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The Ten Biggest News Stories of the Decade in Marketplace Lending

We take a look back at the news stories that shaped marketplace lending in the 2010s

December 30, 2019 By Peter Renton 1 Comment

I started writing about marketplace lending back in 2010, so I have spent almost the entire decade immersed in this space. While we have expanded our coverage on Lend Academy today beyond marketplace lending this remains a major focus.

We have certainly come a long way in the past ten years and the industry is almost unrecognizable from where it was in 2010. Back then there were just two notable companies in the space, LendingClub and Prosper, originating just a few million dollars a month in loans. No one could have predicted that by the end of the decade marketplace lending would have led to a resurgence in personal loans and changed expectations for customer experience across all lending verticals.

As I look back at the past decade here are, in my opinion, the top ten most important news stories in chronological order.

Prosper Recapitalizes and Brings in a New Management Team
(January 2013)

At the time this was a huge story. The number two marketplace lender had been struggling for some time and was in serious danger of running out of money. This new funding round was small by today’s standards at $20 million but it ensured that Prosper would remain a going concern. The deal was architected by, the now fintech legend, Ron Suber as he brought in a new management team and a new board to guide Prosper on to their future growth path. It helped set the industry up for success over the next several years.

LendingClub Becomes First Marketplace Lender to go Public
(December 2014)

This was a momentous day for marketplace lending as market leader LendingClub became the industry’s first company to go public. The IPO was a huge success by any measure. By the end of the first day of trading LendingClub was valued at $8.46 billion and they had raised $870 million in cash. Of course, at the time we had no idea what would happen to the stock but there was a sense a real optimism that this company was going to change the world.

Second Circuit Rules on The Madden Decision
(August 2015)

The biggest legal issue the industry dealt with this decade was the ramifications of the Madden v Midland decision. We have been following this case since the Second Circuit ruling in 2015 and it has had far reaching consequences for the industry. It has led to a reduction in lending activity in Second Circuit states (NY, CT and VT) but the bigger concern was that this kind of ruling would spread nationally. That has not happened and there have been multiple regulatory fixes proposed plus the OCC and FDIC have weighed in as well. But as of this writing nothing concrete has changed since the 2015 decision.

SoFi Raises $1 Billion Led by SoftBank
(September 2015) [Read more…]

Is Loyalty the Key for Amazon Becoming a Successful Bank?

A new survey suggests that it is prime time for Amazon to enter banking.

September 19, 2018 By Ryan Lichtenwald Leave a Comment

65% of Amazon Prime respondents are willing to try a free online bank account offered by Amazon. This data is according to a new survey conducted by Bain & Company which found that Amazon has a huge advantage over the incumbent banks: loyalty. Part of this loyalty stems from Amazon’s excellent customer service and policies. Customers have a trust with Amazon that does not currently exist in banking.

With this trust comes an incredible amount of data around purchasing decisions, credit cards on file and integration across all sorts of devices from smartphones to Alexa devices. Amazon Prime boasts 90%+ renewal rates which connects to a majority of households in the United States. According to data, Amazon’s customers control 75% of US household wealth and account for about 75% of the wealthiest households’ assets making them valuable target banking customers.

It is expected that Amazon will partner with a bank to offer bank-like services which may initially be targeted at young adults. With the acquisition of Whole Foods, Amazon has the potential to reach customers where they would like to be served, even if that means offline. The full results from Bain & Company provide additional insights into Amazon’s customers and the willingness to embrace Amazon as a bank.

Five Things That Excite Me About Fintech Today

There is more change happening in fintech today than ever before but here are five themes that are particularly exciting

July 10, 2018 By Peter Renton Leave a Comment

When I started LendIt with my fellow co-founders back in 2013 I was most excited about how online lending could disrupt the banking system. I felt that we were at the beginning of a paradigm shift in banking and that the online lenders would soon rule the world. While it hasn’t turned out exactly like that I am actually more excited today about where finance is heading than ever before.

Today, there are many things that excite me about fintech, here are five themes that I find particularly exciting.

1. Advances in Data Analytics

I have said before that data science is becoming the most important skill in fintech. There is more data generated today than at any time in human history and we need new ways of analyzing this data. Advances in artificial intelligence and machine learning have meant we can now make sense of this vast amount of data.

There are so many benefits to finance of these advances but the most important one I think is what it means to the underserved consumers around the globe. Advanced data analytics combined with the increased use of mobile phones in the developing world means for the first time everyone has the potential to be connected to the financial system. This is going to have huge ramifications globally over the next decade.

2. Blockchain and Distributed Ledger Technology

[Read more…]

Amazon and Their Push Into Fintech

A new report from CB Insights catalogs all the recent moves Amazon has made into financial services

June 26, 2018 By Peter Renton Leave a Comment

Last week CB Insights released this really interesting report titled, Everything You Need To Know About What Amazon Is Doing in Financial Services. While Amazon has already made some moves in fintech is a huge amount of speculation as to what they will do next. This report covers both what Amazon has done and also speculates as to where they might be going.

The report provides an in depth look at the moves Amazon has made in payments, lending, the new Amazon Cash program and also takes a look at how the company has been developing fintech programs internationally.

Amazon Cash For The Unbanked Consumer

While I was most interested in the lending section before I get to that I want to talk about Amazon Cash. I have paid little attention to this product since it launched in April 2017 but the more I think about it the more I see a product that could move the needle for the unbanked in this country and possibly around the world.

Simply put Amazon Cash bridges the offline and online worlds by allowing anyone to shop on Amazon with cash. The way they do this is through partners like Western Union, MoneyGram and Coinstar. Consumers can bring in cash and deposit it into an Amazon “account”. They can then shop on Amazon and use this balance on this account to pay for Amazon products.

It doesn’t take much imagination to see where Amazon could take this. By the simple addition of a debit card, Amazon could move the unbanked into a quasi bank account that could be used at places beyond Amazon. Many surveys have said how much the public trusts Amazon and they could really make a difference for financial inclusion by developing this product.

Amazon Lending: Lots of Potential But Not Much Activity So Far

[Read more…]

GAFA Will Have a Profound Impact on the Future of Finance

Google, Amazon, Facebook and Apple could well be the fintech leaders of tomorrow

November 1, 2017 By Peter Renton 3 Comments

One of the first posts I ever wrote on Lend Academy back in 2010 was about mulling the idea of Facebook becoming a bank. Of course, I didn’t mean a brick and mortar type of bank but a digital bank of some kind. Seven years later this has obviously not come to pass but tech behemoths like Facebook are showing more interest in financial services.

GAFA is an acronym for Google, Amazon, Facebook and Apple, the largest tech companies in the world. Historically, these companies had stayed out of finance for the most part but in recent years that has changed.

Google and Apple both have payments products that have gained some traction in this country. Google and Amazon have small business lending arms that are providing financing to their existing small business clients. Facebook has their popular Messenger program that is starting to attract new initiatives from both fintech startups and big banks.

I would add PayPal into the mix here as well. They are on a fantastic run lately and their core payments business continues to expand. They also have a successful small business lending operation but like Amazon and Google this is focused on extending credit to their existing customers. What would happen if these companies decided to expand their focus beyond their own customers and take on banks directly?

McKinsey Report on Banking

Last week McKinsey released their annual banking report and it has created quite a stir in banking circles. McKinsey argued that platform companies like Amazon are well positioned to challenge big banks: [Read more…]

The New Breed of Small Business Lenders: Amazon, Paypal and Square

We explore the small business lenders of tomorrow who have significant advantages in customer acquisition and data.

July 25, 2017 By Ryan Lichtenwald 1 Comment

If asked where to get a small business loan most people would state their local banks or even some of the bigger traditional banks. Those aware of the online lending space may mention the likes of Kabbage, OnDeck, Funding Circle or maybe even some of the new online initiatives of big banks like Wells Fargo’s FastFlex product. However there is another, often overlooked segment of small business lenders and they are names you have heard of: Amazon, Paypal and Square.

Until recently I hadn’t paid much attention to these companies. Amazon in particular flies under the radar and little is known about their lending business. Recently it came out that they are doing a considerable amount of lending to small businesses. Amazon lent $1 billion in the last year and has lent $3 billion to more than 20,000 small businesses since launching their lending product in 2011.

Most alternative small business lenders aim to innovate on pricing, speed, transparency or underwriting. Many also claim the use of data for underwriting purposes as a main differentiator. I’d argue that Amazon has more of an advantage when it comes to data since most other lenders rely on third parties or the small business to provide access to their data. Since Amazon is a marketplace for sellers they have an incredible amount of data on the cash flow of businesses that operate on the platform. They also have a significant pool of borrowers, resulting in virtually no customer acquisition costs.

The best way to understand how Amazon lends money to small businesses is hearing about it directly from a borrower. The podcast called Marketplace recently interviewed an Amazon seller and it was fascinating to hear how it works. [Read more…]

The Lending Club Story Now Available in Paperback

December 17, 2012 By Peter Renton 2 Comments

If you are looking for the perfect gift for that p2p lending enthusiast on your list this Holiday Season then look no further. The Lending Club Story is now available from Amazon in paperback.

I even updated the book with all the latest numbers from November so it is completely up to date. Being a paper book, it is more expensive than the digital edition, but it will look better under the Christmas tree than the e-book.

The book covers Lending Club, past, present and future. There are sections on both the investor side and the borrower side of Lending Club as well as a short foreword by CEO Renaud Laplanche. It is a quick read at just 74 pages long.

Of course, if you prefer the Kindle edition that is still available as well. It has been very well received by readers so far achieving 4.9 out of a possible 5 stars from reviewers.

Thanks to everyone who has already downloaded The Lending Club Story, I certainly appreciate it.

End of shameless plug.