In his first public appearance in over a year Renaud Laplanche, the CEO of Upgrade, gave a presentation this past weekend at Lang Di Fintech, LendIt’s annual Chinese conference, in Shanghai. Titled Online Lending 2.0 he laid out his vision for where he thinks the online lending industry is going next.
He talked about how one of the big innovations in Online Lending 1.0 was the introduction of more data into the underwriting process. Ten years ago, which marked the beginning of Online Lending 1.0, this new data allowed more accurate underwriting of consumers. But in Online Lending 2.0 this has expanded dramatically with not just more data but new and better tools available to analyze this data.
The two key data points that are being added in Online Lending 2.0 are location data and free cash flow analysis. We need to adjust underwriting to take into account location because a consumer in New York City has a much higher than average cost of living while a consumer in Greenville, SC has a much lower than average cost of living for example. This is why Debt-to-Income (DTI) is less important than free cash flow today.
Having said all that Renaud also shared that Online Lending 2.0 is not just about data. It is about better processes. We need better liquidity, transparency and alignment of interests with investors. This means being fully transparent on credit policy and data verification. What Upgrade is doing is creating an immutable record of their loan data by storing it on the blockchain – this means better data integrity and transparency for investors. He also talked about the need for better liquidity options for investors, this is part of Online Lending 2.0.