Lending Club, the popular online peer-to-peer lender that essentially cuts too big to fail banks out of the consumer lending dance, is spreading its wings—as per a recent press release issued by the company, Lending Club has added Indiana to the list of states (now 43 of them) where its services are available.
I recently spoke on the phone with Lending Club CEO and co-founder Renaud Laplanche, who is arguably one of the most influential people in financial services today, aside from obvious names like Jamie Dimon and Michael Corbat.
The firm's astonishing growth—"more than 90,000 loans, for a total of more than $1 billion since launching in 2007"—is an indication that online peer-to-peer lending is now a mature technology, and that Lending Club as a brand has managed to avoid some of the over-excitement stumbles of its competitors, opting instead for a more sober approach to rating and approving borrowers.
Laplanche confirmed that the company has a wide range of proprietary factors that go into judging an applicant's creditworthiness within the network, aside from FICO credit score.
He also sounded enthusiastic about the company's future in the mobile app space.
Although Lending Club isn't necessarily something that a Dimon or Corbat need worry about at this point, it does signal a paradigm shift in the way consumers are seeking out loans, in much the same way that a once-obscure YouTube shot to the forefront of online video and revolutionized the way consumers now watch—and share—visual media.
One drawback of peer-to-peer lenders, however, is that they seem to lack (thus far) the resources or motivation to draw in borrowers with tempting 0% introductory rates and cash back, as more traditional credit products such as credit cards are able to do.
If Lending Club aims to hit $2 billion in loan originations, or $3 billion, any time soon it might want to avoid becoming a lender of last resort. Consumers are notoriously fickle online and it may take more than a well-designed platform and "reasonable" rates to keep their attention over the long haul. But for now, Lending Club is the king of the P2P lending space, undoubtedly.
David blogs about personal finance and credit at Credit Card Outlaw.
Disclosures: Credit Card Outlaw features Citi accounts and products, including several of their consumer credit cards, and has a financial relationship with the bank; Outlaw may be compensated for clicks or referrals of such products. Their CEO is mentioned in this article. No financial relationship with Lending Club at time of publication.
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