In an interview on CNBC last week Goldman Sachs CEO Lloyd Blankfein shared some news about their consumer lending platform. He said that Marcus had already crossed $1 billion in total loans issued and was on track to cross $2 billion by the end of the year.
Having launched in October 2016 Marcus crossed $1 billion in just eight months. For the online lending industry that is truly breathtaking speed. And it got me wondering. How does that speed compare to many of the industry leaders we know today?
Now, before I present this research let me say one thing. While it is an interesting data point, the speed at which a platform reaches $1 billion in total loans issued it is not an indicator of how successful a platform will become. Clearly, there are many other factors that are more important than speed of growth.
Anyway, I did a little digging and through publicly available information I was mostly able to figure out how quickly many of the major platforms reached their first billion in total loans issued. While the data here may not be exact I am confident it is close and the order is correct.
1. Marcus – 8 months
Marcus has something of an unfair advantage given that it has access to the many billions of dollars sitting on the balance sheet of its parent company, Goldman Sachs Bank. It did not need to secure outside capital to fund its loans and is able to grow as fast as the company wants.
2. SoFi – 14 months
SoFi made its start with its student loan refinance product, a category it invented but in this article we are looking only at personal loans. SoFi launched a personal loan product in February, 2015 and while they never publicly disclose the breakdown of their business lines we can glean enough information from its securitizations to make an educated guess as to when they reached $1 billion in total loans funded. Based on data from Kroll Bond Rating Agency, we know that by August 1, 2016 (when the SCLP 2016-2 securitization closed) SoFi had issued at least $1.3 billion in loans based on the loan pool balance of their first three personal loan securitizations. Based on that data I estimate they crossed the $1 billion mark around April of 2016, 14 months after they launched the product.
3. Marlette – 17 months
We first wrote about Marlette back in June of 2015. Back then they had been in business just 15 months with the Best Egg brand having made their first loan in March 2014. In those 15 months they had reached $800 million, taking just five months to go from $400 million to $800 million. So, most likely by August they had crossed the billion dollar mark.
4. Avant – 28 months
Avant launched in January of 2013 and when they crossed $1 billion in May 2015 they were the fastest platform to that milestone at the time. I interviewed CEO Al Goldstein on the Lend Academy Podcast soon after they hit that milestone and we discussed their growth strategy.
5. Lending Club – 65 months
Lending Club was the first platform to cross a billion dollars back in November 2012. They created a big splash for this milestone with a “Billion Dollar” party in San Francisco and a press blitz that was celebrated widely. Since 2014 they have done more than a billion dollars in new loans every quarter with the high water mark being $2.75 billion in Q1 of 2016.
6. Prosper – 98 months
Prosper was the first marketplace lender to launch in this country all the way back in February 2006. For many years it was just Lending Club and Prosper in the online consumer lending space and for much of that time Prosper was the market leader. Prosper crossed $1 billion in April 2014. They took over seven years to do their first $500 million and just 11 months for them to go from $500 million to $1 billion in total loans issued.
Now, I know there are other platforms that I have not included here. Some of the banking platforms like Lightstream and Discover have not been included as they do not publicly disclose their origination numbers for their online consumer lending platforms. They have both crossed a billion dollars in loans, though. I also did not include online lenders such as Upstart, Affirm or Payoff as it appears they have not reached a billion dollars in personal loans yet. Others such as loanDepot probably have reached a billion dollars but I could not find any information on them passing that milestone.
The narrative of the industry has changed over the last 18 months from one focused on growth to one focused on building sustainable businesses. And that is a good thing. Marcus is clearly an outlier here, doing their first billion in just eight months.
The one takeaway I have from all this is how large the personal loan market is in this country. A well-funded company like Marcus can arrive and quickly attract tens of thousands of new customers. And with over a trillion dollars in credit card debt there is still plenty of room for all these platforms to continue growing.
Will be interesting to see how quickly RL’s new “Upgrade” reaches $1B.
Yes Rob, it will be interesting. I expect Upgrade will be very high on this list.
I’ve been in the payday loan industry since 1998. It’s still hard to fathom how many opportunities still exist for balance sheet lenders in this space. There are literally 100’s+ of lenders having <$20M portfolios netting 30%+ annually. And, I'm pitched almost daily by startups employing new twists that are tempting!
You are talking about payday loan providers’ portfolios rising 30% annually?
I think he’s talking about 30% net interest margin, which is achievable in the payday loan space. A $20M loan book can be run by a pretty lean operation with minimal overhead, so if they are bringing in $6M of net interest they can very likely drop 25% or more of that to the bottom line … pretty good for a mom and pop business!
However, a business at that scale can’t really attract outside investors. If you are calling yourself a specialty finance co, you are probably pretty happy to get to the point where you pocket $1-2M per year. If you are a fintech, you have your eyes on a billion dollar valuation with a public market exit.
I think it would also be interesting to look at the fastest to 100k (or some number) customers.
Loan sizes aren’t the same so originations obfuscates the real speed of scale.
The comparison here was of unsecured consumer lending platforms, I think they all have an average loan size in the $10-20K range and few or no loans above $50K, so there isn’t too much dispersion. If you look at small business lending, there can be a much broader dispersion of loan sizes.
Don,
I agree the number of loans would be a more interesting data point but that information is very difficult to find. But as Jabairu says these are all unsecured consumer loans with a relatively close average loan size.
You can generally find average loan sizes now from all of the securitizations done. They’re sometimes very different. Sofi average ~$30k. LC around $12k.
There’s a company called Earnest that did it in 24 months as well –
https://www.crowdfundinsider.com/2016/11/92140-earnest-originated-1-billion-loans-refinance-student-debt/
Hi Jeff,
I am fully aware of Earnest and they did not qualify for this list because they do student loans, not unsecured consumer loans. Student loans have a much higher average loan size so if I included those lenders it would not be an apples to apples comparison.