Wrap-Up of the LendIt USA 2016 Conference

LendIt USA 2016 conference in San Francisco, California, USA on April 11, 2016
The LendIt USA 2016 conference kicks off with myself and my LendIt partner Jason Jones

 

I know I am a little late with this wrap-up but I took a few days off after LendIt and am just now getting caught up with everything. What an amazing experience it was at LendIt USA 2016.

For the uninitiated, last week the largest ever online lending conference was held in San Francisco – I am one of the co-founders of this event. We had 3,500 people from 49 different countries at the Marriott Marquis hotel, this was up from 2,500 people last year and less than 1,000 the year before when we were last in San Francisco. LendIt continues to mirror the growth of the online lending industry.

Conference Highlights

LendIt USA 2016 Opening Keynote - Renaud Laplanche CEO of Lending Club
Renaud Laplanche, CEO of Lending Club, giving the opening keynote at LendIt USA 2016

 

For the fourth year in a row the CEO and founder of Lending Club, Renaud Laplanche, opened proceedings with his morning keynote. He talked about marketplace lending’s next phase of growth – how we have moved from the era of rapid growth to one now of stabilization. He said that 24% of all personal loans issued in America last year were originated through an online marketplace. He talked about potential regulation and the fact that despite some negative press headlines regulators are in fact quite positive on this industry. He also shared that lending is showing the same trajectory as other industries such as music, travel and video that have been disrupted by new online players.

While we didn’t hear the typical big announcement from Lending Club this year Renaud shared that they would be making a major announcement of their entry into a new product category on June 13.

The first morning also saw the launch of the most comprehensive survey ever conducted in this industry that Ryan covered last week. Al Goldstein, the CEO of Avant, talked about the true innovation that marketplace lending has brought to financial services and how this innovation is different to anything that has come before it. Marketplace lending is resulting in not just a better deal for the consumer, but quicker access to funds and wider access to credit.

Ning Tang, the CEO of CreditEase, gave an optimistic perspective on the Chinese market. While he acknowledged some of the recent challenges by saying that bad guys can be very innovative and can do bad things at scale, he said that internet finance is critical to the future of China’s economy and that all finance will eventually be driven forward by technology.

One of the consistently negative stories in the last few months has focused around the declining valuations at Lending Club and OnDeck. LendIt addressed this head-on with a public markets panel that included some of the leading private companies in the industry: Kabbage, loanDepot, Avant and China Rapid Finance. Al Goldstein shared that what the industry really needs now is more companies to go public. While he didn’t commit his own company to go this route anytime soon he did not seem that concerned about valuation. The other panelists reflected similar views saying that equity investors over the long term will look at profitability, growth and increasing margins.

As always Ron Suber, president of Prosper, gave an eloquent presentation on the state of the industry today. He talked about what we have learned as an industry, some of the mistakes we have made and how we are addressing the headwinds the industry is facing today. He gave his perspective on where the industry is today and what we need to do to really go mainstream.

In the afternoon the conference split into 14 different tracks of content. There was so much going on covering so many topics that it was impossible to attend every session that you wanted. We also had some challenges with some overcrowded rooms with some sessions proving far more popular than we expected.

On the main stage in the first afternoon we had the second annual PitchIt @ LendIt, the startup competition featuring some of the best up-and-coming companies in the industry. Each company gave a five-minute pitch and answered questions from the judges who were all leading VCs and investors.

Day two began with the announcement of the winners of PitchIt @ LendIt: auto finance platform, AutoFi won the judges award while LogicFi won the audience choice award.

Peter Thiel Keynote LendIt USA 2016
Peter Thiel, Entrepreneur and Investor, giving the opening keynote on day two of LendIt USA 2016

 

Peter Thiel was the opening keynote speaker on day two and it was standing room only for his presentation. He gave a fascinating look at the very early days of PayPal; he talked about the importance of starting with a small market to quickly reach a large market share and he discussed fintech more broadly. Interestingly he said that banks have been focused on globalization and not technology and that they are not politically geared towards innovation.

After his keynote Peter sat down with Bloomberg West anchor Emily Chang to talk about China, unicorns, female entrepreneurs, bubbles, politics, Yahoo, education, the importance of Silicon Valley and more. Emily Chang also say down with Jackie Reses of Square Capital to talk about their innovative approach to small business lending.

We had Dan Ciporin of Canaan Partners give his perspective on where capital for this industry will come from in the future. Noah Breslow, the CEO of OnDeck, talked about collaboration with banks and why he believed that the smartest move for banks is to partner with online lending platforms rather than try to compete directly. He also announced that the Chase-OnDeck partnership has now launched. Sam Hodges, the managing director of Funding Circle USA, shared his belief that the marketplace model will eventually become the institutional framework of the global financial system and that his company would be originating $100 billion in loans annually by 2025.

There was a wide ranging discussion between Mike Cagney, CEO of SoFi and Telis Demos of the Wall Street Journal where they covered misperceptions about banking, why FICO is not a good fit for SoFi’s customer base, how student lending is broken and why wealth management is a logical extension for this industry. John C. Williams, the CEO and President of the San Francisco Federal Reserve, gave the last keynote before lunch where he gave his perspective on the innovations happening in fintech. He said that fintech can lower costs, improve services and provide broader access to credit. But he also issued a warning in that, while fintech can help the economy, it can also hurt those people it is supposed to help – he gave the example of redlining.

My 10 Key Takeaways from LendIt USA 2016

  1. Less exuberance is a good thing – the unbridled enthusiasm of previous LendIt conferences was replaced by a more realistic tone. While most people were still positive everyone acknowledged that the industry is facing headwinds today.
  1. The importance of diverse funding sources – this was a theme mentioned in almost every session it seemed.
  1. Regulators are cautious but generally supportive – regulators want to support innovation but are also focused on protecting consumers.
  1. The fast growth days are over – many companies expect much slower growth this year than in 2015 and that is not necessarily a bad thing.
  1. The easy money has gone – only solid companies with a defensible niche will attract funding today.
  1. Banks are no longer competitors – partnerships is the way forward as so many platforms have signed deals with banks with more to come.
  1. The public markets are notoriously fickle – the lower valuations of Lending Club and OnDeck were discussed in many sessions with no general consensus on the reason. Many did say that both companies are executing well but not being rewarded by the public markets.
  1. Credit expertise is more important than ever – with some investors getting nervous every company needs to show they have strong underwriting.
  1. Getting to positive cash flow is a high priority – no one talked about this last year but there was a sense from both startups and established companies that they need to show a clear path to being cash flow positive.
  1. The opportunity is still huge – This is where the tone was most upbeat. Most conference attendees agreed that the industry is still in its early days and that it will be much bigger in the future.

We recorded all the sessions on the main stages as well as the China Pavilion and the company demos. These videos are all available on the LendIt site now. Most presentations are also available here.

Next year LendIt will be back in New York City. We expect the conference to continue to grow so we have booked the Javits Center on March 6-7, 2017. If you can’t wait that long for the next LendIt we will be hosting LendIt China in Shanghai in July (along with a China tour) and LendIt Europe will be back in London in October.

Finally, I just want to do a big shout out to the LendIt team who all put in a huge amount of work over the last few months to put together our most successful conference yet.

The entire LendIt team after the completion of LendIt USA 2016
The entire LendIt team after the completion of LendIt USA 2016

Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech.

LendIt Fintech conducts three conferences a year for the leading fintech markets of the USA, Europe, and Latin America. LendIt also provides cutting-edge content all year long via audio, video, and written channels.

Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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Observer
Observer
Apr. 22, 2016 7:25 am

Where can I take the other side of the FC @ $100bn in 10 years trade? that is hilarious and exactly why this industry gets lambasted by many public investors

James O'Leary
James O'Leary
Apr. 22, 2016 9:36 am
Reply to  Observer

Time will tell, but the growth of the industry has been on a fast trajectory. The fact that 24% of personal loans are made by marketplace lending is impressive and the banks are all reporting lower revenue and profits. I look forward to a maturing of the industry with an emphasis on great credit underwriting and profit, not just growth.

J Patel
J Patel
Apr. 23, 2016 11:40 am
Reply to  Observer

I disagree as far as industry is concerned. Industry is fine, it has unique challenges to over come, but has great potential and bright future.

But in regards to FC and lofty goal, I am not so sure about it. My understanding is that FC at current size, cannot even meet investor’s obligation of on time delivery of documents. First adopt to best business practices FC!

sara
sara
Apr. 23, 2016 7:56 am

You realize that funding circle’s underwriting is terrible. They took a 60 basis point hit to their fund in December 2015 and have been scrambling to tighten their credit policies. Cluelesss-I’ll double down on the other side of that $100 billion in 10 years trade. Shorting LC and Ondeck has been like taking candy from a baby.

Surprised (not) that LC failed to mention that they were increasing their rates AGAIN at Lendit. Didn’t RL state in February that he didn’t see any credit quality deterioration???

sara
sara
Apr. 23, 2016 12:26 pm
Reply to  Peter Renton

Lawsuit ammo.

HG
HG
Apr. 29, 2016 5:01 pm

Peter – Just curious, is there any buzz on the secondary market topic during this year’s LendIt USA conference?

Sri Reddi
Sri Reddi
May. 4, 2016 1:46 pm

As an investor who uses this platform, my biggest complaint is how long it takes for a loan to go through, after my cash is committed to it. This must be tightened. Even mortgage financing companies don’t take this long. What could these lending clubs be possibly doing for weeks ? This is a huge negative for me and discourages me from investing more of my portfolio into a peer to peer investing company

Ck and pk
Ck and pk
May. 4, 2016 5:15 pm

As a Lending Club investor for almost 4-5 years now, and at times having +$500k invested in some 9-10 thousand hand picked loans, I have been able to manage a default and late payment adjusted average return of approximately 8.75% over this period. Overall, I’ve been happy with Lending Club, but have lately begun the long process of divestment. When I began investing 4-5 years ago, the advertised probability of a total loan default in a nine month timeframe, for loans presently in Grace Period was 23%. In other words, if a loan ever went into the Grace Period, then there was a 23% likelihood that loan would go bad within 9 months. Fast forward to present day, and that same Grace Period loan now has a 28% likelihood of pushing up daisies. The apparent push for loan growth at the expense of loan quality, and thus the investor, has been noticed by me and others.

At present, in my opinion, the number one incentive Lending Club has is to increase originations and thus its upfront fees, until retail investors begin to do the math and begin to squeal. (Or in my case leave.)

Of course, I would trust Lending Club’s underwriting much more if they had skin in the game. I bet if LL amortized their 5% origination fee over the first year of successful loan repayments, instead of taking it all upfront, underwriting quality would miraclously rebound.

For now at least, I’m beginning the process of voting with my feet.

I just wanted to share my anecdotal experience and perspective.