors in lending platforms come from the fact that marketplace lending platforms do not take any balance sheet risk and do not have to comply with the regulators’ requirements. That is possible because marketplace lending platforms don’t do maturity transformation as traditional lenders would.