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
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
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
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
In many ways SoFi was the dominant company of marketplace lending in the 2010s. They raised more money than any other company and this huge round led by SoftBank in 2015 dwarfed every other funding round of the decade. SoFi basically invented an entire category, the student loan refinance, and aggressively moved into other areas of lending and wealth management.
OnDeck Announces a Partnership with JPMorgan Chase
The emergence of partnerships between banks and fintech lenders was one of the big themes of the decade. And no partnership was bigger than the one announced in late 2015 by OnDeck and JPMorgan Chase, the largest bank in the country. This was a big deal not just for OnDeck but for all of fintech as this kind of partnership suddenly became top of mind for all U.S. banks.
We awoke on Monday, May 9th, 2016 to the truly shocking news that the founder and CEO of LendingClub, Renaud Laplanche, had resigned. What actually happened was that the Board demanded his resignation primarily over the improper sale of $22 million in loans. This had ramifications for the entire industry as we all suffered due to this event and some would argue we are still feeling the negative effects from this decision by the LendingClub board.
The rumors had been swirling for some time when Goldman Sachs launched their Marcus platform in October 2016. Their initial product was a consumer loan in direct competition to LendingClub, Prosper, Marlette and others. They went on to become the fastest growing consumer lending platform ever as Goldman poured a huge amount of resources into the effort. Everyone in fintech was suddenly talking about Goldman Sachs as the company began to transition from serving wealthy individuals and corporations to mass market consumers.
Another theme for the 2010s is the emergence of several tech companies as leaders in small business lending. While the likes of OnDeck, Kabbage and Funding Circle dominated for much of the decade by 2017 it was obvious that PayPal, Square and Amazon were all going to become major small business lenders. These companies all have unique advantages with no customer acquisition costs and access to proprietary data sources.
Funding Circle Goes Public on the London Stock Exchange
Funding Circle was the first marketplace lender to expand internationally. After having launched in the UK in 2010 the company expanded to the USA in 2013 and then to Germany, Spain and the Netherlands in 2015. In 2018 they became the first UK marketplace lender to go public with an IPO on the London Stock Exchange. The company raised £300 million at a £1.5 billion valuation.
Judge Rules OCC Unable to Issue Fintech Charters
The OCC first proposed a special fintech charter back in 2016 and there was immediate pushback from the states. So, it was not surprising, when in 2018 the OCC officially allowed firms to apply, that no company jumped at the opportunity. With the states challenging the authority of the OCC to allow such a charter no company wanted to be caught in the crossfire. In October a federal judge ruled that the OCC does not have the legal authority to issue bank charters to non-banks. While the OCC has appealed the decision the fintech charter is dormant for now.
Those are my top 10 stories of the past decade in marketplace lending. Now, I realize I left out many significant news items, as my initial first cut had close to 20 big stories from the past decade. But it was a momentous decade that, when looked at in hindsight, showed a tremendous amount of progress.
As we start the 2020s I can only imagine what big new developments will take place this decade. But I am very confident that by the end of 2029 the lending space will have been transformed once again.