Opening up global pools of capital
Samir Desai, CEO & co-founder
>$1.5 billion has been lent to thousands of small
businesses globally through Funding Circle
350
303
FC Quarterly New Lending ($m)
300
150%
growth
per
annum
250
200
81
226
199
56
175
32
25
150
122
99
100
55
43
50
1
3
4
Q3
2010
Q4
2010
Q1
2011
4
6
Q2
2011
Q3
2011
0
21
27
33
12
14
14
12
14
14
21
27
33
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
UK
US
Source: Funding Circle; Used GBP/USD FX of 1.52
65
1
43
Q2
2013
55
64
Q3
2013
Q4
2013
86
6
17
80
83
Q1
2014
Q2
2014
11
222
150
167
170
Q1
2015
Q2
2015
111
Q3
2014
Q4
2014
Q3
2015
Exciting news: Funding Circle enters 3 new countries
Global leader in marketplace lending to small businesses
• Leading small business lending
marketplace in 5 countries
+
• UK, US, Germany, Spain & the
Netherlands…
• ~450 employees
• ~ $120m lending / month
• ~$300m equity capital raised
The eco-system continues to grow
What is so special about marketplaces?
1
Marketplace lending platforms do not hold inventory,
so are significantly more capital efficient
Capital needed to lend $100 billion per annum
12
10
8
$bn
6
4
2
0
Bank
Marketplace
Marketplaces are delivering better customer service
UK net promoter score
US net promoter score
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
-20%
Funding Circle
UK
UK banks
Funding Circle
US
US banks
Our model means eventually we can accept more
businesses at lower cost
More loans/ data
Better models &
underwriting processes
Better marketing &
acquisition costs
Higher acceptance rates
Marketplaces are Faster, Better, Cheaper
Marketplace lending has arrived – true validation is being
embraced by other internet marketplaces
2
Marketplace lending is transparent
 Financials
 Loan by loan detail
 Investor net returns
3
Marketplace lending keeps it simple –
repeat, repeat, repeat
Global credit risk, analytics & underwriting team
Global Chief Risk Officer, Funding Circle
• 20 yrs experience in credit risk management
• Global Head of Risk Analytics, Barclays
Investment, Corporate and Retail Bank.
• CRO, Barclaycard (£40bn global portfolio)
• Capital One, Risk & Analytics
Manpreet Dhot
Chief Risk Officer, Funding Circle US
• 15 yrs experience in credit risk
management
• Chief Credit Officer, Amex PR
& IDC
• Director, Small Business
Modelling, Amex
• Director, Collections
Modelling & Analytics, Amex
Small business specialist credit assessment team
• Team of 37 dedicated SME underwriters
globally
• 313 years combined experience
Jerome Le Luel
Rahul Pakrashi
Chief Risk Officer, Funding Circle UK
•
•
14 yrs experience in credit risk
management
Prior: HSBC, American
Express, Morgan Stanley,
Discover Financial Services,
and Oliver Wyman
Risk & analytics team
• Team of 10 dedicated SME risk specialists
globally
• 102 yrs combined experience
Torsten Nahm
Chief Risk Officer, Funding Circle CE
•
•
9 yrs experience in credit risk
management
Prior: Commerzbank, Allianz,
KPMG, Oliver Wyman
Leads to superior credit performance
Cumulative loss rates by year - UK portfolio
Attractive and stable returns now available to investors,
where previously held on bank balance sheets
Projected returns H2 2015
18
15.8% gross
16
2.6
14
1.0
12
10
8
6
4
10.3% gross
Annual
Losses
2.1
Fee
1.0
Actual
Net
Return
12.2
7.2
2
0
UK
$1,347m
Lending to Date
US
$247m
Lending to Date
4
Marketplace lending is democratic - any investor small
or big can access the same loans
Whole loan
marketplace
INVESTORS
Funding Circle SME Income Fund
Loan
Applications
Institutional Investors
Partial loan
marketplace
Random
Selector
Government
Retail Investors
Approved
loans
FC Credit
Process
Rejected
loans
Continued
tracking and
analysis of
rejected loans
Individual investors can lend directly to businesses
through Funding Circle in 5 countries
Government can directly support small business
Funding Circle SME Income Fund allows access to global
small business lending
Small business loans
Will be listed on London Stock Exchange
Exclusive focus on small business loans
Simple, transparent, low cost
The global Exchange Traded Fund of small business lending
Banks themselves are also turning to marketplace lending
Banks lend through
marketplaces
Borrowers receive fast
access to finance
Banks also referring leads
Banks of the future?
Up to 1.5x leverage
1.5x
Retail deposit
funded bank?
33x
5
Marketplace lending platforms do not do maturity
transformation
What really happened at Northern Rock?
Composition of Northern Rock Liabilities
BOE Loans
Wholesale
Retail Deposits
Covered Bonds
ABS
£0
£5,000 £10,000 £15,000 £20,000 £25,000 £30,000 £35,000 £40,000 £45,000 £50,000
Liabilities
Dec-07
Jun-07
Short term retail and wholesale deposits fled – “bank run” – matched duration ABS
and Covered Bonds did not
Marketplace lending platforms that follow these
principles do not pose systemic risk
>$ 5 trillion of assets
NOT a SIFI – Systemically
Important Financial Institution
>$ 2.5 trillion of assets
SIFI – Systemically Important
Financial Institution
Recap - principles of marketplace lending
1. Do not hold inventory – only by not holding inventory can we be truly aligned
with investors and be faster, better, cheaper
2. Transparent – loan book data on every loan originated
3. Simple – repeat, repeat, repeat
4. Democratic – any investor, large or small, can buy the same loans
5. No maturity transformation – do not create systemic risk by taking short
duration money and matching to longer term loans
THANK YOU FOR LISTENING