A few of my posts lately have been a little harsh towards Prosper. I've been venting and expressing frustration over a few investment issues that I've had, but it would be unfair and unbalanced of me to criticize without at least mentioning a few things Prosper has done well lately. So below is a list of things that may or may not have marked the beginning of a Prosper "turn around" in the minds of some investors. Please feel free to comment on anything I missed:
Jan 22 - Prosper receives $20 million in new funding and a new management team that takes over with a new 100-day plan.
Feb 01 - Prosper Funding LLC goes into affect, adding another level of protection for investors.
Mar 29 - Prosper issues $15.1 million in new loans, a huge turnaround from previous months, 3rd best month ever.
Mar 30 - President of Prosper, Aaron Vermut, blogs on his commitment for better transparency and more communication with investors and borrowers (
http://blog.prosper.com/2013/03/30/a-note-from-our-president-aaron-vermut-as-prosper-looks-to-the-future/).
Mar ?? - Origination times for loans improve greatly.
Apr 03 - Prosper redesigns its website and implements a new logo.
Here is a comment from Aaron Vermut on 04/04/2013 from his Prosper blog that I find interesting on the issue of retail investors vs institutional investors. I really like the fact that he's working on a solution to what has become a pretty big issue:
"First of all, let me state that we are committed to servicing both retail and institutional investors equally. I think it's pretty clear that retail lenders alone cannot get Prosper to profitability. The question is, how do we keep the retail investors happy while simultaneously meeting the needs of institutions so we can grow? There are institutional lenders that, for legal and/or strategic reasons can only purchase whole loans. Additionally, if we put everyone in the same pool, the institutional investors with their greater resources can develop technology to grab the attractive loans before the retail investors have time to even look at the listings. This is not a "level playing field".
The best solution to meet everyone's needs is to have two separate pools. In the fractional pool, we will be limiting anyone from purchasing more than 75% of a single loan thereby ensuring that retail investors can get a crack at the desirable loans rather than watching them get snapped up by large investors using the API. The whole loans pool, as said, will be listed a little earlier, the whole loan buyers can purchase what they need, and then an hour later the rest go back to the fractional pool. There is no favoritism between each pool. Loans are randomly selected.
As I have mentioned above, we are testing the whole loan program in "beta" right now and hope to be able to officially launch it soon. We will continue to monitor and test and if there are unforeseen consequences that make this strategy inherently unfair to one group or another, we will iterate and improve. Keep the good constructive posts coming!"
I agree things are moving in the right direction. Its nice to finally start seeing a larger loan selection.
I'd be curious how their default rates have been affected over the past few months and how well they are going after deadbeat borrowers(2 payment or less borrowers) in the future. 0-2 payment borrowers who declare bankruptcy are committing fraud in my opinion.
Why rob a bank when you can borrow far more than than a teller has and simply default with little to no recourse from the lender.
@Dennis - Sounds very similar to what Lending Club has in place with the fractional/whole loan situation. I think that will be a very effective way to "level" the playing field, and will help get Prosper through the next wave of growth as they pursue institutional investors.
There have been many positive moves out of Prosper recently and I think that is reflected in the loan volume numbers. While things are far from perfect and it looks like there are still problems with Automated Quick Invest the new management team are clearly taking action. The new few months will be very interesting.
We have so many great 3rd party tools for LC to track performance, select loans, etc and none for Prosper, it makes we wonder why I bother with Prosper at all.
The US p2p market is certainly big enough for 2 players, if not more.
I dont know whether Prosper can ever "catch" LC at this point, but I do see them making a recovery and rebounding in 2013.
But I also think Prosper needs to do more to differentiate itself from LC. Things like secured loans with lower rates, or 2 and 4 year notes (giving borrowers more choices), maybe max loans of $50k for very well qualified borrowers, etc. THey need to attract a bigger pool of potential borrowers IMO.
The following excerpt is from Aaron Vermut at the Prosper blog, "A Note from our President, Aaron Vermut, as Prosper Looks to the Future":
"• Improved collections: Over the past several months, we have focused on improving collections by increasing call intensity, and working with our delinquent borrowers to be the payment of choice during tax refund season. As a result of these changes, we have had 3 consecutive record months of collections. Moving forward, we will be adding a new collections agency and will send delinquent accounts to collections at 16 days past due rather than 31 days past due. This will enable us to expand our call coverage and skip tracing capabilities, which will provide better results for our lenders."
To me this is a huge step in the right direction. The Prosper collection Process has been a sticking point for me ever since I began investing at Prosper 20 months ago. I'd still like to see better transparency though, like at LC. I want to see everything that is being done (each step) to collect on a late note. I don't like that everything in this process is done behind closed doors.
This is great news, indeed.
Both parties receive signifcant and direct benefit from improved collections.
Does prosper really need to catch LC? As long as they provide a good product and are profitable, I don't care who is larger.
IMHO, Prosper should focus on being "profitable" rather than being big.
LC claims that they are now "operationally profitable." I am not aware of similar statements made by Prosper.
VCs would more readily extend help to small, profitable companies than to big, not-profitable ones.
Little bit of a downswing in loans over the past week. End of the month slowdown?
Sadly, I am seeing the same thing.
And you're correct. Listings and originations are both way up in April, but the majority of the loans are being taken down in the whole-loan pool and are not accessible to retail investors. Of the loans that do make it into the fractional pool, most are quickly taken down by API bidders and are available for only minutes on the website.
To give you an idea of what's going on, 59 new listings were added this evening: 25 in the whole loan program and 34 in the fractional pool. Within 10mins of 5pm PT, all of the 25 whole-loan pool loans were filled and 11 of the fractional pool loans were filled. That's 61% of the evening's loans. It's good news for Prosper but, yes, relative to 1 month ago, the number of loans accessible to retails investors is down by ~50%. Keep in mind that the loans that get filled quickly are of higher quality than the ones that remain. The leftover ones are available precisely because others chose not to bid on them.
From Aaron Vermut > Posted 4/03/13 −
"For those of you with questions about our new whole loans product, we will be posting a more thorough update after the completion of the beta period.
What we can tell you now in order to answer your questions is that these loans will be randomly selected and distributed in the whole loans pool for 1 hour only. We don't anticipate this to crowd out our individual, retail investors or to change the risk profile of loans available across the platform. Additionally, we are simultaneously ramping up volume in order to provide more than enough loans for both pools."
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As of this writing, there are zero HR, zero E, one D, five C, and nine B notes to choose from. I've actually seen even fewer notes than that on the Prosper platform this week. In the 21 months I've been with Prosper, I've never seen a poorer selection. To me it looks like the retail investor is absolutely being squeezed out. Where is the ramped up volume???
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From Aaron Vermut. posted 4/05/13
"We are taking a measured approach to ramping up our marketing to bring more borrowers on the platform. Keep watching the numbers and you'll see what I am talking about!"
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I must be looking at the wrong numbers since I really don't see what he's talking about. What I've seen for the last 2 weeks is the worst availability of loans I've ever seen at Prosper. Maybe I haven't given the new management team enough time, but what I'm seeing so far isn't very promising.
Your guess is as good as mine on the AQI. It's impossibly slow; I switched over to the API ~18 months ago and haven't looked back. I really hope that they fix-up the AQI - it simply can't be that complicated and it would really help out retail investors who have jobs to attend to intraday. I've thought about licensing out my API bidder, but Prosper doesn't allow one to place bids on behalf of others and I'm not sure whether the size of the market ever justified the time necessary to prepare a proper software package.
Bidding via the API may become much easier this week when they release their new API. It uses RESTful rather than SOAP; RESTful is much simpler and more widely supported. The queries are URL-based so I expect the API to be more accessible to people who may not have an extensive CS background.