Prosper Targets Retail Investors Anew After Big Buyers Pull Back

  • Firm aims to have a third of loans funded by small investors
  • Company has overhauled an online platform used by those buyers

Prosper Marketplace Inc. plans to lean harder on small investors to fund consumer debts it arranges online, reemphasizing the company’s roots as a “peer-to-peer” lender so it’s not too reliant on Wall Street money.

Prosper hopes retail investors will fund about a third of loans by the end of this year, Ron Suber, the San Francisco-based firm’s president, said in a phone interview late Tuesday. That’s up from just under 10 percent at the end of 2015 and 20 percent in recent months, he said.

As a part of the push, Prosper relaunched an online platform for retail investors in recent days to improve the experience for loan buyers. New features include a redesigned automatic investment tool and a dashboard to see portfolio performance.

“We have been working for more than a year to do more with retail,” Suber said. “This is the first time you’re able to see the investment.”

The effort shows, in part, how Prosper aims to weather an industrywide slowdown in funding. Some big investors have pulled back from buying online consumer debts this year and demanded higher returns amid questions about loan performance. That’s pushed firms including Prosper to work with banks to help line up big purchasers. The ventures also raised interest rates to bolster returns for buyers.

‘Marketplace’ Moniker

Pressure on the industry mounted in May after the surprise resignation of Renaud Laplanche, the founder of Prosper’s biggest competitor, LendingClub Corp. An internal review found some loans were misdated and that Laplanche, 45, failed to properly disclose a personal investment. Since then, more large investors have delayed or curtailed loan purchases.

Retail money has gained as a percentage of Prosper’s funding this year as those buyers showed more interest and as some large firms pulled back, Suber said. Still, the company has long intended to cultivate more small investors through a number of channels, including through mutual funds that buy the debt, he said.

When Prosper started a decade ago, individuals were the primary loan buyers, and it was commonly referred to as a peer-to-peer lender. Eventually, money from big investors and institutions poured in, fueling rapid growth and prompting platforms such as Prosper to recast themselves as “marketplace lenders.”

But the company hasn’t forgotten how to work with small investors, Suber said.

“It’s not a new thing for Prosper to have retail,” he said. “We’ve had retail since the day we opened.”

Before it's here, it's on the Bloomberg Terminal.