It was November 17, 2010 when I published my first ever article on fintech, ten years ago today. At the time I really believed in the concept of peer to peer lending but I had no idea how this glorified hobby would change my career and my life. For the select few that have been with us for a long time, the pre-cursor to this site was called Social Lending Network (www.sociallending.net) which is the blog I purchased in 2010 to get started in this industry. I rebranded to Lend Academy in 2012 and LendIt Fintech was started in 2013.
Initially my focus was on the retail investor experience at LendingClub and Prosper as that is what interested me. It soon expanded to the business of peer to peer lending, then online lending in general. In 2017, as we saw these lending platforms expand into other areas of finance, we started to expand our scope. Today, while lending innovation is still an emphasis we also cover all areas of digital banking as well as payments and financial health.
I went back and reviewed the biggest news stories each year I have been writing about this industry. So, here is a journey back through time highlighting one story a year for the past decade.
One of the biggest challenges for broad adoption of peer to peer lending was the arcane regulatory structure that platforms had to operate in. The Government Accountability Office as part of Dodd-Frank was instructed to analyze the p2p lending industry and make recommendations on possible regulatory changes. The keenly anticipated report was a disappointment to most observers as in the end they made no recommendation for changes saying we could keep the status quo or move to a new new system under a single regulator such as the CFPB. No changes were made.
The JOBS Act was signed into law in April 2012 with the goal of helping small business with access to capital. For the first time non-accredited investors would be able to invest in the equity of small business. There was much hope at the time that this would lead to a democratization of capital flow as companies look beyond the traditional sources. It hasn’t quite turned out that way but this was a very big deal back in 2012.
Prosper had been struggling for some time and was in serious danger of running out of money in early 2013. Founder Chris Larsen had resigned as CEO the previous year and there was an interim CEO who was not doing a good job of attracting capital. Enter the now fintech legend, Ron Suber, who put the deal together, bringing in a new management team and a new board to guide Prosper on to their future growth path. This new funding round was small by today’s standards at $20 million but it ensured that Prosper would remain a going concern. This was seen as critical for the future growth of online lending.
In December of 2014 the largest marketplace lender, 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. We can look back it this event in hindsight with a different perspective but at the time it is hard to overstate how big a deal this was, as there was a sense a real optimism that this company was going to change the world.
SoFi went from a relatively unknown niche player focusing on refinancing student loans to the leading player in fintech very quickly. 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 has not just invented a new category, the student loan refinance, but also had aggressively moved into other areas of lending and wealth management.
After May 9th, 2016 the industry was never the same again. We awoke that morning 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. The manic growth of the marketplace lending platforms had already started to slow down but this episode ground new investment to a halt. It impacted everyone involved in online lending and was a black mark on the entire industry.
The tech giants had been slowly building out their small business lending operation for several years. Amazon, in particular, had been flying under the radar but we found out in 2017 that they had loaned out more than $3 billion to their merchants to date so had become a significant force. PayPal had launched their lending operation in 2013 and by 2017 they had also crossed $3 billion in total loans issued. Square was a smaller player but was also growing their lending operation. All three tech giants were becoming major players in small business lending and with zero customer acquisition costs had many advantages over other fintech lenders.
Marcus came on the scene in 2016 with a consumer lending offering. But it was in 2018 that we really learned the true extent of Goldman Sachs’ plans for fintech. At an event in 2018 David Solomon, then President of Goldman Sachs (now CEO) shared a slide that showed Goldman Sachs was looking at credit cards (we all know about the Apple Card now), mortgages, auto, payments and checking accounts for future products and that they would more tightly integrate these products with their wealth management and savings offerings.
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. This process is still ongoing and the current head of the OCC, Brian Brooks, is trying hard to resuscitate the fintech charter.
For the rest of time 2020 will be remembered for the global pandemic and its impact on so much of the economy and the world. For fintech, there was a silver lining. The Paycheck Protection Program launched in April and while fintech lenders were not a major part of the first round, by the second round companies like Kabbage were dominating PPP loan originations. Fintech lenders proved they could move quickly to get a new program up and running and really make a difference for hundreds of thousands of small businesses. This was recognized by both small business owners and the government and was a coming of age for fintech.
So, those are some of the big stories from the past decade. I realize that choosing just one story a year left out many major developments but that will give you a sense of the journey that Lend Academy and the whole industry has been on. I am looking forward to seeing how my second decade covering this industry unfolds. One thing is for sure, it will look very different to the last decade.