Will the Collapse of Silicon Valley Bank Hurt American P2P Lending?
The collapse of Silicon Valley Bank (SVB) sent the fintech industry into full blown panic, as investors and start-ups alike feared their assets were doomed. The US Government quickly stepped in to help regulate the fall and prevent a full-blown catastrophe, but questions remain. Is this another indicator of how unstable the US economy really is? Was this a one-off or the start of a run-off? How will these events affect fintech and peer-to-peer lending and investment? Lastly, what does this collapse tell us about the importance of liquidity?
SVB was one of the 20 largest banks in the United States on March 8, 2023 when Moody's placed a call to its parent company stating it was planning to downgrade their rating. Within 48 hours, the bank was dead in the water. On Friday March 10, the California Department of Financial Protection and Innovation (DFPI) revoked its charter and placed it under receivership. The Federal Reserve and FDIC had sent examiners that morning to asses the bank's standing, and found it insolvent. The previous day's run on the market had resulted in inadequate liquidity, as major funds, including Peter Thiel's Founder's Fund, yanked their deposits. It would be the second largest bank collapse in US history, $208 billion—topped only by the $307 billion collapse of Washington Mutual in 2008.
Luckily, none of the major peer-to-peer lending sites were directly affected by the collapse. LendingClub, a one-time p2p platform, did suffer exposure in the amount of $21 million, but according to the company's attorneys "[the] amount is not material to the Company’s liquidity position or capital levels, and does not pose a risk to the Company’s ongoing business or operations." No other major P2P lending operation has reported series exposure due to the collapse of the bank. On the other hand, Circle, a US-based cryptocurrency firm, announced $3.3 billion in exposure, amounting to nearly 10% of the company's total valuation.
Only time will tell if this is the beginning of a financial crisis, but there is a lesson you can learn from this: Remember to diversify. Placing all your assets in one bank is much like investing all your capital in one stock. Both increase your profile risk, and if something goes wrong, all is lost. Liquidity is a position, and you should protect it like you protect other positions. To be sure, bank collapses are rare, and their risk profile is quite low, but as we can see, things can and do go wrong. As such, make sure your cash is spread out among several locations. Remember that the FDIC only insures $250,000 per account, and everything above that amount remains uninsured and exposed to risk.
Investing in P2P Loans Can Help Protect Your Assets
One way to diversify your portfolio is to invest on European peer-to-peer lending platforms, which unlike the American platforms do not require accreditation. If you have access to a European account, consider investing on some of the top Europe p2p platforms, such as PeerBerry, Mintos, Reinvest24, EstateGuru, and HeavyFinance. If you have a specific loan type in mind, look through our Platforms by Loan Purpose page. There you'll find sites devoted to eco-friendly investment solutions, those devoted to large investments (i.e. over €5000), and even one or two platforms willing to fund independent films.
Top European P2P Lending Platforms
Market Type
Consumer Loans
Average Returns
9 - 12%
Minimum Investment
EUR 10
Signup Bonus
0.5%
Registered users
70,000
Total funds invested
EUR 1.8 Billion
Default rate
7%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, Bank Card, TransferWise
Withdrawal methods
Bank Transfer, Bank Card, TransferWise
PeerBerry is an excellent P2P platform to its 100 percent successful fund recovery track record. They offer slightly below market interest rates in exchange for a guarantee users will never lose their funds.
Market Type
Mortgage Loans
Average Returns
12 - 17%
Minimum Investment
EUR 100
Signup Bonus
EUR 10
Registered users
25,000
Total funds invested
EUR 40 Million
Default rate
0%
Regulating entity
Self-Regulated/EU Compliant
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, Bank Card, TransferWise
Withdrawal methods
Bank Transfer, Bank Card, TransferWise
Reinvest24 is an equity backed real estate rental P2P lender. Though they are a much smaller P2P lending platform in comparison to the top P2P lenders. They deserve a high place on the list because of their attention to detail and successful execution of business goals.
Market Type
Consumer Loans
Average Returns
9 - 12%
Minimum Investment
EUR 10
Signup Bonus
1%
Registered users
500,000
Total funds invested
EUR 8.9 Billion
Default rate
16%
Regulating entity
Financial & Capital Market Comission (Latvia)
Buyback guarantee
Secondary market
Payment methods
PayPal, Bank Transfer, Credit Card, TransferWise
Withdrawal methods
Wire transfer, Credit Card
Mintos is P2P loan originator aggregator whom after years of slow growth exploded and became the number one P2P lending platform in Europe. Find out why in this review. Is Mintos an investment worth considering?
Market Type
Mortgage Loans
Average Returns
8 - 13%
Minimum Investment
EUR 50
Signup Bonus
0.5%
Registered users
150,000
Total funds invested
EUR 700 Million
Default rate
6%
Regulating entity
Bank of Lithuania
Buyback guarantee
Secondary market
Payment methods
Bank Transfer, SEPA, Credit Card, TransferWise
Withdrawal methods
Bank Transfer, SEPA, Credit Card, TransferWise
EstateGuru is a highly recognized and successful P2P Lending company. What makes EstateGuru as P2P Lender so profitable and secure? Explore the breakdown with P2PIncome's thorough analysis of EstateGuru's strengths and weaknesses.
Market Type
Agri-business
Average Returns
12%
Minimum Investment
EUR 100
Signup Bonus
Prizes
Registered users
8000
Total funds invested
EUR 36 Million
Default rate
3%
Regulating entity
European Crowdfunding Service Providers
Buyback guarantee
Secondary market
Payment methods
Paysera, Lemonway
Withdrawal methods
Paysera, Lemonway
HeavyFinance is a peer-to-peer lending and investment platform focusing on the agri-food market. Read this detailed review to learn whether you should add HeavyFinance to your investment portfolio.
Among the very best sites you can select is PeerBerry. The experts at P2PIncome have tracked PeerBerry's performance for quite a while, and you can find the reports on our Portfolio Reports page. The site offers interest rates ranging from 9% to 12%, and a reported annualized return of approximately 9%. There are hundreds of loans to choose from, and because so many are short term, you'll have no problem in terms of liquidity.