Marketplace Lending
Lending Club Reveals Q4 Figures, $146 Million Loss for the Year
February 15, 2017
The year that shook the industry ended six weeks ago but the total damage wrought is just now coming out. Lending Club lost $146 million in 2016, $32 million of which can be attributed to Q4. But it didn’t end all that badly according to CEO Scott Sanborn.
On the earnings call he said, “our attention was focused on rebalancing our funding mix, a key step to bolster our resiliency and enable a return to growth. We set a target to help our bank partners close out their rigorous diligence, so that they could return to scale. I’m pleased to say that our efforts have paid off as not only are all of our key bank investors back buying on the platform, but we’ve also welcomed multiple new bank partners over the last few months.”
And so they’re feeling quite optimistic. “It’s an exciting time for Lending Club and I look forward to beginning the next phase of our growth,” Sanborn concluded before turning the call over to new CFO Tom Casey.
Casey went on to predict that the company would lose another $69 million to $84 million in 2017, with nearly half of that expected to be generated in the first quarter of this year.
In brighter news, the company celebrated the 10th year anniversary of their first loan and surpassed more than $25 billion in loans since inception. With close to 2 million customers-to-date, that would mean that nearly 1% of the adult population in the US has had a Lending Club loan.
Less than 10% of their loan volume is comprised of education and patient finance loans, small business loans, and small business lines of credit, according to their report.
The LendIt Story
February 12, 2017![Jason Jones](https://debanked.com/wp-content/uploads/2017/02/BoBrustkern-1024x1024.jpg)
The LendIt Conference was supposed to be a smallish local meetup for New York-based members of the online lending community. But founders Jason Jones and Bo Brustkern soon discovered they had the makings of a big annual industrywide national convention. And before long, they found themselves replicating their successful American show on other continents.
To understand how the trade show was born and how it’s matured, flash back about seven years. In 2010, Jones and Brustkern were putting together venture capital deals when they happened onto the fledgling peer-to-peer lending movement. “Consumer credit was something we weren’t all that knowledgeable about, but we could see the market was large,” recalls Jones. “There was a clear opportunity that was structural in the market, and there were stable, consistent returns.” So the two of them launched one of the first P2P funds.
Their lending business soon took off, but Jones and Brustkern felt they were working in a void. The industry lacked community, and they decided to do something about it. Jones contacted his friend, Dara Albright, who had been organizing a series of crowdfunding conferences for Wall Street starting in mid 2011.
To heighten the credibility of the new confab, Jones, Brustkern and Albright decided to seek the help of Peter Renton. They didn’t know Renton personally but considered him “the voice of the industry,” Jones says. Renton had nurtured and sold off two printing businesses and used the proceeds to take up online lending as a hobby. He had also launched the Lend Academy in 2010 to teach the world about peer-to-peer lending. Somehow, he had also found the time to develop a following for himself as a blogger.
In early January of 2013, Jones and Albright cold-called Renton to gauge his interest in putting on a show. As fate would have it, Renton had just made a New Year’s resolution to launch a conference for lenders and was receptive to joining up. Together, they put a plan in action.
The originators put up their own money and worked together daily from January to June of 2013, when the first show convened. They secured space that would contain 220 people and calculated their break-even point as 200 attendees. “This was never intended to be a profitable enterprise,” Jones says of those early days. “This was something we all wanted to do for the community. We thought that if we wanted it, others would want it.”
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More than 400 people registered for that first conference. “We had a line literally out the door,” Jones notes. “We had to shut off registration. We ended up squeezing about 375 people into that first event. It was completely shocking to us.” From the beginning, attendees came from all over the world. “That’s when I learned China had a P2P industry,” Jones says.
After the initial event, Jones, Brustkern and Renton formed a unified company. Renton brought in Lend Academy, while Jones and Brustkern added their investment fund. The conference also became part of the united company. Ever since, a holding company has owned all three businesses. Dara went on to launch Fintech Revolution TV and continues to support LendIt.
From the initial attendance of 375, the U.S. conference grew to 975 attendees in 2014, 2,500 in 2015, 3,500 in 2016 and a projected 5,000 for this year. About 33 percent of attendees come from the fintech industry, 23 percent are investors, 23 percent are service providers, 14 percent are banks and 2 percent come from government, the media and other backgrounds, Jones says. At first, many of the attendees come from the ranks of CEOs and managing partners, but that’s changing as the industry comes to view the conference as an annual convention where lower-ranking members of an organization can learn about the business, he notes.
![Javits Center NYC](https://debanked.com/wp-content/uploads/2017/02/javitscenter.jpg)
Meanwhile, the exhibition floor is becoming an increasingly important component of the show. The gathering attracted 18 exhibitors in 2013, followed by 47 in 2014, 112 in 2015, 177 last year and an expected 210 this year. “We’re transforming from a conference-led event to an expo-led event,” Jones says. This year, exhibitor booths will occupy a 120,000 square-foot hall in New York’s Jacob K. Javits Convention Center.
The U.S. LendIt conferences alternate between San Francisco and New York City, renting larger spaces as the show has grown, Jones explains. Two years ago, the gathering seemed cramped in the gigantic New York Marriott Marquis near Times Square, he says, necessitating this year’s move to the Javits Center. Javits is designed for conventions with at least 10,000 attendees so the show is a little small for that venue, he admits. But the facility could become LendIt’s long-time New York home as growth continues, he predicts.
Jones traces some of the growth in exhibitors to the expansion of the fintech industry. “You have a meeting of the start-ups with the more traditional players who are rethinking their businesses and how to apply the new technology that’s being developed into their businesses,” he says.
Conferences that compete with LendIt in the fintech category are proliferating because of the nature of industry, in Jones’ view. As soon as fintech companies are launched, the internet quickly makes them national or even international in scope, he says. At the same time, the anonymity of cyberspace creates a need for gatherings that provide face-to-face meetings, he maintains. “They live online,” he says. “The spend their year online so there is a need for a convention to meet with their peers, their clients, their service-providers, their customers, their suppliers. There is a need for that physical connection.”
The increase in fintech conferences is also driven by content-related companies that provide articles on fintech innovation. Those sites have regarded conferences as money-makers that complement their journalistic endeavors, Jones says. For example, TechCrunch, an online publisher of technology industry news, puts on the TechCrunch Disrupt conferences in San Francisco, New York City, London and Beijing. In another example, Business Insider conducts the IGNITION conference.
Those forces – the internet, globalization and web-based publishing – are making themselves felt in the convention business in general, not just in fintech, Jones notes. Event-related companies trade at roughly 12 times EBITDA (earnings before interest, tax, depreciation and amortization), he says, characterizing the convention business as “a very healthy category of our economy.”
Still, the fintech field’s crowded with more than 30 conferences, but LendIt is succeeding because of its early start and an emphasis on community, according to Jones. “We come from the industry,” he contends. “People are happy with what we can produce. They love our content so they come to learn.” Because the conference has become established, the media outlets focus on covering it, which encourages businesses to use it as a stage for introducing products or announcing mergers and acquisitions, he maintains.
Jones views LendIt and Money20/20 as the largest pure-play fintech conferences. The latter, which attracts 11,000 attendees, focuses on payments and contains a “layer” of fintech, while LendIt specializes in lending and likewise offers a “layer” of fintech, he says. Payments and lending represent the two biggest categories in fintech, so the structure of the shows makes sense, he suggests. By chance, Money20/20 occurs in the fall and LendIt takes place in spring, creating what he considers a “nice balance” that encourages prospective attendees to go to both shows.
Finovate holds a rival fintech conference that focuses more narrowly on innovation than do the LendIt and Money20/20 shows, Jones says. A competing bank securitization conference offers information on lending but doesn’t address fintech in great detail, he says.
![LendIt China](https://debanked.com/wp-content/uploads/2017/02/IMG_9204-1024x675.jpg)
While LendIt has been coming of age in the U.S., it’s also gained siblings in Shanghai and London. The Chinese edition of the show, which made its debut in 2014, ranks as the largest fintech show in Asia. The Chinese fintech market has grown to at least five times the size of any other market in the world, and it’s home to four of the world’s five largest fintech companies, Jones says. “We were completely blown away,” he says of learning about the industry during a visit to China.
Despite the language barrier and the challenges of dealing with an unfamiliar culture, LendIt has managed to prosper in China. Through a joint venture with a local financial think tank, LendIt helped produce annual Chinese events known as the Bund Summit for two years with attendance capped at 500. For the third year, LendIt parted ways with its partner and recast the show as a larger event. After the change, the confab, now called the Lang Di Fintech Conference, attracted 1,200 attendees, making it China’s largest. “There’s a ton of future opportunity,” Jones predicts of the China endeavor. “We want to be the annual convention for the Chinese fintech industry.”
Although it’s difficult to set up operations in China, cooperation has prevailed there in at least some areas. “The government has been quite supportive,” Jones says of of Chinese officials. “They appreciate what we’re trying to do there.” In January, LendIt launched its Chinese language daily news feed.
Thousands of miles away, the European-based LendIt confab ranks second in size on that continent only to the European version of Money20/20, Jones says. Attendance at the London-based LendIt show numbered 450 in 2014, which was its initial year. It climbed to 800 in 2015 and reached 925 last year.
Putting on the European event requires much less effort than the Asian version because it’s almost an extension of the U.S. original, he says. It’s dominated by firms from the United Kingdom but draws a smattering of companies from other European nations. Crossing borders presents challenges for European fintech companies, which keeps the industry’s companies smaller there than in the U.S. and China, but that may change, he believes. “There’s a lot of innovation there, but they still have a ways to go,” he says.
To handle its far-flung operations, LendIt relies on 20 full-time employees, 11 contractors and 10 people working in a joint venture in China for a total of 41 staff members. “These events are incredibly large shows, and we constantly feel understaffed,” Jones says. That feeling prevails despite recent additions to the staff, he notes.
And additional opportunity beckons in myriad locations. “The challenge is, do you have a bunch of conferences all over the world, or do you do a beachhead and pull people to those three events?” Jones wonders aloud when asked about the future. “For the moment, we have made the strategic decision to stick with these three events and go deeper with them. But there are so many opportunities all around the world. We’re constantly being asked to come to different countries.” Then, too, LendIt could convene smaller, one-day events around the glove as feeders to the three main conventions, he allows. “That’s something we’re batting around now.”
The established two-day conferences could also grow into three-day affairs – but not right away, Jones suggests. “We’re totally running out of time,” he says of trying to cram in all the speakers and exhibitors that LendIt would like to present. Stretching the format could create conflicts because some participants attend other events immediately before or after LendIt.
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Notable LendIt speakers have included Larry Summers, who’s served as Harvard president and U.S. Treasury Secretary; Karen Mills, former administrator of the U.S. Small Business Administration; John Williams, president and CEO of the Federal Reserve Bank of San Francisco; and Peter Thiel, venture capitalist and member of the Trump transition team. This year, attendees can look forward to meeting the robot that represents Watson, the IBM computer. Watson will take the stage to field questions about fintech. For Jones, however, creating a conference isn’t just about the big-name speakers be they human or mechanical. “People who are lesser-known can be really fascinating,” he says.
Whoever handles the speaking duties, the LendIt Conference executives vow that they’re in it for the long run as the fintech industry’s annual convention during both boom times and economic slumps. As Jones puts it: “We want to be a reflection of our industry.”
deBanked Begins 2017 With Thickest Magazine Issue Ever
February 8, 2017Forty-eight pages. That’s how thick deBanked’s January/February 2017 edition is. As the wider industry heads to the LendIt Conference in NYC next month, we decided it was only fitting to feature the city that never sleeps on the cover.
This issue delves into Equity crowdfunding, the story behind the LendIt Conference, and what it’s like to actually be a merchant getting a business loan from one of today’s fintech lenders. There’s more of course, so if you’re not already subscribed, you’ll want to make sure to do that now so that you receive this and future issues FREE.
deBanked’s chief editor Sean Murray is a LendIt awards finalist for best journalist coverage. And while there are already 30 pre-selected judges who will decide the outcome, we would like to thank everyone that has supported us and made our publication possible.
In the meantime friends, stay fresh, stay fintech, stay deBanked. The future of finance depends on it.
We’ll see you at the Javits Center for LendIt on March 6th and 7th. If you join the Small Business Lending track, you’ll actually be able to grab a copy of this issue at the conference.
Former CIO of the CFPB and FinTech Entrepreneur Joins FinMkt’s Advisory Board
January 31, 2017New York City-based FinMkt, a leading provider of marketplace technology solutions for the financial services industry, today announced the addition of Tim Duncan, a seasoned financial technology entrepreneur and innovative leader, to its Advisory Board. Tim brings an impressive roster of experience, including serving on the executive launch team for the U.S. Consumer Financial Protection Bureau as its Head of Technology and CIO. Tim will advise FinMkt’s management team on strategy and product development
Tim’s expertise and experience combine technology, finance, and law. In the late 1990s, he founded a startup that pioneered the use of the Internet to deliver market data, research, and news to senior executives, analysts, and investment managers, and later sold the company to Thomson Reuters. He then served as President of Thomson Interactive, where he was responsible for leading the digital transformation of the $5 billion global data and information company and spearheaded the initial design and development of ThomsonOne, a digital platform that generated hundreds of millions in revenue.
Tim then served as a government and public policy advisor, working closely with then Governor of Massachusetts, Mitt Romney. He also founded and led the American Business Leaders for Financial Reform in support of the Dodd–Frank Act and worked closely with Elizabeth Warren on strategic outreach and communication to the business community. Tim participated in the review, drafting, and negotiation sessions on the text of Dodd–Frank legislation and was present when President Obama signed the Dodd–Frank Act into law.
Tim was recruited by Elizabeth Warren, then Special Assistant to the President of the United States, to join the executive team tasked with launching the CFPB on time and on budget. As Head of Technology and CIO, Tim led technology strategy, planning, and implementation for this inaugural federal agency in the digital age with a budget of $500 million. Under his leadership, the agency implemented an agile, lean process to document, budget, approve, and prioritize technology projects and also became the first federal agency to utilize scalable commercial cloud services while increasing staff from 50 to 500 in an 18-month period.
Tim’s most recent endeavor has been as recipient of a Ford Foundation grant to develop and launch a national social impact project enabling low- and moderate-income families to practice better financial decision-making toward homeownership.
Commenting on Tim’s impressive record as an entrepreneur, technologist, and innovative leader, FinMkt CEO Luan Cox stated: “ We are thrilled to have Tim join the team. His deep passion and experience for fintech and the online lending space will help FinMkt continue our rapid growth .“
About FinMkt
With offices in New York City and Hyderabad, FinMkt provides best-in-class, customizable online marketplace technology for the global financial services industry. We help organizations rapidly deploy marketplace solutions in a timely, cost-efficient manner while ensuring the highest quality technology and client support. From customer acquisition to product matching to tracking and reporting, our secure, patent-pending technology solutions are the gold standard of the financial marketplace ecosystem. FinMkt’s industry-leading platform and applications drive innovation, accelerate processes, and expand opportunities for growth in the financial services arena. For more information, please visit us at http://finmkt.io/ or email us at info@finmkt.io.
Introducing LendingRobot Series: One-Stop Investing in Alternative Lending
January 26, 2017January 26, 2017 – Seattle, WA – LendingRobot, the first robo-advisor for Alternative Lending built for individual investors, announced today the launch of robo-fund LendingRobot Series. Designed as an alternative to traditional fixed income investments, LendingRobot Series is a one-stop solution that combines cloud-based investment automation, fully transparent fund secured by Blockchain technology and sophisticated machine learning algorithms to provide superior, predictable returns uncorrelated to stock market performance.
LendingRobot Series is a unique combination of a robo-advisor and an investment fund, created as one-stop solution for accredited investors looking for a way to easily invest in consumer, small business or real-estate loans diversified across multiple ‘peer lending’ origination platforms.
“Alternative lending proved to return excellent performance and with new origination platforms growing quickly comes the opportunity to diversify further. But fragmentation makes investing even more complex for individual investors” said Emmanuel Marot, CEO of LendingRobot.
Unlike a traditional fund, LendingRobot Series improves liquidity, is flexible with regards to loan selection, and 100% transparent. Investors decide what kind of risk and time horizon they want, and LendingRobot automatically manages their investments.
Hedge Funds typically charge management fees of 2% plus 20% of performance, plus obscure or unlimited fund expenses, which makes their expense ratio disproportionate to fixed income returns. In contrast with traditional investment firms, LendingRobot Series only charges 1.00% of assets under management, and caps fund expenses at 0.59%.
“Turmoil within the past twelve months among some of the largest origination platforms showed that ‘platform risk’ is real, and left many clients increasingly worried about investing only in unsecured consumer loans despite the fact that the returns have remained steady,” continued Mr. Marot. “All investors would be well served by diversifying into multiple marketplaces, but that process is tedious, complicated, and requires a high degree of domain expertise to accomplish correctly. That’s why we’ve created LendingRobot Series: to provide investors that understand the value of investing in Alternative Lending with the confidence that comes from intelligent automation, easy liquidity, and complete transparency.”
LendingRobot manages investments across four different Series, with target maturity going from 20 to 36 months, and net returns up to 9.66%. Investor’s money is converted in Units of ownership in these Series, that are issued on a weekly basis. By default, loans payments keep being re-invested and the Units value increases. LendingRobot publishes every week a detailed ledger of its holdings, down to the value and individual payments made by each note.
A ‘Hash code’ signature of the ledger is integrated in the subsequent versions as well as notarized in Ethereum’s Blockchain to ensure the data is tamper-proof.
To ensure maximum safety, assets are hold in a bankruptcy protection vehicle, with no other liabilities than its investors.
Investors willing to cash simply flip a switch on the LendingRobot website to start redeeming their Units on a weekly basis. Between 33% and 100% of loan payments are distributed in priority for redemption, which means that under normal circumstances investors should be able to cash out entirely in less than 3 weeks.
Investors interested in learning more about LendingRobot Series can visit www.lendingrobot.com/series.
About LendingRobot:
LendingRobot is a fully automated investment service for alternative lending platforms including Lending Club, Prosper and Funding Circle. After signing up for a LendingRobot account, investors select their risk tolerance and enable LendingRobot to instantly make investments on their behalf. Based in Seattle, Washington, LendingRobot serves 6,500 clients totaling over $120M in assets.
This So-Hot Robot Is Launching a Marketplace Lending Hedge Fund
January 26, 2017LendingRobot has come a very long way since I first connected with them two years ago. Back then, CEO Emmanuel Marot was simplifying access to marketplace lending for individual investors by automating the decisions and executions. A year later, they were the first in the industry to introduce that technology via a mobile app. As someone who has used their service for a long time, one thing was always the same, the company helped you invest and monitor performance but they didn’t have custody of the actual money.
That’s all changing with the announcement of their new hedge fund (“LendingRobot Series“), which will actually be separate and only open to accredited investors. The fund is managed by LendingRobot’s robo-advisor technology which scores, invests, and even manages secondary market activity without any need for human advisors. Basically the robots are doing the heavy lifting and they’re only investing in loan marketplaces such as Lending Club, Prosper and Funding Circle. Because of that, the fund only charges 1.00% of assets under management, and caps fund expenses at 0.59%.
The way Marot tells it, they’re taking the mystery out of a hedge fund. There’s no “black box,” he says. Instead, the fund uses Blockchain technology to deliver a public, unalterable ledger, so that LendingRobot Series investors see exactly which loans the fund is invested, where the defaults are, and exactly what the costs are across the fund.
One of the biggest allures of investing in marketplace loans in this fashion is the liquidity offered. Investors don’t need to wait 3-5 years to wait for the loans to fully mature to take their money out. Investor money is converted to Units of ownership in these Series that are issued on a weekly basis. By default, loans payments keep being re-invested and the Units value increases.
Marot said that the company only has 7 employees, yet they’ve managed to rack up more than 6,500 clients (myself among them) for their original service and have helped those clients deploy more than $120 million in assets along the way. They claim that they’ve been able to improve returns in alternative lending by more than 2.5%.
Founded in 2012, the company raised $700K in seed funding and $3M series A from Runa Capital.
As mentioned, LendingRobot Series is available to accredited investors only, and they’ll initially only allow 99 investors to participate in the fund with a minimum investment amount of $100,000.
Why Funding Circle Exited Spain
January 24, 2017Funding Circle operates in the US, UK, Germany, and the Netherlands. Up until recently, they also counted Spain among its active European markets, but no longer. The timing is curious, right after the company raised $100 million through a round led by Accel, but upon a closer look, Spain was never really their thing to begin with.
“We inherited Spain following our acquisition of Zencap in 2015,” Funding Circle Samir Desai said. “We decided to pause new lending in June last year and we have now taken the formal decision to stop all new loans for the foreseeable future. We continue to invest in Europe in Germany and the Netherlands where we are growing fast, and expect to enter more countries in the future.”
Zencap was once said to be the fastest growing online lending marketplace in Continental Europe. In August 2015, Victory Park Capital had agreed to invest up to €230 million in loans originated by Zencap over a three year period. Funding Circle acquired them a mere two months after that, inheriting their operations in Germany, Spain and the Netherlands.
“Funding Circle will continue working on behalf of all investors to service the existing loan book,” the company said. “In total €16 million of loans have been completed in Spain, which is approximately 0.1% of cumulative global originations. Alternative roles in the company have been offered to the team and the company will retain part of the team to service the existing loans.”
Ryan Weeks of AltFi, wrote of the decision to exit Spain, that it was a combination of limited awareness around P2P lending there and low quality loan applicants.
With more resources at their disposal now to focus on Germany and the Netherlands, the company also announced two new senior appointments. Thorsten Seeger has joined as Managing Director for Germany and Belkacem Krimi has joined as Chief Risk Officer for Continental Europe. Thorsten Seeger joins from Lloyds Banking Group, where he was Head of Financial Markets for SMEs and was responsible for driving and delivering access to financial markets for small businesses. Belkacem joins from GE Capital and brings extensive experience in credit risk and operational risk management, developed over 17 years across multiple countries in Europe and Asia. In his last role, he was the CRO for GE Capital France, based out of Paris – managing risk for over $10Bn consumer and commercial assets.
Desai, of Funding Circle, said, “We’re delighted to welcome Thorsten and Belkacem to the team. Both are hugely talented and have extensive experience and understanding of small business lending across Europe.”
But for now, it’s Adios to Spain.
The NYDFS Opposes Fintech Charter Proposed by the OCC
January 19, 2017New York State regulators are not happy with the OCC’s willingness to grant bank-like powers to non-banks in the fintech movement.
“NY DFS disputes the OCC’s claim that it has the authority under the National Bank Act for this proposed new charter,” a letter by Superintendent Maria Vullo states. “Nonbank financial institutions are not banks nor are they similar to the entities encompassed by the National Bank Act.”
The letter goes on to make many points, one of which is the reminder of New York’s state sovereignty and another is the argument that such a regulatory experiment would lead to a financial crisis.
The letter follows similar concerns by Democratic members of Congress.