Author Topic: Gone in 60 seconds!  (Read 4346 times)

SeattleSun

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Gone in 60 seconds!
« on: December 15, 2013, 12:40:31 AM »
60% of all Prosper loans funded with in 60 seconds!


Distribution of time to invest

The distribution of the time to invest in Prosper loans has changed a lot over the past two years.  Below, we show the percentage of loans that were fully invested in within 1 minute, 1 hour, 1 day or over 1 day.  Historically, most loans were invested in more than a day, but in the last 3 quarters we see that the number of loans fully invested within a minute growing very quickly now comprising almost 60% of total loans.

 
Conclusion

Online Direct Lending has received greatly increased attention from investors over the past year, leading to a situation where the demand for loans outstrips their supply.  With the most sophisticated investors automating their investment strategies, the many loans are being purchased quicker.  60% of listings are purchased within a minute of posting and this number is looking to increase!  Historically, the gulf between quick-funding and slow-funding loans is vast, and as the market matures, any investor seeking to build a large and high-quality portfolio will need to pursue a highly-automated investment strategy.

http://www.orchardplatform.com/investment-timing-for-prosper-loans-2/

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« Last Edit: December 15, 2013, 12:49:10 AM by SeattleSun »

MarinBB

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Re: Gone in 60 seconds!
« Reply #1 on: December 15, 2013, 07:32:58 PM »
This is really interesting, thanks for posting it. Did you take out Whole loans from your sample? I imagine that those either fill inside of a minute or last for over a day until they drop down into the Fractional pool. It might be messing up the data a little.

SeattleSun

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Re: Gone in 60 seconds!
« Reply #2 on: December 18, 2013, 12:01:15 PM »
MarinBB,

The analyis is from the people at Orchard Blog, who I note are now selling a note selection service to institutional investors, so may have an interest in spookin' them into their service.

Follow the link to hopefully get an answer to your question.

SS

dagilbe

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Re: Gone in 60 seconds!
« Reply #3 on: December 18, 2013, 08:31:07 PM »
Seattle, thank you for posting.  This chart represents everything that is wrong with P2P lending.  If you wonder why the loan quality has been so bad over the past year, this is why. 

What services are out there that use the API to automatically invest?  I am sick of the leftovers.




nonattender

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Re: Gone in 60 seconds!
« Reply #4 on: December 18, 2013, 10:25:09 PM »
While I understand that those who run the platforms have other priorities to balance, I continue to be disappointed in both that they
are permitting and promoting the "sale of priority" via "third parties" and, at the same time, giving away their tool of PRICE CONTROL.

It seems to me that if they looked at it properly (by which I mean "the way that I do"), they'd see the benefits of centralized price control.

If only someone were involved at some level who may know something about central banking and the necessity of maintaining stability...

I am open to being informed and enlightened as to the wisdom of introducing more "middlemen" into a disintermediatory system, but... ;)

*shrug*

ETA:  Fundamentally, now that demand for loans outstrips supply of loans (or demand for capital is outweighed by demand for notes -
however one may think of it), isn't the simplest and easiest thing to do (if the platforms cannot/willnot not package and sell tranches)
just to implement an auction mechanism by which the notes can be sold and the market can be heard ("auction") and best man wins?

Pardon me for being an idealist, but... really!
« Last Edit: December 18, 2013, 10:46:44 PM by nonattender »
A little nonsense now and then is relished by the wisest men.

MarinBB

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Re: Gone in 60 seconds!
« Reply #5 on: December 19, 2013, 08:56:45 AM »
The original version of Prosper used an Auction mechanism. It didn't work well for two reasons:
1. Borrowers had to wait 1-2 weeks until their listing's auction closed to go into funding.
2. Much worse, lenders systematically underpriced risk and listings funded at very low rates. You can check the returns on Prosper loans from the first few years; I think that the average investor lost money or came close to it.

The returns profile looks much better now. They stopped allowing one to see who bid on each loan, but last I was able to look at this, nearly all investors with 50+ loans were making at least some money. That's good for Prosper and for P2P investing as a whole.

That being said, I would strongly support lowering the loan participation cap on fractional listings from 50% to maybe 20% to let more lenders get on each loan. The best listings would also last longer. I use the API and many of the best loans fill in under 1 second.


SeattleSun

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Re: Gone in 60 seconds!
« Reply #6 on: December 24, 2013, 08:10:00 PM »
Gone in 6 Seconds!

Bryce Mason of P2P Picks says us "fractional pool" lenders have it easy.

In the "whole loan world" things go in a few seconds.

Great Pod Cast by Peter this week at here.

http://www.lendacademy.com/bryce-mason-p2p-picks-interview/comment-page-1/#comment-26820