Blackmoon, a Russian financial technology startup that analyzes, screens and prices loans issued by others to sell on to investors, is opening a U.S. office to expand in the world's biggest market for non-bank lending.
Borrowing money without banks as intermediaries has gained popularity in recent years. LendingClub Corp. and Prosper Marketplace Inc. doubled their issued loan volume last year to over $10 billion. While they provide loans for the purpose of selling them on to investors, so-called balance-sheet lenders originate debt to keep the loans and earn income from interest. Blackmoon seeks to connect balance-sheet lenders with debt investors.
"Marketplaces are very popular among investors, while there are only a few large ones and their capacity is limited," Blackmoon co-founder Ilya Perekopsky said by phone. "At the same time, there are thousands of balance-sheet lenders, which do essentially the same thing, but they are less flexible when it comes to raising capital."
Founded last year, Blackmoon is partly counting on an expansion into the U.S. from a New York base to reach a goal of $1 billion in brokered loans by the end of 2017, from $13 million today, Perekopsky said. To achieve that, the company will target all kinds of unsecured credit in the largest market for alternative lending: consumer, small-business, student and car loans. Blackmoon currently works with European online lenders, from Finland to the Czech Republic, Perekopsky said.
Achieving its goal as early as 2017 will be a challenge for Blackmoon, said Mike Lobanov, a founder and partner at Moscow-based Target Asset Management, which agreed in February to form a $100 million fund to invest in the startup's loans. If Blackmoon successfully establishes connections to both U.S. lenders and asset managers, the company's brokered loan volumes could reach $1 billion by 2018 to 2019, Lobanov said.
"There aren't that many competitors right now who provide access for asset managers to balance-sheet loans, however, we should not underestimate the competition here," Lobanov said in an e-mail. Although it looks as if Blackmoon has a "first-mover advantage," it will be crucial to exploit that opportunity quickly, he said.
Blackmoon functions as an intermediary between institutional debt investors and lenders — both alternative providers and traditional banks — allowing them to scale their business without additional leverage, while mitigating the risks of default. The company says it uses assessment algorithms to screen, score and price loans to protect investors.
Social signals and other unstructured data sets are transforming conventional credit analytics for both marketplace and balance-sheet lenders as consumers increasingly turn to online providers as their preferred sources of credit, according to JMP Group.
While non-bank lending has shown the potential of technology to transform borrowing, it's too early to claim success, Rajesh Kandaswamy, an analyst at research firm Gartner, said in an e-mail.
"While non-bank lenders have grown, they have not been tested with a downward economy yet, not only how their loans perform, but also in their ability to attract more money to lend," he said.
The alternative lending industry has come under greater scrutiny following the surprise resignation in May of Renaud Laplanche, the founder of LendingClub. An internal LendingClub review found that loans were misdated and that Laplanche failed to properly disclose an investment.