Here we are 12 months down the line and I thought I’d give a little report and comment on what’s going on in the world of P2P/social/web2.0/dis-intermediated finance with a focus on those companies that made presentations. (Little disclaimer: I am a Zopa lender and the links to Zopa are referral links).

Zopa

The concept

Zopa is a social lending platform that matches borrowers with lenders. Lenders deposit their cash, set their interest rates depending on risk category (A*, A, B, C and Y (Young)) and their exposure level (the maximum amount they are willing to lend to one borrower). Borrowers apply and are assigned a risk category. The “matching engine” then does its magic to generate a loan rate. If the borrower accepts, Zopa carries out credit checks and, if successful, the administration of loan repayments. In return they take a percentage fee from lenders on lent out and a flat rate fee from borrowers.

The status in January 2009

£31m in over 7000 loans had been distributed in the UK with 0.2% bad debt since launching in March 2005. Lending fee set at 1% per annum for new borrowers (0.5% for some early members and 0% for those even earlier), borrowing fee at £94.25. They also had operations in Italy since January 2008 and had disbursed €4.3m. The US arm had been halted in October 2008 after only 10 months due to difficult consumer credit conditions. Planned to get involved in Japan.

What’s changed?

Zopa UK has now distributed £60m+ in over 12000 loans with bad debt in the region of 0.7%. The lending fee remains unchanged but borrowers are now charged £118.50. The Italian operation had disbursed a total of €7m before they were suspended in July 2009 by order of banking regulators. They are yet to reopen. Zopa has not re-entered the US market, nor launched in Japan.

The UK team must be pleased with the growth they have experienced with more lent out in 2009 than the rest of the company’s life. Zopa Italy was also showing good growth until the regulatory problems struck. Perusing the the Zopa Forum you do see lenders concerned with rising bad debt rates and the tax treatment of bad debt. Regardless, Zopa is a success story in the P2P finance world.

Kubera Money

The concept

Kubera Money planned an online Rotational Savings and Credit Association (ROSCA). ROSCAs are found in the “real world” all over the world and are an early example of microfinance. In short, a group of n people meet on n occasions. At each meeting, every member contributes an equal amount of money and one member takes the entire sum but only once per cycle of the ROSCA.

The status in January 2009

Claimed to be registering with the FSA and launching soon. They were holding their cards close to their chest regarding the finer details of their model.

What’s changed?

I’ve seen no activity; their blog hasn’t been update since December 2008 and I’ve found no discussion about them elsewhere.

I’m sad about this as I was interested in how popular a service that facilitates formalisation of funding from friends and family would be in the UK especially as Virgin Money has attracted large volumes in the US. Perhaps this venture will be rekindled. However, I do wonder how large the demand would be. Do people want to be involved in a system where saving and borrowing are tied? Would someone looking for a car loan, the most common stated purpose on Zopa, consider using a ROSCA? I think the potential time delay between entering the ROSCA and getting access to the funds could put off a lot of people. I’d especially like to hear any comments you have on this.

Midpoint & Transfer

The concept

To cut out currency exchange middlemen by matching complementary exchanges e.g. Customer A in the UK wants to pay Supplier B in US Dollars. Customer C in the USA wants to pay Supplier D in Pounds Sterling. Via trust accounts, Customer C can pay Supplier B and Customer A can pay Supplier D and no currency exchange is required. In return for organising this Midpoint & Transfer asks for a flat rate fee.

The status in January 2009

Planned on offering the service for a fee of £30 which would give a saving of £100+ on a £10,000 transaction compared to brokers and banks. They were looking for funding to enable the company to match transfers that were left unmatched by other members. PeerFX was already operating, allowing CAD and USD exchange.

What’s changed?

The web presence has disappeared! Another company with the same concept, PeepEX has sprung up but has yet to launch. Todd Veri of Midpoint & Transfer met these guys at MiniBar in August. Perhaps something of a collaboration is on the cards, pure speculation of course. Over in North America, PeerFX is still operational.

The concept seems very sound and if an individual or company £100+can save per transaction I would expect the service to become popular. The major problem is the launch stage where transactions have to be matched out by the service provider. If new members are slow in coming and complementing transactions are thin on the ground, transaction costs could quickly burn into the reserves.

Other news from the sector

Growth is seen at many operations:

• At Lending Club over $300,000 was being disbursed every working day in December 2009, more than double the January 2009 volume.They suffered with regulatory issues in 2008 but these have eased with the primary market open in just over half of US states and the secondary market, where Notes corresponding to loans are traded, is available in all but seven states.

• Smava in Germany disbursed €1.5m+ per month at the end of 2009 compared with around €700,000 at the start of the year (thanks to Wiseclerk.com for these stats). They also expanded into Poland at the start of January 2009 and had facilitated loans of over 30 million Zloty since formation until the end of November 2009 which I make to be £6.5m+.

• Auxmoney, also in Germany, sent out €500,000+ per month at close of 2009 compared to less than €50,000 at the beginning of the year (thanks again to Wiseclerk.com for the numbers).

Decline and apparent closing down is observed elsewhere:

• Virgin Money displayed somewhat of a decline after disbursing approximately $60m in 2009 (based on Wiseclerk.com’s January 2009 datapoint and the Q3 2009 figure from Virgin themselves) compared to $140m in 2008 (based on the same Wiseclerk point and the December 2007 numbers from Virgin). This is probably due to the activity noted over at P2Plendingnews.

Regulatory problems continued to affect players in the world:

• Prosper reopened in late April 2009 after a cease and desist order from November 2008 but was only open to those resident in California. The SEC promptly shut them down again in early May but by mid July the marketplace was up and running again and available in just over half of US states. Around $2m per month was being disbursed in late 2009, compared to $6m per month in the three months before the suspension and a peak of $9m+ in May 2008.

• Loanio has so far failed to reopen after voluntarily suspending operations in November 2008 and registering with the SEC in July 2009.

• As mentioned early, Zopa‘s license to operate as a financial intermediary in Italy was revoked in July 2009 and remains closed to new members.

• Austrian company Bankless Life was ordered to stop making loans in late December 2009.

• IOU Central Canada remains closed since regulators stepped in just weeks after the launch in February 2008. IOU Central USA is yet to get running after filing for registration in May 2009.

• Boober Italy remains closed to new members since Banca d’Italia involvement in late July 2009.

Some players disappeared:

• Boober Netherlands went under in March 2009 after facilitating €1.65 million in loans.

• Perturity Direct was liquidated in August 2009 after only opening in early January 2009.

While others opened:

• isePankur in Estonia
• Aqush in Japan
• CommunityLend in Canada

I will be watching with interest during 2010 to see the winners, losers and new entrants. I will also be keeping a eye on how regulators in different countries deal with the sector.

Up-to-the-minute P2P finance news can be found at P2P-Banking.com, which I highly recommend.

Comments, criticisms, corrections, questions – I welcome them all. Next time I’ll be back to writing about cool science. Stay tuned.

Update:

Between drafting and posting this there’s been a bit of a kerfuffle over the state of Prosper. Mark Gimein published a less than complimentary article regarding bad debt levels. He flags up that over 36% of loans made before November 2007 have ended in default and how from a $136m subset of loans, admittedly classed as high risk, $38m has been written off.

Prosper responded stating that high yields (16%) make up for the bad debt. The problem is that they didn’t. Lenders made a loss of 4% on loans made in or before 2006. On high rate loans (those over 18%) lenders have lost 10% per annum. Prosper goes on to state this is fine because of the recession and makes a dubious comparison to the S&P 500 which lost 6% per annum over the last three years. As rebuttals go, this is not a strong one. To be fair to Prosper, they do describe how their rating methodology has changed to provide a better indication of risk and bravely predict returns of 10% for loans made since these changes. I will be following this with interest.

It’s a warming experience seeing a manuscript come out of the research we do. Performing analysis and referencing wet lab results that corroborate our results are the truly interesting points of molecular dynamics research. Getting the figures looking fit for publication is not so fun, but I’m lucky that Emi dealt with all that.

As the old adage goes, “the proof of the publication is in the citation” and I hope I can look forward to a few of these.

If I want another paper, but with my name in pole position, I’d better get back to work!

Today we’ll start with membrane proteins!

All cells have plasma membranes which are great for separating the interior from the big bad world outside, it’s the bag that holds everything in and keep things out. Some cells also have specialised subunits inside themselves called organelles which are membrane bound. Biological membranes are mainly comprised of lipids with hydrophobic (water hating) chains and a hydrophilic (water loving) head groups. These arrange themselves so the water hating bits are hidden away from water and the water loving bits are bathing in the stuff. The resulting structure is a bilayer as shown below.

Thanks to Jerome Walker for the image

This lipid bilayer is impermeable to all but small and non-charged molecules such as water, carbon dioxide, oxygen, ethanol and urea.

But no cell (or organelle) is an island; they need stuff (carbohydrates, amino acids, nucleotides etc. etc.) to carry out processes (respiration, protein synthesis, replication etc. etc.) and information to react to changing conditions on an environmental, organismal and cellular level such as a change in level of nutrients)

How does stuff and information get through? In the majority of cases, it’s down to membrane proteins. Let’s tackle stuff first. Membrane proteins known as channels, pumps and transporters are the key players and behave as follows:

Channels

These are selective pores in the membrane that allow only a certain chemical or subset of chemicals to move through by diffusion. Aquaporins and potassium channels come to mind as prime examples Peter Agre and Rod MacKinnon won the 2003 Nobel Prize in Chemistry for research into them. Channels are often opened and closed in response to mechanical, electrical or chemical signals.

Pumps

This group actively pumps the desired chemical through the membrane using a chemical called ATP as “fuel”. The ABC (ATP binding cassette) transporters are a major family that import a wide variety of chemicals including maltose and molybdenum in E. coli. They are also responsible for the export of chemicals from cells and are believed to confer resistance to chemotherapeutic agents in cancerous cells.

Transporters

Here the movement of a chemical up its concentration gradient is powered by movement of another, co-tranport molecule (or ion) down its concentration gradient. This co-transport molecule can be moving across the membrane in the same direction as the transport molecular (symport) or in the opposite direction (antiport) as shown below. An example of symport is glucose uptake in the small intestine with sodium ions as co-transport. Antiport is responsible maintaining a high calcium ion concentration in the sarcoplasmic reticulum, an organelle found in muscle cells, priming them for contraction. Sodium ions are the co-transport species.

Modified from original by Zoph

So there you have it; passive diffusion through the membrane would be sufficient if cells just needed to move water, oxygen, carbon dioxide, urea and ethanol in and out but they need far more and proteins facilitate import and export of this stuff.

Next in the WIDAD series: getting information into the cell.

Want to know what a protein is? Don’t know your DNA from your RNA? Coming soon: Biomolecules Demystified.