Another Tweak on Prosper to Help Small Investors

Prosper is still working on a response to concerns that were raised last month in the comments of my post on Prosper 1.0. To recap many investors were concerned that they were being crowded out by the large investors – in particular Prosper’s largest institutional investor: worth-blanket2.

What was happening is that worth-blanket2 was gobbling up entire loans within seconds of them hitting the platform leaving just their unwanted loans for other investors. Worth-blanket2 was investing via the API, so Prosper made some tweaks to try and level the playing field somewhat.

Then earlier this week I received this email from Prosper:

Just wanted to give you a heads up that we are further tweaking the API speeds tomorrow for our 9am postings. In addition to shortening the API delay from 90 seconds to 30 seconds, we will also be asking some of our largest API investors to limit their bids to no more than 90% of the loan on their initial bid. We’ll keep watching the results of this latest change while we work on our longer term process.

Worth-Blanket2 Now Investing in Just 90% of Each Loan

I have been watching worth-blanket2 since yesterday morning and sure enough they have reduced the amount they are investing to exactly 90% of each loan. This leaves at least some chance for the smaller investors although with the small $4,000 loans these are still closing out very quickly. But as far as I could tell since this change was made there have been no loans that have been 100% funded by worth-blanket2. Index_Plus, the other large institutional investor is also adhering to this limit it seems. Now, every loan will be available at least in part to retail investors.

Prosper Has To Balance Retail and Institutional Investor Needs

As I reported in my monthly p2p loan volume report last week, Prosper now has more than 50% of their volume coming from institutional investors. So, they don’t want to do much to annoy this important group. And worth-blanket2 still has $130 million to invest and no doubt they would like to put it work as quickly as possible. I would have preferred they make the limit 75% to really give retail investors more of a shot but I can live with 90% for now.

I still think that the Automated Quick Invest should take precedence over the API but I am hardly objective in this – that would benefit me directly. The good news is that the number of loans available on Prosper seems to be slowly increasing.

This is probably not a viable long term solution for them because it appears they have just “asked” worth-blanket2 to stop investing 100% and they have agreed. So that is not a solid basis for going forward. I hope and expect to see a viable long term solution that is equitable for all parties without the need for any special requests. I will let you know when that happens.

  • Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.