Personal Loan Industry

Part
01
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Part
01

Personal Loans Industry - United States: Current Over-served and Under-Served Market Segments

The current over-served market segments in the personal loans industry in the United States, specifically focused online, are the people who need debt consolidation, those who need credit card refinance, and those who have home improvement projects. On the other hand, the current under-served market are the small business owners, people buying a home, and people who are looking for green financing.

Market Growth of Personal Loan Industry

  • Financial technology companies made up 38% of personal loans in the United States in 2018. These fintech companies help to boost the market size of the personal loan industry to $138 billion.
  • People in the United States treat personal loans as "quick cash" that they can utilize to pay many things, including credit card debt and vacations.

Over-Served Market Segments in the Personal Loans Industry

DEBT CONSOLIDATION
  • Americans use debt consolidation to pay off multiple debts. With debt consolidation, several debts are paid at once in the form of a single, larger debt but with more favorable payoff terms such as a lower monthly payments and interest rates, etc.
  • Around 39.2% of personal loan borrowers in the United States use their loans to pay off general debt consolidation.
  • Considering the information above, Americans that need debt consolidation serve as one of the market segments in the personal loan industry that is currently over-served.
CREDIT CARD REFINANCE
  • Credit card refinancing is typically referred to as a balance transfer. Americans utilize personal loans to transfer funds to their credit card, giving them a specific amount of time to fully pay off their credit cards.
  • About 21.8% of personal loan borrowers in the United States use their loans for credit card refinancing.
  • Taking this information into account, Americans that need credit card refinance are a current market segment that the personal loan industry is over-serving.
HOME IMPROVEMENT
  • Home improvement involves the replacement, renovation, addition or alteration, remodeling, modernization, repairment, or conversion of any building or a section of said building. It could also be an improvement to a section of land that is adjacent to a building.
  • Since home improvements tend to be expensive, Americans turn to forms of debt to help financially support their home improvement projects.
  • About 7.7% of personal loan borrowers in the United States use their loans for home improvement projects.
  • Based on this information, Americans that have home improvement projects and are seeking loans to help finance it is an over-served market segment of the personal loan industry.

Under-Served Market Segments in the Personal Loans IndustryINDUSTRY

BUSINESS
  • Business owners often turn to personal loans if they fail to qualify for business loans.
  • Just 1.0% of personal loan borrowers in the United States use their loans to finance their business.
  • Considering this information, Americans that are small business owners are an under-served market segment in the personal loan industry.
HOMEBUYING
  • A personal loan is best used when buying a mobile home or a small residence.
  • Merely 0.7% of personal loan borrowers in the United States use their loans for homebuying.
  • Based on this information, Americans seeking a loan to buy a house are a market segment that is currently under-served in the personal loan industry.
GREEN LOAN
  • A green loan is offered to loan borrowers when they are administering energy-efficient measures within their residence.
  • At least 0.3% of personal loan borrowers in the United States use their loans as green loan.
  • Considering this information, people that plan to transform their houses into environmentally sustainable homes are an under-served market segments in the personal loan industry.

Research Strategy:

For this project, we initially focused on searching for a direct answer. However, after expanding our research to global scope and not focusing on online delivery, we were unable to locate specific data. We did find relevant industry statistics from industry reports on the personal loans sector in the United States.

Based on the industry statistics, we were able to determine the top reasons people seek personal loans and corroborated this information across multiple sources. Considering the meaning of market segments, we were able to provide a list of both under-served and over-served market segments in the personal loans industry based on the reasons on the borrowers use personal loans.
Part
02
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Part
02

Personal Loans Industry - United States: Psychographics

The psychographics of a typical personal loan consumer in the US includes its excessive spending behavior with endless debts that generate repayments. They are also enthusiastic credit card buyers, and they prefer efficient financing options where customization and comfort are part of the service.

GENERAL PERSONAL LOAN CONSUMER -PSYCHOGRAPHICS

HABITS

  • Most personal loan consumers tend to engage with traditional banking services for their banking and lending requirements.
  • Intending delinquency, which even goes to around 60+ days past due in case of personal loan, is a possible habit in most of the consumers.
  • Most short term personal loan consumers tend to borrow money as they have an ongoing shortage of cash and have a constant need for more income.

LIKES

  • Personal loan consumers perceive that lenders are profit-driven and like the lender who offers reasonableness of fees and competitiveness of rates.
  • Digital applications lead to better satisfaction rates from personal loan consumers who like to engage with online and digital-only options for their lending requirements.

SPENDING HABITS

  • Survey reports highlight that most of the personal loan consumers in the US, are avid credit card shoppers, trapped in a fashion of overspending leading to debt on repayments.
  • The top choices for consumers to spend their loan amount include debt consolidation, making large purchases, or paying for home improvements.

VALUES

  • Consumers value fast and efficient funding options when looking for personal loans.
  • Consumers prefer personalization and comfort while exploring options for their credit requirements. They feel inclined to explore alternative sources such as Fintech for their loan requirements, which offer an online solution with individually tailored interest rates and repayment terms.

Research Strategy:

The research team compiled insights on the psychographics of a typical general personal loan consumer in the US through multiple loan consumer surveys and industry reports by leader firms such as JD Power, LendingTree, Experian, and Chamber of Commerce. Those reports allowed us to determine key insights relating to preferences, likes, spending habits, values, and reasons to opt for personal loans.
Part
03
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Part
03

U.S. Personal Loans Industry - Barriers to Entry

Three barriers to entry in the personal loans industry are regulatory uncertainty, raising capital, and customer acquisition. Details on each barrier are provided below.

Regulatory Uncertainty

  • Currently in the U.S., there are eight federal agencies that have input into the finance industry. There are also 50 states with their own regulations.
  • The U.S. has extensive compliance regulations that must be followed by lenders. Ensuring that the proper procedures are in place to meet all these regulations can take extensive amounts of time and money, resources which many startups are short on.
  • In early 2019, the national association for state bank regulators put out a call to eliminate barriers to fintech lenders. For example, some states have laws indicating that lenders must have a physical presence in the state in order to provide loans. Another outdated regulation in some states is that disclosures must be done in specific font types and sizes.
  • Businesses looking to break into the lending business in the United States need extensive knowledge, or assistance from experts, to ensure that all regulations, both federal and state, are being followed.
  • For companies in the personal loan space, or looking to enter it, there is a bit of push-pull happening. These new companies want the freedom to experiment with new ways of lending without being stifled by regulation. However, too much uncertainty in the area of regulations means that companies can't be certain of the long term viability of their business plans.
  • The U.S. lags behind other countries in regulating fintech, so investments in other countries are growing more quickly in this area.
  • Regulatory uncertainty was mentioned as a barrier to entry in the financial industry by several experts, which is why it was included.

Raising Capital

  • Since the purpose of lending business is to loan money, relatively large amounts of capital must be raised in order to have money available to lend.
  • Typical interest rates for startups borrowing lending capital is in the 5-10% range. With the average rate on a personal loan currently at 9.41%, this does not necessarily leave a lot of room to make money.
  • Alternatively, new businesses can try to obtain venture capital for funding, but only 0.05% of startups successfully do this.
  • Sometimes when companies are desperate for money, they give too much away to potential investors, which can be detrimental to the company down the road.
  • This was chosen for inclusion because of lack of capital would be a paralyzing barrier for a personal loan company to overcome.

Customer Acquisition

  • Customer acquisition is a challenge for most fintechs. Not only are they competing against other personal loan provider startups, they are also competing against big established players in the financial industry.
  • The ability to successfully acquire customers is dependent on several factors including the company's competitive advantage, their knowledge of their target customer, and what they have done to build trust with potential customers.
  • Existing competitors in the personal loans industry are paying hundreds of dollars to acquire each new customer, and a startup will likely not have the funds to compete with that.

Research Strategy

Our initial research on the barriers to entry in the personal loans industry on sites such as the Online Lenders Alliance, Investopedia, and Deloitte did not uncover any data specific to the personal loans industry. However, some further research on the personal loans industry uncovered that that growth in the industry is being driven by fintech companies that primarily focus on online lending. Based on this information, and on the lack of publicly available data specific to personal loans, we slightly changed the focus of the research to online lenders. Most online loans are unsecured, as are personal loans, so the barriers to entry should be similar.
Part
04
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Part
04

Personal Loans Industry - United States: Known Regulatory Concerns

Four regulatory concerns in the personal loan industry in the United States are the lack of direct regulation of Fintech firms, the potential of amendments to the Community Reinvestment Act to make it easier for banks to ignore under-served communities, the potential threat to the Community Financial Protection Bureau posed by a pending Supreme Court decision, and non-financial risks. Each is defined and reviewed for the impact on the personal loan industry before an input from thought leaders or industry experts.

Lack of direct Fintech regulation

  • Fintech companies are not subject to a federal banking regulatory agency. If a Fintech company wishes to operate across state lines, it must apply for licenses state-by-state, a process that is complex and long. However, the companies are subject to overarching federal regulations in consumer protection, Bank Secrecy Act/Anti-Money Laundering (BSA/AML), and to indirect overview via bank and vendor relationships.
  • At the end of the first quarter of 2019, 19.3 million Americans had unsecured personal loans valued at $143 billion. Loans sourced from Fintech is estimated at 38% of the total value in 2019, up from 5% in 2013. With Fintech offering unsecured loans in amounts up to $10,000 compared to $5,300 for credit unions and an average of $8,500, market share for credit unions has fallen from 31% in 2013 to 21% and to 28% from 40% for banks.
  • The superintendent of the New York State Department of Financial Services, Maria Vullo, opposes federal regulation of Fintech, contending that states regulators have been doing the job well. Ms. Vullo believes that it would be irresponsible to ignore the historical role of the states and that state regulators are best positioned to both protect consumers and allow Fintech to survive.
  • The Conference of State Bank Supervisors criticized as flawed a proposal by the Office of Comptroller of Currency to create a special purpose charter for banks which would be available to Fintech companies providing non-deposit banking products and services.

Amendments to the Community Reinvestment Act

  • The Community Reinvestment Act contains provisions which keep banks from discriminating against poor and disadvantaged communities. The current Act rewards banks that grant mortgages and small business loans in the community.
  • Amendments to the Act will impact the personal loan industry through the broadening of the definition of what makes up a bank's community to include lending instruments traditionally offered to low-income customers such as credit cards and personal loans.
  • The head of the Office of the Comptroller of Currency who is proposing the changes, Mr. Joseph Otting, has states that the proposed changes will lead to an increase of $500 million in spending in the communities. The head of the Federal Reserve System, Ms. Lael Brainard opposes the changes believing that fund distribution will concentrate on large community loans or investments instead of meeting community needs. As CEO of National Community Reinvestment Coalition, Mr. Jesse Van Tol opposes the expansion of the list since the regulations bring building and improving facilities such as stadiums and hospitals under the purview of the Act.

Legislative threat to the Consumer Financial Protection Bureau

  • The Supreme Court is considering the case Seila Law LLC v. Consumer Financial Protection Bureau. A point for decision in the case is the constitutionality of the Consumer Financial Protection Bureau, criticized by constitutional scholars and the business community for its director appearing to be unaccountable to anyone. The Bureau makes, enforces, and adjudicates on rules, in addition to the ability to punish wrongdoers. Funded by the Federal Reserve, the Bureau does not need the approval of Congress for its budget.
  • With oversight of over than 18 consumer protection laws in areas such as banking, mortgages, payday loans, debt collection, student loans and credit reporting, the activities of the Bureau impacts directly on the personal loan industry. The judgment also has the potential to diminish state power to investigate and punish financial wrongdoing.
  • As a judge on the US Court of Appeals for DC Circuit, Justice Brett Kavanaugh dissented in a 7-3 judgment stating that the agency holds "enormous power" and because of this power and the absence of presidential supervision independent agencies such as the Bureau pose a significant threat to individual liberty and the separation of powers. He referred to the director of the Bureau as the single most powerful official in the US government other than the President.

Research Strategy

To source regulatory concerns in the personal loan industry the research team began with a search of current regulatory outlooks for the industry. This search led to a review of regulation in a banking outlook report from Deloitte. The review referenced the lack of regulations in Fintech. Next, the team searched for potential regulatory impacts on the personal loan industry. This search led to information on the legislative threat to the Consumer Financial Protection Bureau and the potential impact of amendments to the Community Reinvestment Act. The information sourced from both the general search and the report from Deloitte was a baseline for further research to determine exactly what the concern is, why it is a regulatory concern, and inputs from regulatory concerns.
Part
05
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Part
05

Personal Loans Industry - United States: Demographics

Approximately 20.2 million Americans have a personal loan, and about 19.3 million of them have at least one outstanding unsecured personal loan. Below are details about the demographic profile of people who take out personal loans.

GENERAL PERSONAL LOANS DEMOGRAPHICS

Age

  • When it comes to personal loan balances, baby boomers have the highest average balance at $19,253. They are followed by Generation X, whose average personal loan balance is at $17,175.
  • Millennials, on the other hand, have an average personal loan balance of $11,819, while Generation Z has $4,526.
  • When it comes to personal loan balance growth, millennials have seen the highest growth over the past five years at 44 percent, more than double the growth seen in any other generation during the same period. However, their average personal loan debt is still 39 percent lower than that of baby boomers.
  • For year-over-year growth, Generation Z saw the biggest average personal loan balance increase at 12 percent.
  • Although baby boomers have the biggest average personal loan balance, Generation X takes out the highest average personal loan amount at $8,592, followed by baby boomers at $7,703 and millennials at $7,046.

Gender

  • Thirty-six percent of men have taken out a personal loan, and their top reasons for taking out a personal loan include debt consolidations, home renovations, business, medical expenses, moving homes, and vacations.
  • On the other hand, 33 percent of women have taken out a personal loan, and their top reasons for taking out a personal loan include tuition fees, rent, vehicles, and bills.

Marital Status

  • Married couples or those in domestic partnership take out higher personal loans than divorced or single borrowers. The average amount of personal loans of married people or in a domestic partnership is $8,468.
  • On the other hand, single people take out an average personal loan of $7,204, and divorced borrowers take out an average of just $4,111.

Location

  • Consumers in the state of Washington has the highest average personal loan balance at $27,188, followed by North Dakotans at $26,342 and South Dakotans at $26,137.
  • Consumers in Hawaii, on the other hand, have the lowest average personal loan balance at $12,802.

Reasons

  • About 61 percent of personal loan borrowers take out a personal loan to pay off other debs (debt consolidation at 39.2% and credit card refinance at 21%).
  • After debt consolidation and credit card refinance, other reasons given by consumers when taking out personal loans, in order of frequency, are other (14.6%), home improvement (7.7%), major purchase (3.5%), medical bills (3.0%), moving and relocation (2.7%), vacation (2.3%), car financing (1.7%), wedding expenses (1.5%), business (1.0%), home-buying (0.7%), and green loan (0.3%).

RELEVANT FINDINGS

Payday Loans/Short-Term Personal Loan Borrower Demographics

  • Fast cash advance, or payday loans, is one of the seven most common types of personal loans.
  • About 12 million Americans take out payday loans annually. However, in certain states, payday loans are heavily regulated or entirely prohibited.
  • Compared to other age groups, people aged 25 to 49 are more likely to take out payday loans.
  • People who do not have a four-year college education are more likely to use payday loans.
  • Compared to other races or ethnicities, African Americans are twice as likely to take out a payday loan.
  • Households with income less than $40,000 annually are three times more likely to use payday loans than households with higher incomes. However, households that earn an annual income between $15,000 to $25,000 are the most likely to take out a payday loan.
  • Compared to homeowners, renters are more than twice as likely to take out a payday loan.
  • Unemployed or disabled people are more likely to take out payday loans compared to those who are employed.
  • People who are divorced or separated are twice as likely to take out a payday loan than single or married people.
  • Parents are more likely to use payday loans than couples without children.
Part
06
of nine
Part
06

Personal Loans Industry - United States: Market Size

The current US personal loan market size is estimated at $143 billion, with a growth rate of 11% in the year 2020. The average personal loan per borrower in the US is $8,402.

US Personal Loan Industry Market Size

Projected Growth Rate of the Market

Research Strategy

To determine the market size of the US personal loan industry and the number of people who took out personal loans in the past 2-3 years, we searched market reports and industry research. We found pre-compiled information on different reports, including Market Watch, Forbes, Chamber of Commerce, Experian, and CNBC. The reports only provided data for those who took personal loans in the past two years (2019 and 2018). To find data for the third year (2017), we triangulated the 2017-2018 growth rate with the 2018 data. Our calculations were as follows:
According to Market Watch, the number of personal loan accounts rose by 12.5% from 2017 to 2018.
Thus, the number of people who took out personal loans in 2017 = 2018 statistics / yearly growth x 100
= 19.5 million / 112.5% x 100%
= 17.3 million
Based on the above triangulation, the number of people who took outstanding personal loans in 2017 was 17.3 million.
There was, however, insufficient information in the public domain concerning the future projection of Compound Annual Growth Rate (CAGR) the personal loan market in the US i.e., the growth rate for a 3-year or 5-year forecast period. We searched through industry report sites like Market and Markets, Grandview Research, Statista, Transparency Research, among others for the projected market growth, but there was no pre-compiled information. The 2024 market growth projection was only available behind a paywall. We, however, found an estimated growth rate of the industry for the year 2020, which we have outlined in the findings.

Part
07
of nine
Part
07

Personal Loans Industry - United States: Funding Announcements

Notable funding announcements in the personal loans' industry in the past 12 months in the US include the funding rounds of Sofi ($500 million), Affirm ($300 million), Upgrade ($225 million), Figure Technologies($103 million), BlockFi ($18.3 million), and Branch International ($170 million).

PERSONAL LOANS INDUSTRY — FUNDING ANNOUNCEMENTS

SOFI
  • Online lending start-up, Social Finance, closed a $500 million funding round in 2019. The company, better known as SoFi, is planning to use the money increase and strengthen its $2.3 billion total balance sheet.
  • SoFi was founded in 2011 in order to help with millennial student-loan refinancing but expanded its services to personal and mortgage loans and wealth management. The company has 700,000 members and 7.5 million registered users.
  • With the latest funding, Sofi's valuation reached $4.3 billion. The main investor in this round was a Qatar-based private equity and sovereign wealth fund, Qatar Investment Authority. The firm has about $12 billion in assets under management and has invested in Uber, Flipkart, and HelloFresh among others. In the previous funding round, SoFi also attracted $1.9 billion from names like SoftBank Capital and Peter Thiel.
AFFIRM
  • Founded by Paypal's Max Levchin, the fintech company Affirm gives consumers an alternative to personal loans and credit by financing online purchases at point-of sale. The company focused on payment and lending but it requires a vast amount of capital to sustain operation.
  • In April 2019, the company raised $300 million in a series F funding round. This increased the company's total market value to $3 billion.
  • Currently, Affirm has raised $1.03 billion in funding from Ribbit Capital, Founders Fund, Andreessen Horowitz, Khosla Ventures, and Lightspeed Venture Partners.
UPGRADE
  • Upgrade is an online lender in the consumer credit sector.
  • "Upgrade Receivables Trust" issued $225 million in notes backed by personal loan assets facilitated through the Upgrade platform. According to Upgrade, the Jefferies were the lead investors while Barclays and Credit Suisse were co-leads.
  • Since launching in April 2017, Upgrade has helped fund more than $1.4 billion in personal loans to more than 125,000 borrowers. (Source 3)
FIGURE TECHNOLOGIES
  • In December 2019, a blockchain lending firm, Figure Technologies, announced that it closed a $103 million series C funding round led by Morgan Creek Digital and MUFG Innovation Partners Co., Ltd. The series C funding increased the company's valuation to $1.2 billion. Other investors included DCM, Digital Currency Group, HCM Capital, Ribbit Capital, RPM Ventures, and The Partners at DST Global.
  • According to an investor, Figure is bringing radical change to the finance and lending markets by leveraging blockchain technology to drive speed, efficiency and cost savings to lending.
  • The company's flagship product is Figure Home Equity Line, a fixed-rate credit line that enables customers to gain approval in as little as five minutes and funding in five days. In early 2019, Figure began offering student loan refinance and mortgage refinance products. The company has so far originated over $700 million in loans since its founding in 2018.
BLOCKFI
  • In August 2019, a cryptocurrency lending company, BlockFi, has secured $18.3 million in venture capital funding to expand its operation internationally and to roll-out new financial products.
  • The company's Series A included a number of existing investors, such as Morgan Creek, Galaxy Digital, Fidelity and new investors Valar ventures and Winklevoss Capital. In 2018, BlockFi raised $50 million from Galaxy Digital.
  • Currently, BlockFi is in the business of lending and paying interest on deposited bitcoin, stablecoins, and ether. The company has its sights set on diversifying its product offering in order to reach a wider mainstream audience.
BRANCH INTERNATIONAL
  • In April 2019, Branch International, a fintech startup that assesses creditworthiness using smartphone data, has raised $170 million in Series C financing and announced a new partnership with Visa. Foundation Capital and Visa led the round, which also included B Capital, Andreessen Horowitz, Formation 8, and Trinity Ventures.
  • Branch International, a California based company, has more than 3 million customer that have received over $15 million in loans in Kenya, Nigeria, Tanzania, Mexico, and India. Its loan duration ranges from a few weeks to more than a year, and the typical loan amount is around $50. Branch launched its operations in India last month and has added more than 30,000 users so far via word of mouth.
STRIPE
  • In 2019, the world's most valuable private fintech company, Stripe, moved into new area of banking — loans. After its last funding round, Stripe's value reached $22.5 billion thanks to investor like Andreessen Horowitz, Peter Thiel, Elon Musk, Google’s venture arm Capital G, Sequoia Capital, and Kleiner Perkins.
  • The San Francisco-based Stripe Capital helps online companies borrow money to grow their businesses. The average loan is between $6,000 and $7,000 but could be as low as $500.
Part
08
of nine
Part
08

Personal Loans Industry - United States: Notable M&A Activity and IPO's

IPO's in the personal loans industry in the past 12 months are Oportun Financial, 9F, and MoneyMe, whereas notable M&A was Lending Tree acquiring Valuepenguin in the United States.

IPO'S In the Personal Loans Industry

  • There were about 153 Initial Public Offerings (IPO) in the US.
  • Out of 153, there were 24 IPO's in the finance sector.
  • Most of the offerings were from brokerage companies and other banks and only two were from the personal loan industry (Oportun Financial and 9F).
Oportun Financial
  • Oportun Financial, a fintech company that offers low-cost loans to those it calls “credit invisible,” raised $94 million in its IPO on the 26th of September 2019.
  • Oportun offered 23% of its outstanding shares to the public and sold 6.25 million shares at $15.
  • On an opening day, the company's share gained 8% and closed at $16.17.
  • The company was founded in 2005 and focuses on the 100 million Americans with no credit or limited credit history.
  • In 2018, the company's revenue reached $500 million, up from $360 million in 2017.
  • The total amount of loan the company distributed is more than $7.3 billion ranging from $300 to $9000.
  • The company's site is here.
9F
  • China-based financial services and technology companies went public in the United States in 2019.
  • The 9F was targeting a $7.50 to $9.50 per-share IPO price.
  • The offered price was $9.50 and the stock price reached $9.58 on an opening day.
  • The company was founded in 2006, and by 2018 it already reached over 60 million users in mainland China.
  • 9F leverages technology, a deep understanding of large user base and strategic partner relationships to create a one-stop experience bringing together borrowers, investors, financial institution partners, and merchant partners.
  • The 9F is already a profitable company and experiencing revenue decline in recent years.
  • In 2018, the company's revenue was $824.7 million and net income was $320.2 million.
  • The company's site is here.
MoneyMe
  • Even though there were only two personal loan companies launched in the US in the past 12 months, one of them raised funds through IPO in Australia to pursue US expansion.
  • Australian online consumer lender MoneyMe sought $45 million in December 2019 to increase its marketing spending, invest in product innovation and expand into new markets.
  • The company said it is testing the US Market.
  • MoneyMe was founded in 2013 and over the 6 years it acquired over 80,000 customers.
  • The offering price was $1.25 per share.
  • MoneyMe offers loans ranging from $500 to $50,000 and the average amount of loan was $5,000.
  • The company had revenue of $31.9 million in 2018/19, an increase of 32% over the previous year when it had made a loss of $1.6 million.
  • It was forecasting revenue of $45.8 million for the 2019 and a loss of $200,000.
  • The company's site is here.

M&A In The Personal Loans Industry

  • According to CB Insights data, the U.S. FinTech funding reached its highest level in five years in 2018 hitting $11.89 billion.
  • Analysts say VCs are focusing more on late-stage investment, alternative lenders are having a tougher time securing funding, particularly market newcomers in a crowded market.
  • According to HousingWire's mergers, acquisitions and funding news trackers in the mortgage and finance industries, there was one acquisition in the personal loan industry in the past year, LendingTree, to acquire a personal finance company ValuePenguin.
  • On the other hand, new fintech companies forced the traditional bank to merge, Southern regional giants BB&T and SunTrust announced a $66 billion merge in 2019.
Lending Tree Acquires Valuepenguin
  • The acquiring sides were the personal loan companies and traditional banks which are merging to compete.
  • One this case was LendingTree, America's largest online lending marketplace, which acquired personal finance company ValuePenguin.
  • ValuePenguin is a personal finance website that conducts in-depth research and analysis on a variety of topics from insurance to credit cards.
  • Value Holding was acquired for a total consideration of $105 million and the deal was completed on January 15, 2019.
  • Lending Tree's site is here.
  • ValuePenguin's site is here.
Useful Findings
  • LendingTree also acquired QuoteWizard.com, LLC in October 2018 for over $300million.
  • In July 2018, LendingTree acquires Student Loan Hero for $60 million.
  • Although it is not M&A or IPO, the biggest event in the personal loans industry in the past 12 months was blockchain lending startup, Figure Technologies, which reached a valuation of $1.2 billion.
  • Former execution of another leader in the market Soft, Mike Cagney, helped a new player in the market Figure Technologies to reach over $1 billion valuations in less than 2 years.
  • The company raised $103 million in Series C round of funding in 2019. The company leverages blockchain technology to drive speed, efficiency, and cost savings to lending.
  • QuoteWizard's site is here.
  • Student Loan Hero's site is here.

Your Research Team Applied The Following Strategy

To address the IPO part of the request, we searched all IPO in the US last year and identified IPO's in the sector.
For the M&A part, we searched for many reputable business sources like Bloomberg, CNBC, Financial Times. But we were not able to identify M&A in the specific industry.
Part
09
of nine
Part
09

Personal Loans Industry - United States

According to the Experian survey, in the second quarter of 2019, the United States had a personal loan balance of $305 billion. Below is an in-depth overview of the request.

Overview

Insights and Statistics

  • In the second quarter of 2019, the personal loan balance in the United States reached $305 billion from $148 billion in 2018.
  • According to TransUnion, the rapid growth in personal loans in recent years is due to an explosion of fintech apps and websites that have made getting these loans very easy. Someone can apply for these loans anywhere in there comfort.
  • Fintech's unsecured loan category market share increased from 22.4% ($650,000) in 2015 to 49.4% (1.3 million) in 2019, a 27% increase. However, traditional banks' share for this type of loans decreased to 28% in 2018 from 40% in 2013, while that of credit unions decreased to 21% from 31% during the same period.
  • In 2019, there were 38.4 million personal loan accounts in the United States, an 11% y-o-y increase from 2018. However, despite this rapid growth, personal loan debt accounted for only 2% of the total U.S. consumer debt in 2019.
  • The average loan balance in 2019 was $16,259, while the average monthly payment was $360. Additionally, the percentage of consumers with a personal loan was 11%. Consumers in Washington state had the highest average personal loan balance of $27,188, while consumers in Hawaii had the lowest average personal balance of $12,802.
  • According to the average personal loan balance by generation in 2019, baby boomers led with a balance of $19,253, while Gen X'ers came second with a balance of $17,175. For millennials, their average personal balance was $11,819, a 44% increase from 2014, while Gen Z had a balance of $4,526, a 12% increase from 2018.
  • As per the Experian survey in 2019, 28% of Americans took a personal loan to use for large purchases, 26% used it for debt consolidation, 17% used it for home improvements, 9% used it to refinance existing debt, and 30% used it for unlisted reasons.
  • This year, 2020, the U.S. personal loan market is projected to grow at a rate of 11%, according to Bankrate.
  • In 2018, according to marital status, married or domestic partners had the highest personal loan balance of $8,500. They were followed by single people, whose average balance was $7,100.
  • In the fourth quarter of 2019, personal loans' delinquency rate was 3.39%, twice that of auto loans (1.44%) and mortgages (1.45%).

Sources
Sources

From Part 08