Happy New Year everyone. As I do every year at this time I make a few predictions for the year ahead as well as review my previous years predictions.
Review of my 2017 Predictions
First, let’s review my predictions I made exactly one year ago. We had an interesting year as an industry in 2017, it was certainly a better year than 2016. I think I did ok on my predictions from last year although as you can read below I did get some things completely wrong.
- 2017 will be the year of the bank partnership
I would say I was partially right on this one. We certainly saw a large number of new bank/fintech partnerships with deals closed from Avant, Fundation, Upstart, P2Bi, LendUp, Biz2Credit and many others. And in Europe the floodgates opened with dozens of new deals between lending platforms and banks announced. But in the US I was expecting even more partnership deals than we had so I think it is bit of a stretch to call 2017 the year of the bank partnership here.
- The OCC Fintech Charter will receive a positive reception
It was an interesting year for the OCC Fintech Charter. With Thomas Curry leaving as head of the agency in April, then Keith Noreika holding the acting role for a few months and finally Joseph Otting being sworn in to lead the agency in late November it was difficult for any new initiative to get momentum. There was also the case of the Conference of State Board Supervisors suing the OCC over the charter, which was dismissed in December. So, while many of the fintech platforms supported the charter there was no real positive movement this year.
- Lending platforms will offer banking products
While we had a couple of platforms offering credit cards for the most part this prediction failed to materialize. With the possible exception of SoFi I think we are still some time away from lending platforms offering a variety of banking products.
- One large platform will be acquired
I am going to say I got this one right as one major platform was acquired in 2017. Student lender Earnest was acquired by Navient in a deal announced in early October. My guess that Prosper might be the platform to be acquired was wrong but there were rumors flying around about acquisition talks at more than one major platform last year.
- There will be no new IPOs this year
I was almost right on this one but one US lending platform did have an IPO in 2017. Short term lender Elevate went public in April after postponing their IPO in 2016. None of the major marketplace lenders braved the public markets in 2017 as valuations continue to be depressed at many of the leading companies.
- China will become an important source of capital outside the USA
I got this one right. China continues to make its presence felt as more US companies are looking for capital from that part of the world. The leading Chinese fund, the CreditEase Fintech Fund, made investments in 2017 in Upgrade, dv01, Orchard, Lenda and Nav just to name a few. China is now becoming a consideration for many more companies looking to raise money.
- Artificial intelligence will take center stage
I think I read more articles about AI this year than in the previous five years combined. Whether it is for underwriting, customer acquisition, collections, compliance or cybersecurity AI is now central to the success of many lending platforms. It has taken center stage and will remain important for the foreseeable future.