October 2013 was another record month for Online Lending in the United States, with LendingClub booking $223MM in loans (a 10% MoM increase), and Prosper booking $51MM (a 53% MoM increase). The growth experienced by these major originators represents great progress for the entire ecosystem, as more borrowers and investors discover the benefits of P2P/Online Lending.
These monthly numbers have been the subject of much-deserved excitement and a significant volume of press. Less often examined, however, are the day-to-day origination patterns of each platform and the fluctuation of new loan bookings within any particular month. As we examine the daily origination volume of LendingClub and Prosper, we can actually see 2 rather different patterns.
The graph below shows the dollar volume of loans originated each day on each of the 2 platforms. As we can see, LendingClub is still quite a bit larger than Prosper, but another observation emerges as well. The Prosper line (blue) appears fairly steady, whereas the LendingClub line (red) is much more volatile.
While the LC line is more spikey, it does seem to exhibit its own fairly consistent pattern. Each month begins with a very large influx of new loans (lately in the $20MM-$30MM range) and ends with a relatively slower few days of origination (generally between $2MM-$7MM). This could be due to the timing of borrower marketing campaigns or due to some other detail in the loan operations process.
The nuances of day-to-day origination volume matter for a couple reasons. First, if you are an investor looking to deploy a large amount of capital, your LendingClub-targeted efforts are likely to be most fruitful towards the beginning of a new month. Second, if you are trying to use partial month-to-date numbers to forecast full-month data, as we did last month, you will likely have better accuracy with Prosper’s smoother curve.
While each originator has shown a distinct pattern, both are “up-and-to-the-right” overall, which is what truly matters. It will be interesting to see if the shapes of these lines remain the same or change as the market grows and matures.