Prime Meridian Capital Management is a Bronze Sponsor at LendIt USA 2017; in this featured blog post they give a review of marketplace lending in 2016; a challenging year for the industry, lending volumes and confidence retreated for one of the first times in the industry's history due to rising rates and an executive scandal; the release of Lending Club's CEO and Founder Renaud Laplanche added increased incentive for improving operations and increasing transparency which led to recovery in the second half of the year; a number of platforms, including Lending Club, secured new sources of funding and introduced new product expansion; the top three P2P platforms ended the year with combined originations of $2 billion per month and momentum for continued growth appears to be positive for the industry in 2017. Sponsored Blog Post
LendIt USA 2017
Online lenders don't have a deposit base to lend out money, so they need to look at different forms of capital sources and Paul Fielding of SoFi talked about these options at LendIt USA 2017; they break up the investor pool into a few different buckets; investors looking to buy whole loans, their securitization shelf that has thus far done over 20 securitizations and direct capital from banks; understanding the right fit for the right investor and how that fits into the capital buckets is the key; while taking questions Paul discussed the recent formation of 1940 Act funds and believes the likes of BlackRock and AllianceBernstein could move into the consumer whole loan market as pensions begin to look at playing in the space; he also talked about the ABS markets being fickle, but in his view all markets are fickle as investors look at their allocation strategies. Source
In 2016 the online consumer lenders had an unexpected downturn; platforms experienced a capital markets crunch as well as concerns over credit quality; this panel with some of the largest consumer online lenders explores their expected growth going forward; despite the pullback, the major lenders continued to underwrite a significant amount of loans and believe growth for their businesses will return albeit in a more measured way; panelists discuss changing platform strategies and the focus on profitability. Source
APIs combined with banking has become an important topic for banks and fintech companies; we are seeing increasing interest in APIs as every bank has to have an API or open banking strategy; since APIs often need to be built on legacy infrastructure there are often many challenges involved; the panel has a wide variety of perspectives from API service providers to banks who share how to build APIs on traditional banking technology. Source
At LendIt USA 2017, Lang Di CEO Gabriel Hai hosted a panel themed how fintechs are changing the way that Chinese people bank; one approach is to use big data technology to reach the individual credit market; panelists agree that China's fintech platforms are more willing to cooperate with traditional banks, as the banks have a more friendly regulatory environment and sufficient cheap money, whilst platforms are at advantages of bringing new technologies to the cooperation; however, Zhou Xinming, CEO of Hexindai, pointed out that China's fintech companies' customer base is more of individual investors rather than institutional investors, and the former are still not financially sophisticated. Source
Rachel Schneider discusses a new way of thinking about the financial lives of Americans; suggests that many of the models are out of date; Schneider worked with a research project called US Financial Diaries which worked with 235 families to learn about every dollar that they spent, borrowed, saved, earned, and more; through the research they understood these families on a much deeper level to understand the 'why' behind financial decisions; Schneider shares many interesting data points including income and spending spikes in the lives of Americans; highlights the opportunities for fintech companies in the US. Source
Over 50% of Americans can not afford an unexpected expense of $400; at LendIt USA 2017 we hosted a fireside chat focused on helping Americans save; a key area that companies look at is an individual's spending as a way to help change their behavior to save more; round up from the everyday coffee you buy or set goals through your lifestyle; each way can help individuals to better set aside money when needed, as well as invest for the future; technology today allows for companies to better help individuals who thought they were left out of the investment community; the chat also focused on why they believe as a startup they can help to solve the financial inclusion question as opposed to the incumbent banks; the discussion also touched on the future of their businesses, current partnerships with top consumer brands and potential add ons for their current product offerings. Source
Providing credit to the underserved is something a lot of companies attempt to achieve; 138 million people in the US need access to credit and most of these individuals are concentrated in nine states; when it comes to credit there isn't a lot of options for non prime consumers; at LendIt USA 2017 James Gutierrez of Insikt discussed expanding access to credit where the consumer gets a personal touch to their experience; at his previous firm James offered face to face loans in Latino supermarkets to the underbanked; his experience there allowed him to bring that personal interaction to a digital platform without losing the intimate feel; Insikt is able to scale in a quicker fashion but still provide credit where the consumer knows they are getting an option that suits their needs. Source
Regulation in the US is far different than in China; CredEx is a Chinese company that shares the state of regulation there; Jo Ann Barefoot shares her perspective on regulation in the US, having spent most of her career working in consumer protection and financial inclusion; she believes that we have produced a regulatory system that has high cost and low value which has left consumers confused by products; while not discounting the importance of regulation, Barefoot shares that fintechs can do more to further goals around financial inclusion than regulation can; one area where the US is lagging behind much of the world, specifically China is in mobile adoption and regulators in the US are struggling to keep up as technology quickly changes. Source