future of finance: when everyone is an online lender
TRANSCRIPT
ARE YOU AN ECOMMERCE PLATFORM
OR A SMB LENDER?the future of finance when everyone is a lender
FUNDING FOR LENDING STARTUPS EXPLODING
WHY?
NEW COMPETITION FROM OUTSIDE TRADITIONAL FINANCE
LOTS OF MONEY AND OPPORTUNITY UP FOR GRABS
BUT SMBS AREN’T
BORROWING JUST FROM
BANKSthey’re borrowing from a new
class of lenders
ECOMMERCE LENDINGTRANSACTIONS AND FINANCING
AMAZON LENDING
➤ Invite only, began in 2012
➤ 90 - 180 day loans of $1k to $600k
➤ 6% - 14% interest rates
➤ Since inception, offered hundreds of millions of dollars worth of loans
➤ Announced Summer 2015, program is expanding to Canada, France, Germany, India, Italy, Spain and the UK
Source: Business Insider
PAYPAL
➤ Fall 2015 announced it had surpassed $1 billion in SMB loans after 2 years
➤ 60,000 merchants have used PayPal’s Worlking Capital
➤ now lending $3 million/day
➤ Sizes and effective APR depend on sales volume merchants do using PayPal
➤ Recently expanded credit limits to $85,000 from $65,000, and simultaneously upped the amount a borrower could take on to 15% of sales (from 8%)
Source: Forbes
LENDERS TARGET SHOPIFY MERCHANTS
➤ Kabbage provides loans to Shopify merchants
➤ Affirm, Max Levchin’s new online lender, allows Shopify merchants to provide financing options to customers
THE CHINESE ECOMMERCE/BANKING
EXPERIMENT
TENCENT/WEBANK
➤ Tencent, one of top Internet companies in China, launched January 2015 first private online bank in China, called WeBank
➤ Tencent’s WeChat is one of most popular messaging apps in Asia, already offers personal loans in minutes (without guarantee/collateral)
➤ Seeking to raise $1 billion in fresh funds
➤ WeBank’s first loan was 35,000 RMB($5600)to a truck driver
Source: TechCrunch, WSJ
ALIBABA/MYBANK
➤ Alibaba bank affiliate, Ant Financial launched MYbank Summer of 2015
➤ Registered capital of 4 billion yuan ($644M)
➤ Issue loans of under 5 million yuan to SMBs
➤ Clouded by regulatory concerns
Source: WSJ
BAIDU
➤ China’s Google has partnered with Citic Bank to launch an online bank
➤ Baidu has 640 million users and Citic Bank is China’s 6th largest bank with 4 trillion RMB ($626 billion)
Source: CNBC
UNSECURED LENDING
getting better at assessing risk with additional ecommerce data
KABBAGE
➤ Recently raised $135M + credit facility of $900M
➤ Funded over $1 billion to 100,000+ small businesses
➤ Loan approvals require link to business apps (Checking accounts, Intuit Quickbooks)
➤ Loans $5M to SMBs
➤ Plans to expand into Europe, Latin America, India, and Canada
Source: Fast Company, TechCrunch
Both balance sheet lenders (OnDeck) and marketplace lenders (Funding Circle and Lending Club) are going after the SMB market
SECURED LENDING
Securing collateral behind online lending
BORRO
➤ loans of up to $10,000,000 secured against luxury assets such as fine art, antiques, jewelry, luxury watches, prestige & classic cars, fine wine
➤ Raised over $170M in equity + lending facility
➤ Borro will usually get a loan to someone in 24 hours, with the average loan size at £70,000 and term of five months
Source: Crunchbase, CityAM
FACTORING/INVOICE FINANCE
Providing financing for specific purchases
EXAMPLES (BEHALF, BLUEVINE, C2FO, FUNDBOX )
➤ 82% of business failures are due to poor cash management
➤ In the United States, these invoices represent a $72 trillion market, according to Fundbox Chief Executive Eyal Shinar
Source: Forbes
KICKFURTHER
➤ SMBs finance inventory to the crowd at a consigned rate. If funding goal is met, Kickfurther buys the inventory and gives to SMB. The business sells it, returning a % to backers each month, depending on volumes sold
➤ Backers earn equity-like returns in just a few months
Source: MarketWatch
“People have long thought that the Internet is overhyped. But when you realize that it now has the power to reinvent the multi- trillion banking industry – I argue that it still hasn’t been hyped enough.
-Charles Moldow, Foundation Capital
