We kicked off LendIt China with a welcome dinner with attendees and speakers. The next day we attended the 2015 Mobile Finance International Summit, which also included an expo hall of many p2p lending companies in the industry. Jeremy Todd, Head of West Coast Sales at Orchard presented to the audience an overview of their platform. He educated attendees on aspects of the US market and shared best practices in the marketplace lending industry.
Among many speakers at the summit was FICO China. With the lack of a credit bureau, it was interesting to hear FICO China talk about their plans. There was a big focus on making the financial system inclusive, where anyone can get access to funds with loans priced for an individuals specific risk. The presentation then moved to a discussion of the FICO score in the United States. FICO China hopes to bring scoring models to the Chinese market in the coming years using big data, modeled off the success in the US.
In the afternoon, David Ruddiman, CEO of LendEx was on a panel and was asked about risk management in Australia. David stated that the systems, controls, underwriting and credit models across the board are important in risk management. By choice, LendEx goes through additional processes that a bank would have to go through. This means that that an investor can feel as comfortable with working with them as they would with a bank.
A big part of many p2p lenders in China is the focus on the mobile application. David shared that LendEx operates a fully responsive website. This is due to the unique demographics in Australia. They have over 80% smartphone penetration and project that in 2016, this will be much closer to 100%. Not surprisingly, adoption is around 23% for those over the age of 40. Millennials adoption rate is 86%. LendEx found that banking apps were rated quite poorly in the app stores. They learned that they should not rush the product out using an iterative approach, fixing issues along the way. He thinks many companies would be better off to take a step back and deliver a fully tested product with security also being a priority.
Our last panel consisted of Gene Barash (VP of Business Development, Realty Mogul), Ron Suber (President, Prosper) and Jason Jones (Co Founder, LendIt). The moderator wanted panelists to talk about the differences between the US and China as well as what the future holds. The panel focused on comparing and contrasting the p2p lending market. Ron spoke to the fact that they offer 500 pieces of data and the FICO score is just one of those.
Jason Jones shared how much larger the p2p lending market is in China than the US. Total originations in the US topped $14 billion in 2014, while the Chinese market totaled $54 billion. Jason said that while the markets are different across the globe, p2p lending is a global phenomenon.
Another topic that was brought up was infrastructure. The infrastructiure is not as strong in China as it is in the US. The Chinese government has engaged with the industry, but the industry still has not yet been regulated. They are however looking at what is happening around the world, so the expectation is that any regulation will be well thought out.
This contrasts to the US market where we are fitting p2p lending into existing regulations, which is a challenge the US industry faces. The UK didn’t have a system in place, but created an industry association to come up with a framework. Companies put their heads together to come up with a framework of what they would like to put into law. The government took these ideas and regulations into place. Best of all, it is supported by the major industry players.
The major theme of a centralized credit agency was again brought up. Gene Barash stated the fact that we take this for granted in the US. We have a credit score that follows you around, it is something you value. When you put it at risk, you want to make sure you don’t want the credit score to be negatively effected. He also spoke to specifics on real estate crowdfunding market, where we need to adapt to the information age, the age of the internet.
The focus then turned to the future. Ron Suber pointed out that trust and transparency are key for both the investor and borrower. Companies like Airbnb and Uber are blazing the trails of a new way of doing things. What these companies have done to transportation and lodging, Prosper and other platforms hope to do to the lending industry.
Jason Jones finished with talking about the importance of not just building a platform, but an ecosystem. He believes there are several Chinese companies doing this, such as TenCent and Alibaba. The three keys to creating an ecosystem are openness, access to data and an API.
Throughout the day, attendees were able to network with various Chinese p2p lending companies. We were welcomed with open arms and it is clear that they are very interested in other markets around the globe. The day concluded with a private dinner with Chinese venture capitalists. Tomorrow we are off to the Great Wall of China, hosted by CreditEase.
