Sometimes, you just have to get back on the horse, especially when that horse is galloping through a market valued in the trillions.
Michael Solomon and Todd Walters, the former executives of the ill-fated Loanio.com, a peer-to-peer (P2P) lending venture that launched in 2008 before falling victim to the economic downturn, unexpected Securities and Exchange Commission regulations, and an inhospitable economic climate, are giving the P2P business another shot by partnering with a group of loan marketing experts to form CircleBackLending.com, an Internet-based platform connecting accredited investors to prime borrowers.
By the third quarter of this year, CircleBack will join well-established industry leaders Lending Club and Prosper Marketplace in the rapidly expanding online consumer credit market, a growth industry that allows clients to borrow cash through an online marketplace, cutting out the middle-man by linking individual investors with people who want to loan money without involving the banks.
“This business model has been validated and there is a clear vision for the industry,” CircleBack CEO Solomon told BanklessTimes about the timing of the launch. “With five years of historical data and ROI available, it makes it much more exciting now that the dust has settled.”
Lending Club, which launched in 2007, recently surpassed $1 billion in total loan originations. Prosper Marketplace, which launched in 2006 making it America’s first P2P lender, today reports more than $400,000,000 in funded loans.
While these competitors have a strong foothold in the industry, Solomon and Walters believe that there is plenty of room for new online lending platforms in the U.S. consumer credit market, valued at more than $2 trillion.
“This is not a zero sum game,” said CircleBack COO Walters, comparing the landscape with the rest of the financial industry, citing that there aren’t just two banks, or two investment houses.
“We’re not looking to knock out the other players, in fact, more success in the industry actually helps them,” said Walters. “That said, we’re trying to compete, and we’ve created a platform that will make us the go-to for institutional investors.”
Rather than act as a “one-stop shop” for any and all loan investors, CircleBack will focus on creating a specific marketplace that caters to accredited and institutional investors, as the pair believes that these investors will need to rely on multiple platforms as the market continues to grow.
Jim Bruene, founder of Online Financial Innovations, a boutique research firm focused on the future of financial and banking technology, believes that the success of CircleBack’s competitors makes it “an excellent time” to enter the space because investors have been embracing P2P lending.
“Investors are comfortable that the risk models are now working, and returns appear somewhat predictable,” said Bruene, though he cautioned via an email that this can always change.
The current economic climate seems to suit this venture, as Bruene added, “Other competitive investments [such as] bonds, money market, and savings accounts are paying historically low rates.”
It looks like this time around, Solomon and Walters have picked the right time to saddle up.
