SAN FRANCISCO (PRWEB) June 10, 2008
May 2008 Prosper People-to-People Lending Market Survey
The next People-to-People Lending Market Survey will be released on July 15, 2008. In August, it will resume its normal release schedule, publishing on the second Tuesday of every month. To register to automatically receive the survey, send an email with "SUBSCRIBE" in the subject line to: email@example.com.
Market Commentary By Prosper Co-founder and Chief Executive Officer, Chris Larsen
In May, a record number of loans – in terms of dollars and units – were funded in the Prosper marketplace. The sudden increased supply of loan listings with an attractive risk-return tradeoff (as cited in last month's survey) was the key driver of the record level of originations. Also notable in May and worthy of further discussion are two recently introduced marketing initiatives.
Earlier this spring, Prosper began testing a radio advertising campaign in select major metro markets, and in early May we unveiled our new Lets Bank on Each OtherTM tagline and pilot TV ad campaign in the Minneapolis metro region. No actors were used for the television campaign; rather they feature real Prosper borrowers and lenders who have benefited financially and socially through their participation in the marketplace. In June, we expanded the television campaign pilot to select San Francisco Bay Area markets and continued our radio campaign in select markets around the country.
Another new initiative is the enhancement we made to our Facebook application. After experiencing very limited success on Facebook, in mid-April we decided to lower the minimum instant transfer amount to $50 for lenders who install the Prosper Facebook application. For lenders who do not install the application, the minimum instant transfer amount must be $500 and less than 20% of their active loan value. Since the introduction of the new feature, the adoption of the application has significantly increased, growing from a mere 400 users to approximately 4,000 users. This indicates that the added benefit is serving lender demand for lower minimum instant transfer amounts. In addition to the $50 instant transfer feature, the application enables Prosper members who use Facebook to share their Prosper listings, bids, and watched listings with their family and friends on Facebook.
Membership and Loan Volume Statistics
New Members 33,050 33,625 187,635 171,474 725,763 Funded Loans ($) $9.6 million $7.7 million $38.5 million $36.0 million $147.0 million Funded Loans (Units) 1,603 1,068 5,982 5,213 23,302 Average Loan Size $5,989 $7,201 $6,442 $6,901 $6,303 Daily Average Number of Borrower Listings 2,875 2,373 2,443 1,970 1,705 Mix of Funded Borrowers
Prime 41% 33% 41% 29% 33% Near Prime 55% 56% 54% 55% 54% Sub Prime 4% 11% 5% 16% 12% Estimated Annual Return on Prosper Select Index
May 2008 Prosper Select Index 7.87% Prime Select Index 8.78% Near Prime Select Index 6.81% Sub Prime Select Index 12.39% Average Borrower Rates on Prosper Select Loans
Prime Select Loans 9.55% 9.86% 10.21% 9.86% 9.93% 9.99% Near Prime Select Loans 16.17% 15.52% 15.97% 15.99% 15.19% 16.06% Sub Prime Select Loans 22.37% 35.00% 25.52% 26.57% 23.31% 24.12% Definitions
Attractive Risk-Return Tradeoff: For purposes of this survey release, listings are considered to have attractive returns if, based on historical loan repayment performance of Prosper borrowers with similar characteristics, they are priced sufficiently to compensate lenders for risk. Risk includes both the risk of non-payment by the borrower and other risks associated with people-to-people lending. In general, as the credit quality of the borrower declines, the range of possible returns widens, requiring a larger risk premium to compensate the additional uncertainty. The amount of risk premium required to compensate for a given level of risk is a subjective judgment. The following formula is used by Prosper to determine if a listing is priced adequately to have an attractive risk adjusted return: Maximum Borrower Rate > Risk Free Rate1 + 3.25% + (Expected Annual Default * 1.5) + Prosper Servicing Fee. All lenders must make their own judgments with respect to what constitutes an adequately priced listing.
1Risk Free Rate = 2-year CD national rate on BankRate.
Since Inception: November 1, 2005 through May 31, 2008. Prosper's by invitation only "friends and family" launch began on November 1, 2005 and Prosper launched to the general public on February 13, 2006.
2008 Year-to-Date: January 1, 2008 through May 31, 2008.
2007 Year-to-Date: January 1, 2007 through May 31, 2007.
Prosper Select Index: The Prosper Select Index return is the estimated average annual return on principal, based on actual delinquency performance to date. The Prosper Select Index includes AA - E credit grade loans for borrowers whose credit reports at the time of application indicated zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less. The annual return period reflects loans originated in the twelve month period ending one month prior to the observation date of May 31, 2008. Prime Select includes AA and A credit grade loans (credit scores of 720+). Near Prime Select includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime Select includes E credit grade loans (credit scores between 560 and 599).
Average Borrower Rates: Average Borrower Rates are the weighted average borrower rates on Prosper Select Index loans with loan amounts between $5,000 and $10,000. Rates shown are interest rates, not annual percentage rates.
Mix of Funded Borrowers: Prime includes all AA and A credit grade loans (credit scores of 720+). Near Prime includes all B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes all E and HR credit grade loans (credit scores below 600).
Prosper, America's largest people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone. Prosper's membership consists of over 725,000 people from across the country. Since launching in February 2006, over $150 million in loans have been funded in the marketplace.
The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform. People who want to borrow on Prosper create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. People who register as Prosper lenders set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. In addition to criteria commonly used by institutional lenders, such as credit data and histories, Prosper lenders can consider borrowers' personal stories, endorsements from friends, and group affiliations. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan to the borrower. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrowers and lenders.
Prosper was co-founded by Chris Larsen, co-founder of E-LOAN, and John Witchel, technology entrepreneur. Backed by Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital, and Omidyar Network, Prosper has raised approximately $40 million. Prosper's marketplace platform is patent pending.