Crowdfunding Fusion

Building Europe's Online Lending Champion

samir desai ceo funding circle ddp
Samir Desai, the CEO of British online lender Funding Circle, said his company's purchase of a German rival, Zencap, will create a European competitor to U.S. market leader Lending Club.
  • Why it matters

    Why it matters

    The British-German fusion in online lending, which creates a European firm on a par with U.S. market leader Lending Club, will only raise pressure on traditional banks.

  • Facts


    • U.K.-based Funding Circle is one of the biggest online lenders globally, alongside U.S. firm Lending Club.
    • Online lenders’ share of the U.S. lending market is to increase from 2 percent today to 15 percent over the decade, Goldman Sachs has predicted.
    • German startup investor Rocket Internet, the majority owner of Zencap, will become a minority shareholder in Funding Circle.
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Europe’s online marketplace for business loans grew more interesting on Tuesday when Funding Circle, Britain’s largest online lender, bought a German competitor, Zencap, in a deal that observers said reflected the growing importance of crowd-sourcing by new financial-technology firms.

The terms of the purchase were not disclosed, the companies said in a statement. With its takeover of Zencap, which was majority owned by the Samwer brothers, German tech entrepreneuers, Funding Circle plans to expand into Spain and the Netherlands, bringing its business to five countries.

The Samwer brothers, who successfully took their own startup incubator company, Rocket Internet, and an online shoe retailer, Zalando, public last year, will be minority shareholders in Funding Circle, the companies said.

The British-German deal could herald a new chapter in the so-called fintech sector, a growing collection of financial firms that are using new digital technologies to challenge traditional banking models around the world.

The latest acquisition could mark the start of an era of cross-border consolidation for the young industry.

“Banks have reacted too slowly and not extensively enough.”

Nikolay Kolev, Partner, Deloitte Digital

It marks the second big deal in Germany’s fledgling finance startup scene this year. In July, stock exchange operator Deutsche Börse said it would acquire foreign exchange trading platform 360T, one of 200 so-called fintechs operating in Germany.

The growing prospects of fintech firms are also attracting growing numbers of investors. On Tuesday, insurance firm Aegon said it was investing €150 million ($170 million) in Auxmoney, a German credit marketplace.

By bringing Zencap into the fold, an expanded Funding Circle will be able to accelerate its assault on established banking in more countries.

Founded just 18 months ago, Zencap claims it is the fastest-growing online lender in Europe.

The transaction comes weeks after U.S. investor Victory Park Capital plugged €230 million in additional lending capital into Zencap, a vote of confidence in its business.

Through the deal, the Zencap brand will disappear and its managing directors and co-founders, Matthias Knecht and Christian Grobe, will move to Funding Circle.

Funding Circle’s main global rival is a U.S. online lender, Lending Club.

“With the merger, we are getting significantly closer to our shared vision of building the first global credit marketplace,” said Mr. Knecht, the Zencap co-founder.


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For Funding Circle Chief Executive Samir Desai, the takeover is another step in “helping millions of businesses across the world sidestep the outdated and inefficient banking system and borrow from investors.”

The company, which has already secured more than $5 billion in loans for more than 12,000 small businesses, was valued at about $1 billion in a financing round six months ago.

Part of its success has been put down to its willingness to cooperate with competitors in the established banking sector.

Funding Circle has agreements with the British subsidiaries of Spanish bank Santander and Scottish bank RBS, which refer customers whose loan applications are rejected to the online service.

“Deals like this could be expanded to other countries,” Mr. Desai said.

However, experts say that in general, established banks have yet to nail down the right approach to dealing with fintechs, which many see as a challenge to their traditional way of doing business.

They have reacted “too slowly and not extensively enough,” said Nikolay Kolev, a partner at consulting firm Deloitte Digital. That might be because the credit mavericks still preside over a relatively small share of the lending business.

But Mr. Kolev said the fintech sector is set to grow at a tremendous rate, with traditional banks unable to advance at the same speed.

Online lenders now hold a 2-percent share of the total U.S. lending market, although Goldman Sachs predicts that that could expand to 15 percent in the next decade.

Others are skeptical. German entrepreneur and fintech investor Carsten Maschmeyer told Germany’s Manager Magazin that up to 90 percent of new lending startups would fail.

Critics of the online lending business model point out that online credit suppliers will face a critical test when, eventually, central banks begin to raise interest rates, which could prompt a greater number of borrowers to default on their loans.

In preparation, Funding Circle has already invested in risk analysis and hired a risk manager.

“We can benefit from that,” said Mr. Grobe, the co-founder of Zencap. “A comprehensive pool of borrower data enables us to reduce the likelihood of default and calibrate interest more accurately.”


Frank Drost and Katharina Slodczyk are editors at Handelsblatt. To reach them: and


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