Can you tell us a bit about your personal background and what led you to the initiative of launching the Lend Academy? Who are its members?
I have been an entrepreneur most of my adult life and, after I sold my second company, I started looking for investment alternatives. This is when I stumbled across LendingClub. I was passionate about the P2P lending industry, and, noticing that no one was really writing about the space back then (this was 2010), I saw it as an opportunity to start investing my own money and writing about my experiences on Lend Academy.
Initially, Lend Academy readers were all individual investors like me. Over time, we have evolved to serve institutional investors in P2P lending and, currently, we serve a broad cross section of fintech enthusiasts but still with an emphasis on lending.
What are some of the recent trends in the P2P world that investors should keep an eye on? What other trends do you see on the horizon especially concerning identity management, KYC/AML, fraud, and how will new technologies have a significant impact on this industry?
P2P lending has definitely grown beyond its consumer lending roots. Today, investors can build a diversified portfolio of consumer loans, small business loans and real estate loans. For accredited investors there are even more options with invoice financing, litigation finance and even marine finance is now available.
Around identity management I think we are at the beginning of a sea change in all of fintech, not just P2P lending. We are seeing a movement away from traditional personal identifying information to more biometric based identification. If you’re looking down the road, that combined with looking at a user’s entire digital footprint for authentication will vastly reduce fraud. We are also seeing some interesting blockchain applications around decentralized and trustless system but nothing has gained a lot of traction yet. But watch this space.
How does open banking change the P2P lending landscape?
Open banking is a huge opportunity for fintech platforms. What it really is about is giving customers control over their own financial data. What this will mean is that the financial institution with the best user experience will be able to attract customers. The fight is on for what company will be central to our financial lives. There are certainly P2P lending companies vying for that spot, but, to be successful, P2P lenders have to be about more than just a lending product, they need to become the central financial tool for their customers.
Are there opportunities for cryptocurrency to transform the lending industry? If so, what are the risks of crypto lending?
Cryptocurrency has the ability to transform the lending space, but we are in very early stages of any possible transformation. There are companies like SALT Lending, ETHLend and Celsius Network providing loans backed by crypto assets and that is definitely filling a need. But the more interesting idea is from Figure, Mike Cagney’s (former CEO of SoFi) new company. He is planning on moving the entire lending process to the blockchain, everything from origination, funding, payments to the trading of the loan – everything happens on the blockchain. That is an idea to keep an eye on.
What is the role of P2P lending in financial inclusion?
Scott Sanborn, the CEO of LendingClub, laid down the challenge earlier this year at LendIt Fintech USA. He explained that all companies, including P2P lending platforms, need to do a better job at improving consumers financial health and bringing more people into the financial system. The breakthroughs in underwriting for online lending have already meant that millions of people around the world have been able to obtain a loan for the first time. But more needs to be done in this area, particularly for those people who are classified as subprime borrowers and P2P lending can lead the way.
In your opinion, what is the role that traditional banks can play in the P2P lending space and how can they get there?
There are many ways that banks can get involved in P2P lending today, as follows:
Investing in the loans: banks have been investing in the loans of P2P lending platforms for over five years now. At LendingClub banks are now responsible for more than USD 1 billion in loan investments every quarter.
Lending-as-a-service: many P2P lending platforms such as Upstart, Avant and Fundation in the US are powering the online loan operations of banks giving them a new way to obtain customers.
Equity investing: the VC arms of many banks, SunTrust, Barclays, Santander, and Citi, for example, have made equity investments in platforms.
Acquisitions: some banks have acquired online lending platforms as they look to create their own online loan origination engine.
Build their own platform: while this has nothing directly to do with P2P lending but some banks such as Goldman Sachs, PNC, RBS and Barclays have built their own lending platforms using the best practices championed by the P2P lending industry.
Banks have long played a central role in lending and that will continue. However, P2P lending has forced banks to look at their business model and adapt to a new online world. Before P2P lending came along, no bank offered an online channel for loan origination, today it is common place.
How is LendIt Fintech Europe positioning itself in the current lending landscape now, 4 years after the inaugural edition in 2014? What are the main hot topics that will be brought into question this year?
This year will mark our fifth annual LendIt Fintech Europe event. In that time the P2P lending industry in Europe has matured from very much a fringe industry to a mainstream part of finance. LendIt Fintech Europe has helped to lead this maturation as digital banking and P2P lending come together. We have seen P2P lending platforms such as Zopa apply for banking licenses, we have seen digital banks offering loans on their own platform often in partnership with P2P lending platforms. This is a hot topic that we will touch on in some depth at LendIt Fintech Europe 2018.
Other hot topics that will be prominent this year include the rise of blockchain technology in financial services, trends in digital identity and anti-fraud, the latest in lending innovation, financial inclusion, artificial intelligence and data analytics, as well as the evolving regulatory environment in Europe.
About Peter Renton
Peter Renton is the founder of Lend Academy, the leading news and educational resource for the marketplace lending industry. He has been writing about this industry since 2010 and he is the author and creator of the Lend Academy Podcast, the first and most popular podcast on lending and fintech innovation. He is considered one of the world’s leading experts on marketplace lending and speaks regularly on the topic at industry conferences. He is also the co-founder of the LendIt Conference, the world’s first and largest conference series dedicated to the fintech and online lending industries.
About LendIt Fintech
LendIt Fintech is the World’s Leading Event in Financial Services Innovation. LendIt Fintech hosts three conferences per year in the USA, Europe, and China. These events bring together every major fintech, blockchain, lending and digital banking companies from around the world. Professionals in the financials services industry come to learn, network and do business.
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