There is big news out of LendingClub today for their tens of thousands of retail investors. They have given notice that they are closing down their Notes platform at the end of the year and individual investors will no longer be able to invest in any loans originated by LendingClub.
This is a disappointing development for the industry, as LendingClub was a pioneer in peer to peer lending, and for me personally as I have multiple LendingClub accounts going back more than a decade.
All investors should have received an email this morning detailing their plans. Here is an excerpt from that email:
As we move towards becoming a full-spectrum fintech marketplace bank, we have looked closely at our current and future product suite and have started development of new products to help our members keep more of what they earn and earn more on what they keep. Unfortunately, under a prospective banking framework, it is not economically practical for LendingClub to continue to offer Notes. So, we had to make the difficult decision to retire the Notes platform effective December 31, 2020.
While LendingClub began in 2007 as 100% focused on individual investors over the years it has moved to a much more institutional investor-focused approach. This was understandable as it is difficult to originate huge loan volumes on the back of just retail investors.
It is true that LendingClub has deemphasized individual investors over the past several years. We saw that the loan trading platform was closed down earlier this year, we have seen investors in some states being locked out of investing, increased investment minimums and there have been few, if any, new innovations for retail investors in many years.
Now, we are coming to the end of an era. The peer to peer lending model has not proven to be the wonderful innovation that it promised. There are virtually no platforms operating at scale today that have a pure retail investor approach. UK platform Ratesetter was probably the biggest, at least in the West, and that was sold earlier this year to a traditional bank for a fraction of what it was once worth. [Read more…]