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Grouplend CEO Kevin Sandhu

Vancouver startup Grouplend brings peer-to-peer lending to Canada, finally, but will it work here?

Expedia changed the way we book flights; Airbnb, accommodations. Few industries have gone unscathed in the Internet age, as startup after startup has struck fear into decades-old institutions by allowing people to share cars, trade with strangers and rent out rooms without the middlemen. One industry that’s remained relatively unaffected, however—at least in Canada—is banking.

A Vancouver company, Grouplend, wants to change that. Launched last fall by 31-year-old former investment banking analyst Kevin Sandhu, Grouplend is modelling itself after U.S. companies such as Lending Club and Proper Marketplace: online peer-to-peer (P2P) lenders that connect investors with borrowers directly. Those two organizations have been in operation since 2006 and 2005 respectively, and between them last year facilitated $6 billion in loans—over double what they did in 2013. “You look at a map of the G20 countries, virtually every country has a handful if not more doing this sort of thing,” Sandhu says. “But no one’s been offering this kind of product to Canadian consumers.”

Canadians ♥ Credit Cards
$2,627: the average credit card balance in Canada
48.4% carry less than $1,000
26% carry between $1,000 and $5,000
20.7% carry more than $5,000
Source: RateSupermarket

For borrowers, Grouplend’s pitch is simple: borrow up to $30,000 at a moderate interest rate (between six and 20 per cent, depending on your credit history) to pay down high-interest credit card debt. Plus, rates are personalized, Sandhu says, whereas with credit cards, you’re essentially subsidizing high-risk borrowers. Between January and March of this year, his 10-person company received over $30 million in loan applications, and while less than half of those were ultimately approved (for now, Grouplend only offers loans to Canadians with good credit), $30 million is “bigger than we thought we’d see this early on.”

For Grouplend’s “network of investors” who fund these loans, Sandhu says healthy returns (projected at seven to nine per cent) have so far attracted “several million dollars” from lenders (who, for the time being, all fund the same pool of borrowers). While Grouplend isn’t available everywhere yet—at press time, Grouplend has yet to enter Quebec, Saskatchewan and Nova Scotia due to regulatory hurdles—Sandhu is confident that it will be accessible coast to coast before year’s end.

Nathaniel Payne, an SFU lecturer who specializes in tech and finance, says Grouplend’s model is “intriguing.” But it’s not enough to look at America and assume the same kind of company can exist here. “Canadian financial institutions prioritized stability over rapid growth,” he explains. “The way Canadians are used to banking is not like in the U.S.... There isn’t typically a lot of change.” It also remains to be seen whether banks respond—either by lobbying for regulatory changes to stifle P2P lenders or by competing with something similar. “These banks have massive marketing budgets.”

That said, our credit card rates are high indeed, Payne says. “I’m excited about Grouplend, even if they’ve got an uphill battle.”