Louis Schwartz, chief executive of Loanpad, explains how his platform will appeal to conservative and return-chasing investors alike…
CASH savings and stocks and shares investments had a woeful 2018, due to low interest rates, rising inflation and extreme stock market volatility.
So, this is the perfect time for Loanpad to remind investors across the UK that they have sought to create a happy medium by combining the convenience of an online account with the inflation-beating returns of an investment portfolio.
“Peer-to-peer lending arose mainly because the interest rates paid by banks were exceptionally low, all the way down to zero,” explains Louis Schwartz (pictured second from left), chief executive of Loanpad. “But what no one has actually done is turn a P2P platform into a system that works operationally like a bank account, albeit with greater investment risk.”
This is where Loanpad comes in. The platform has created two products which operate with similar functionality to bank accounts, albeit with greater investment risk. This makes them incredibly user friendly, even for those lenders who have never used a P2P platform before.
“As a business we are obsessed with user experience,” says Schwartz. “We built our lending platform from the ground up with the aim of being not just the easiest to use but the safest. These two factors are what we feel differentiates us from other platforms. We put investor experience at the forefront of everything we do.”
Loanpad has been described as a “hybrid lending model” as it combines the most attractive features of pure P2P lending with balance sheet lending. Loanpad itself does not originate loans directly. Instead it works with lending partners who originate loans within the property sector and share a portion of these loans with Loanpad’s investors.
These lending partners will fund at least 25 per cent of each loan on a first-loss basis, which acts as a buffer to protect Loanpad’s retail investors from the risk of default or de-valuation.
“Even if there was a sizable correction in real estate valuations, we still feel that our investors would be protected, because the loans on our platform relative to the property values would be anywhere between 10 and 50 per cent,” explains Schwartz.
Loanpad converts every loan into two different risk classes: a lower risk senior part and a higher risk/return junior part. Loanpad’s lending partners will always fund the higher risk part, while the platform’s individual investors will only ever fund the lower-risk senior part of each loan. This effectively reduces the risk of capital loss for retail investors.
“I think that investors generally are becoming more conservative due to a number of factors – with Brexit of course being one of those,” says Schwartz. “Rising defaults, platform closures and economic uncertainty have made investors take more caution with which platforms they use and what type of lending they are comfortable with.
“However, Loanpad’s senior tranche model is designed to provide consistent daily returns notwithstanding changes to the wider property market or economic climate.”
Over the next few months, Loanpad will continue to enhance its usability by introducing new automatic features, so investors can auto-lend or auto-withdraw their interest.
By keeping user experience front and centre and focusing on consistent returns, Loanpad may have found the perfect balance for the investors of 2019.