There has been much wailing and gnashing of teeth over in the Prosper forums about delayed processing. I guess I'm part of it, since I have been tracking the number of Prosper loans in "Pending Review" status. It's not a comforting picture right now.
There has also been many complaints of intense lender competition, where lenders are bidding rates down and creating a "borrower's market." So I thought I'd like to see if this is the truth, are more lenders actually competing for loans?
I analyzed the number of bids on a daily basis and arrived at the following chart of cumulative bidding numbers.
I've forgotten the calculus necessary to calculate the equation for the curve, but it is clearly a quadratic curve, which means there is accelerated growth as far as bidding on loans is concerned.
The picture is even more impressive if one charts the bids on a daily basis. There has been a sudden and rapid increase of bids. Good thing that bidding is completely automated and requires no human intervention. As long as Prosper can throw hardware at it, lenders can bid away to their hearts' content.
The same automation does of course not apply to the loan issuing process, which is why there was a about 195 loans pending review according to the data download for 12/15/2006.
As I was typing this, I wondered if there was a corresponding increase in the available listings, so I returned to my trusty spreadsheets to graph the daily and cumulative listings on Prosper.
No such luck, this is nearly straight-line growth. The daily chart backs this up as you can see from the next chart.
The conventional wisdom on Prosper is correct, there has been a huge increase in the number of bids, which would suggest increased competition, but there are not a larger field of listings. So a lot of money is chasing relatively few opportunities.
So what's a lender to do? Hope that Chris Larson will pull a rabbit out of his sleeve? Some TV spots advertising Prosper as a borrower's heaven? If he does, I hope he does it in a manner that doesn't attract HR borrowers. Those we have enough of. What we lack are quality listings that make it easy to bid.
I think Prosper relied on the group concept to bring borrowers to Prosper, but that is clearly not working at this time. A huge number of groups hunt for the unaffiliated borrowers that have already found Prosper, that is much easier to do than to go out into the wide world and convince people that you are a trustworthy individual to whom a prospective borrower should divulge his financial life. Of the concept of close-nit groups, I've not yet seen one where the goup has both lenders and borrowers and the lenders in the group bid substantial amounts on loans within their groups.
What has happened, is that Prosper had to introduce a "block" feature so that lenders could block clearly dangerous individuals and groups.
Well, it's early days and perhaps the Prosper team will go away and brainstorm a few solutions for us over the Christmas holidays.
1 comment:
Thanks for your fair and balanced analysis of Prosper. I started lending after reading about it in Money magazine. I'm going to take a wait and see approach before committing more $$.
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