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Prosper February Update

by Prosper on 02/7/14

We’re a little over a month into the New Year and already it’s shaping up to be another year of growth and momentum for both Prosper and the peer-to-peer finance industry. January was our biggest month ever, with a total of $67.06 million in loan originations. This momentum follows a very successful 2013, where we grew from just $9 million in loan originations when the new management team took over Prosper Marketplace in January, to $59 million in loan originations in December. Even more importantly in 2013, we focused on improving our customer experience for both borrowers and lenders, stabilizing the company, and setting ourselves up for continued growth in 2014.

Our goal since day one has been to provide a marketplace that disruptively changes the way borrowers and lenders gain access to personal lending and we remain steadfast to that goal as we head into 2014. To that end, we are investing heavily in product enhancements, great customer service, and an emphasis on our retail investors.

Commitment to All Investors

I have gotten a lot of questions and comments recently about the increase of institutional money in peer-to-peer lending. Over the past year, we essentially went from zero to 65% of the platform’s loans being sold to institutional lenders. Retail lenders are and always will be an indispensable component of our business. However, bringing on these institutional lenders was important to our ability to grow and scale. They added what we call “lender stability” to the platform and it allowed us to go out and market to borrowers with confidence that the loans would likely be funded quickly.

Despite that, we feel that the right balance between institutional and retail lender volume has not yet been achieved. In 2014, the goal is to enable retail lenders to get access to more loans in which to invest. Some of the ways that we are doing that is by limiting institutional access to the fractional loan pool and by simply not accepting new institutional money on the platform. I hope that as the year progresses, retail lending will invest in a meaningful percentage of the loans originated through the platform as we grow our overall volume.

We will continue to look at new ways to improve the retail lending experience and to grow loan volume and therefore make investing in loans easier. We are looking at new avenues to attract more borrowers to the site, including expanding our marketing channels with additional advertising and direct marketing. We are also exploring new partnerships that would give us valuable exposure to potential borrowers with innovative offers.

Finally, I want to address the removal of the Loan Description and Loan Details fields. In September, we addressed many of your questions and concerns on this topic. It’s something we were testing on the new borrower application and we hadn’t made any firm decision to permanently remove at that time. After an additional five months of testing, and the rapid growth we have seen since this change, we have decided to make the change permanent.

A look back at 2013

As I mentioned, 2013 was a great year for Prosper and the industry in general. We closed December with $59,775,615 in loans issued for the month, which is a 17.56% increase over November, 2013 and an astounding 522% increase over December, 2012. In 2013 a total of $357,437,811 in loans were originated through the platform, a 133% increase over 2012 and a 376% increase over 2011. You can see the growth demonstrated in the graph below.

Prosper Originations over 2013

We also made important changes to the business. Over the course of 2013, Steve, Ron and I recapitalized Prosper Marketplace, restructured the Board, and reorganized the management team into a group of focused professionals with a collective purpose. We also implemented customer-oriented solutions that helped to stabilize and legitimize the business. Some of the things we did include:

  • Established protection for all of the platform’s lenders regardless of size, by forming a new legal entity called Prosper Funding LLCProsper which is a wholly owned subsidiary of Prosper Marketplace and is now the owner of all loans tied to Notes and the issuer of all Notes on the Prosper platform.
  • Prosper Marketplace entered into an agreement to settle the class action lawsuit allowing us to move forward and focus on growing the business.
  • Brought on Institutional class customers to the platform to provide lender stability.
  • Improved the platform’s borrower experience and the technology infrastructure.
  • Hired a new Chief Product Officer of Prosper Marketplace and reoriented into a product focused organization.
  • Transitioned the platform over to the FICO 08® scoring model. This change more directly aligns Prosper with industry standards and enables us to better meet borrower expectations with rates and offers.
  • Scaled Prosper’s customer service operation to better meet the needs of both sides of our platform.

As we look ahead, we’re extremely optimistic about our growth, and project that loan originations will average just above $100M per month. We look forward to bringing our customers even better products and services, and continue to value your feedback.

Aaron Vermut
President, Prosper Funding LLC

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32 Responses

Michael | February 7th, 2014 at 9:51 pm

Exciting changes. Looking forward to Prosper passing 1 billion this year.

Kevin Todd Roberts | February 8th, 2014 at 2:23 am

while I’m glad for the turnaround and growth, I wish yall would put the new loans active for funding more than twice a day. To get the good loans, I feel like a greyhound at the starting gate and cant waste time reading the loan info. Just have to invest like crazy for a few seconds and there all gone. This is why I have been putting any new money into anther platform and just reinvesting existing here for now. It really has taken a lot of the fun and personal touch out of it that made P2P great. I do understand the Power and lure of big money (inst. investors) , I’ve seen a lot of companies fail overnight because they are the ones so quick to pull out at the first sign of trouble or a better option.

Hans Burkholder | February 9th, 2014 at 6:43 pm

As someone who has invested in Prosper for years, the last 3 months have been incredibly frustrating. I can no longer find any loans above 10% yield to invest in. Many times when I long in to see what loans are available, there are only 7 or 8 options available compared to well over 100 in the past. Congratulations on your growth, Prosper. Its too bad you had to sacrifice the notion of peer to peer lending to accomplish it.

rockotodd | February 10th, 2014 at 1:41 pm

This blog post has confirmed they may have cared initially
about the retail investor, because they had to, now they have basically outgrown us. The icing is the removal of the loan details and descriptions, only retail investors cared about that so the permanent removal is the clearest signal they don’t want or need us anymore. Its disingenuous to say the rapid growth is why the change was made permanent while also lamenting that 65% of the loans now go to institutional investors (up from 0%). I had such high hopes for using Prosper more and more over the years but I guess its time to move on.

rockotodd | February 10th, 2014 at 1:47 pm

totally agree. For example there are only 13 total listings right now. All between 6%-7%

Sean Turner | February 10th, 2014 at 4:14 pm

Kinda to echo the comments we’ve had already here, trying to buy into new loans as a small fry investor is wickedly hard. Everyone is pretty much primed to have to pounce on listings as soon as they go live and it takes the fun out of things. About the only things I can take my time to purchase are notes that are up for sale in the trading platform.

Speaking as someone who has both an individual account with a balance of about 8k and a small institutional account with a balance of only about 13k (which I opened due to some legal limitations and so I can house some funds for my LLC for my rental property etc) I can say in general I really like the low thresholds that let me setup my account etc as a small investor.

That being said fighting so hard to find new listings is brutal, and not in a very healthy balance. I would recommend keeping restrictions off AA and A rated notes, and for loans rated B and below split the loan pools in half. 50% of the loans should be available for institutional accounts and the other 50% for retail investors. Let each set of investors devour the loans for their own pools as they see fit and after 24 hours lift the restrictions and let everyone take their pick of what’s left available.

Honestly 24 hours is not that long of a time for a retail guy, and as much as little guy investors like me have learned the ropes and are willing to trust more of our money to the service, I think if we had a healthy diversified list of loans we could pick out I think we’d happily grow to fill most of the remaining balance.

At that point no one would really give a crap about what the final tally of retail vs institutional would be as far as percentages go….. except for institutional investors who might want more access to loans. However, if someone with 1Mil + is looking for a way to invest in consumer loans…. tell them to just go buy J P Morgan ($JPM) stock whenever it pulls back in price and chill out. They have plenty of ways to invest in loans.

brian burke | February 10th, 2014 at 7:58 pm

Regarding your decision to permanently remove detail / description fields, I now will only loan to debt consolidations where the requested loan amount closely matches the individual’s outstanding credit balance. Lack of information makes me more conservative in my lending. I suspect I am not alone. I suspect you are drying up retail lending in order to be able to more easily bundle loans for institutional investors. Not only did you remove a feature I relied on, I am finding less and less loans that meet my criteria as you continue to cater to institutions and push out the retail investors. Way to go. Expect no word-of-mouth advertising from me.

Tim DuBois | February 15th, 2014 at 6:14 am

I share the sentiment of most postings here and agree with Sean Turner about trying to place restrictions on the percentages for 24 hours to allow the loyal people (small investors) who helped build the success continue to acquire some of the cream of the crop loans. Then open it up to the people who could buy every loan on the site in 2 seconds or less.

RJ | February 16th, 2014 at 4:33 am

Prosper — I’m a retail investor and I disagree with the complaints you’ve received here. The loan description field is not an important loss for an investor, and the data backs that up. Also, since you’ve instituted some restrictions to institutional investing speed, I’ve been able to put money to work using Automated Quick Invest without issue. Keep up the good work!

ProsperLoans | February 21st, 2014 at 4:12 pm

Thanks for your feedback! This is a large discussion internally and we will take all viewpoints and suggestions into consideration. We project larger loan inventory going forward will solve much of the allocation concerns.

Lavarock | February 24th, 2014 at 2:18 pm

I disagree because I would prefer not to fund loans where:

a) a couple is borrowing money to get married
b) newlyweds are borrowing money to fund their honeymoon

I feel getting into debt in those 2 example cases is only leading to bad financial decisions in the future.

Order23 | February 27th, 2014 at 5:14 pm

As someone said earlier I would rather have a slightly lower rate of return, and see the description field back. You could pass the discount on to the borrower.
As a premier investor, I’ve now got over $10k sitting idle waiting to invest, but just don’t have the confidence I once had. Also, it’s really difficult to find any loans now. I might note that your competitors do provide loan description information.

Spaz | February 28th, 2014 at 11:10 am

Speak for yourself RJ. I also disagree with you. The loan description is very important to me. I don’t want to loan to someone who is too damn lazy to fill out the loan description. They don’t deserve my money. When I looked at a loan and didn’t see a loan description than I would not invest in it. Now, in order to try to get anything higher than a B grade I have to use the Automated Quick Invest and I get the scraps. With all of the changes Prosper has done I feel like I am in Vegas gambling not investing. My overall return has dropped to less than 8% and any further drop and I will be taking my money out. I am doing much better with investing in high yield dividend stocks.

Spaz | February 28th, 2014 at 11:15 am

Yes, let the retail investors have first shot.

RJ | March 1st, 2014 at 9:13 am

I did speak for myself, thanks. The fact is there is no evidence that a description impacts the likelihood of repayment.

David Roderick | March 5th, 2014 at 12:18 pm

In the past 30 days I have experienced a significant choice and variety of loans for us retail investors. I have been very happy with my Prosper experience so far. Please keep that variety coming. I am nearly complete with my initial goal of 400 loans, primarily in the A-C categories, with overlap into D and E for increased interest. Over all goal is 1000 loans or approximately, $25,000/$30,000.

John Parker | March 6th, 2014 at 9:00 am

Yes, it is sad to see the end of P2P with Prosper. They are just another institutional loan machine now.

NealS384 . | March 6th, 2014 at 10:21 am

The new restrictions on institutional investing in the fractional loan pool worked fine for a week or two. No more.

Today, a D loan and an E loan were filled within seconds of initial listing. Either there are 10 or more automated investors each taking 10%, or someone is not following the new rules.

Suggestion: reserve 10% of each fractional loan for retail lenders.

ProsperLoans | March 6th, 2014 at 4:31 pm

Hey Neal, Check out this analysis on funding speed and amount of investors/loan completed by Orchard Platform: http://www.orchardplatform.com/availability-of-fractional-loans/

ProsperLoans | March 6th, 2014 at 4:35 pm

Great to hear David! Let us know if you need anything going forward- investorteam@prosper.com

Marshall | March 8th, 2014 at 6:44 pm

Whether intentionally or unintentionally, Prosper is pushing out retail lenders. I have been a Prosper lender for over six years. I dabbled for a long while, and after having learned through experience where the sweet spot lay (B-D consolidation loans), I had been looking at transferring over a large 401k when I returned from a deployment given that the potential returns appeared significant and steady in the right categories on Prosper. But now, I am pulling my money out. I have not seen a reasonable B-D consolidation loan available when I have logged in for the past few months. The institutional investors are snapping up all the worthwhile loans based upon the established history by the prior lenders and are doing very well. P2P was a nice concept. Glad we (i.e., the “true” peer lenders) could help Prosper out when they needed a proof of concept and track record to present to the institutional crowd.

ProsperLoans | March 10th, 2014 at 9:38 am

Give us a call! We’d be happy to explain how the platform has changed and discuss strategies for staying competitive. Investor Services- (877)611-8797 investorteam@prosper.com

mtvtgirl | March 16th, 2014 at 1:56 pm

I’m glad to see more loans available to retail customers today than in other recent times I’ve checked (I was just about to give up on this completely actually). But I really liked the loan descriptions. I liked to know about my investments, and there were loans I wouldn’t have made if I didn’t like the cause/explanation and loans I chose not to make where the lender was too lazy to even give an explanation. I also really liked the ability to choose to give P-2-P loans to people that couldn’t get loans or decent interest rates from banks, like loans to couples looking to adopt or fund their wedding, or people looking to start the business of their dreams, and now I don’t have that option.

evergreen16 | March 16th, 2014 at 5:46 pm

All this talk about the record originations and when one looks at the loans, there are total 25 loans available to bid.
Looking at this situation as a investor with Prosper from the beginning, it’s clear that Prosper build this business on the backs of the initial lenders, who were lured into loans with made up credit stats, with huge collection guarantees, even though collection efforts never happened except for handful that were posted on this blog.
So Prosper essentially used our money to grow their business and now cut us completely out of the picture.
I will make sure that this point is raised in the Prosper class action settlement.

Carl | March 18th, 2014 at 3:16 pm

Now that Prosper has all this money coming in from institutional investors how about a debt sale? The buyers are there

Donald Tepper | March 22nd, 2014 at 6:17 pm

I agree. On March 22, there’s only one “C”-rated application and nothing lower. And there are very few higher-rated application to even consider. I’ve stopped putting new money in and just have been reinvesting what I’ve already invested. Even then, my uninvested cash is growing. With the slim pickings available to retail investors, I’m surprised at the growth Prosper says it’s accomplished.

Donald Tepper | March 22nd, 2014 at 6:31 pm

I agree. When someone posted a reason that indicated poor financial judgment, I didn’t invest.

Donald Tepper | March 22nd, 2014 at 6:33 pm


appetizing Gold | March 24th, 2014 at 12:59 pm

This won’t make me popular, but I’d like to defend Prosper’s actions regarding institutional investors (IIs). And no, management is not paying me.

Considering the costs and other risks of any lending, IIs bring financial stability the company. Meaning that without them, yes, retail investors like us would get more options… and less assurance that Prosper would even be here in a month, 6 months, a year, etc… To compensate for lack of II money, Prosper would have to jack up fees on any of lenders/borrowers to a point where we would be complaining about THAT, and pointing out how great it would be if II money could bring some stability and force lower fees so that borrowers/lenders could match loan supply/demand more affordably without compromising company finances.

I agree that the loan pickings are slim, especially at the high yield/high risk end of the spectrum. And yes, that is irritating.

That’s why the good lord invented equity. I think high-risk loans really start to behave like shares of stock in terms of risk/reward. ShareBuilder and the like is where the risk-equivalent of high-yield P2P loans hang out.

Of course this implies that prosper or p2p in general becomes a glorified CD (ignoring Folio trading, which is an awesome feature, by the way). So what? Where else can a lender get such percentages, and wish such small investing capital as some retail investors typically have?

Of course IIs are not ideal to retailers, but given that Prosper exists to make mad money and not primarily to entertain us, Prosper’s decisions are reasonable. And as some here have commented, other P2P platforms like Lending Club are at the ready to make Prosper behave if it gets too chummy with IIs at expense of retail investors.

Not to mention high-risk loans that IIs apparently like to gobble up are high-risk for a reason. Who would we prefer lose money from over-speculative lending to questionable borrowers? Us virtuous small-fry retailers or IIs? I frankly like the fact that high-yield loans are not all over the place like sand on the beach. As I recall, over-ambitious lending didn’t work out well a few years ago. Better IIs absorb most of the “high yield” losses than retail lenders.

Where Prosper did mess up was eliminating that description box. It gave valuable info. Imagine two borrowers, identical in every way (credit numbers, income, location, Prosper score, etc…) except that borrower A says:

“id like 2 pay bak hi-yeld hospital loanz w/ this and i pai on tiem cuz im relible.”

borrower B:
“Due to a medical incident, I’d like to use P2P to pay back high-yield loans that would be more affordable if consolidated through a Prosper loan. I will make every effort to pay back on time and have a proven history of reliability in terms of finances.”

Both borrowers gave the exact same information, but borrower B would realistically get flooded with retail lender money a bit more readily than borrower A. This kind of distinction is needed. Get on it, Prosper, bring back the personal appeal text box.

Richard Tarjeft | April 4th, 2014 at 5:29 pm

I agree with the other investors here. It’s better for retail guys if you let all loans go to the market for 24 hours and then let institutions close out the difference in unfunded portions.

John | April 10th, 2014 at 1:34 pm

Well, this certainly explains a lot. I’ve been using Prosper for about two years now and had everything set up on autopilot using the auto invest feature. Periodically, I would log in and see how things were going. When I logged in this time, I noticed that my cash balance was huge and that no loans had been issued in six months. I figured the auto invest feature wasn’t working until I searched for loans using my saved criteria and came up blank. I had been filtering for 3 year loans, AA to B with a min expected return of 8%. I tried 7% … blank … 6% … nothing … 5% … two. It looks like all of the loans are being sucked up before the average person has a chance to invest.

ProsperLoans | April 25th, 2014 at 9:14 am

Hello John,
Its sounds like you have been more affected by our changes in pricing than competition for loans.
Pricing and our underwriting practices change over time. It is recommended to evaluate your filter criteria on a quarterly basis. Our current pricing can be found here: http://www.prosper.com/help/investing/

Also, we’d be happy to provide you an account review. Email investorteam@prosper.com

posted in Borrowers,Featured,Lenders,Prosper News 32 comments »

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