It’s Too Late to Start Building an Online Lending Platform, OnDeck’s CEO SuggestsApril 16, 2016 | By: Sean Murray
If you’re looking to enter the online lending market, you really only have three choices, said OnDeck CEO Noah Breslow, build, buy or partner.
At Lendit, Breslow admitted that OnDeck’s original concept back in 2007 was to create a small business lending platform for banks. Unfortunately they weren’t ready for online lending at that time, he told the crowd. He referred to the 2007-2010 era as the “low awareness” phase of online lending which was followed by the “skepticism” phase. Today, the industry is in stampede mode, he said.
Because of that, it’s probably too late to build a platform he suggested.
“What’s really unique about online lending is okay, let’s say you’ve built something and then you want to bring it live, you still have to lend and learn. You can’t deploy a billion dollars on day one. So once the technology is live you have to create vintages of loans that perform, refine your credit models, and so when are you going to be at scale in that business? It might actually take you several years to execute the build and then to scale up your actual loan volume.”
And while the merits of buying an existing platform might seem obvious, it’s not always so easy.
“On the buy side, clearly it’s expensive as well. There’s integration risk and maybe there’s pros in that you get more control over these platforms, but we haven’t seen any of that really happen at this point, and I think the expense of it is a major reason why. Which leaves you with partnering.”
Breslow added in regards to partnering, “that’s what we think to be the dominant form of collaboration”
Watch his full Lendit speech below:
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.