How Lending Club differs from other online lenders
2016 was a difficult year for the San Francisco-based company loan club. Scott Sanborn, who took over as CEO and previously served as the company’s chief operating officer, took drastic measures to get the company back on track. In less than a year, Sanborn Cup and rehired 179 jobs and hired a new financial director, COO, General Counsel and head of the capital. Additionally, the company launched a new auto refinance product and an ininvestor mobile app, Lending Club Invest.
I sat down with Sanborn to learn more about Lending Club and how the company plans to grow beyond its current position as America’s largest personal loan provider through its online lending marketplace, where it connects borrowers and Investors.
Omri Barzilay: Since becoming CEO and leading the loan club after a difficult 2016, what are you most excited about moving forward?
Scott Sanborn: Next month will mark the 10th anniversary of the Lending Club. It’s really exciting to look back at all we’ve accomplished and the impact we’ve been able to have on people’s lives, knowing that we’re just getting started. We’ve built a dynamic and efficient marketplace that delivers affordable credit to borrowers and strong returns to investors, is resilient to diverse market conditions, and is scalable and expandable. For example, we are looking at ways to expand access to our assets to even more types of investors through new products and new distribution channels. And we’ve just launched a new app for our retail investors, giving them a simple way to manage their investment portfolios. For our borrowers, we continue to invest in our technology to improve our ability to deliver value and a great experience. Our most recent major product launch is auto loan refinance, where we save consumers an average of 2.5% or $1,300 over the life of their loan.
Barzilay: What does Lending Club offer consumers that consumers can’t find elsewhere?
Sanborn: Lending Club is a two-sided marketplace model where we are able to leverage technology to provide savings and a seamless online experience for borrowers and investors. We remove structural inefficiencies, providing retail investors with unprecedented access to consumer credit that has generated historic annual returns of between 5% and 7%. On the other side, borrowers come to Lending Club to get frictionless access to credit with lower rates than they can find elsewhere, reducing their rates by an average of 25% – that’s real savings. Nearly 75% of borrowers also say their FICO score increased by 19 points after consolidating debt or paying off credit cards, which can help put them on a better financial path.
Barzilay: Lending Club is one of the pioneers of p2p lending, but has moved to include more institutional investors. Are you still focused on the consumer and retail segment?
Sanborn: Absoutely. We are very committed and focused on our retail investors. Our mission has always been to democratize access to consumer credit, which was traditionally only available to banks and large institutions. Today, we have over 148,000 retail investors, more than any other online lender. Part of evolving our market is growing and balancing the mix of investors – having the right mix of investors strengthens our market and makes us more resilient, scalable and better able to serve a wide range of borrowers of all credit profiles. We continue to think about other ways to make investing even better for individuals. In fact, we just launched a mobile app, something we were excited to share as we know it will provide an even better and more valuable experience for individual investors.
Barzilay: How is Lending Club different from other online lenders and incumbent banks?
Sanborn: Our mission has been to transform the banking system to make credit more affordable and investing more rewarding. So everything we do comes from that goal and with the intention of providing a great experience for everyone who comes to our market. With 10 years of experience and incredibly powerful data and insights that inform us about our customers’ behaviors, choices and needs. We are also able to calibrate this data into our models to assess credit risk and better manage our market and the success of our borrowers and investors.
We also have an incredibly diverse base of investors funding loans on the platform, which uniquely allows us to expand access to credit. A traditional bank uses government-backed deposits to lend to spread and can only lend to a narrow range of borrowers. Our credit market attracts retail, asset manager, fund and bank investors, all with different risk appetites, to invest in loans across the credit spectrum so we can say yes to more of borrowers. Our diverse investor base also means that we are not dependent on any type of investor to fund our loans, so we have the flexibility to rotate funding channels to meet changing market conditions.
Barzilay: There are a lot of new players in the space. What do you think of the competitive landscape?
Sanborn: As a pioneer in online lending, we are pleased to see consumer demand driving industry growth. Lending Club has been competing with banks and new entrants enabled by new technologies for some time – competition is not something new.
Barzilay: What do you see as the biggest challenges and how do you plan to overcome them?
Sanborn: We are very focused on evolving our platform to continue improving our customer experience. Lending Club has become a leader through constant innovation, exploring new efficiencies and seizing new opportunities in changing market conditions. As the industry and markets continue to evolve, we rise to the challenge of evolving our platform, our business and our team. This way, we will have the strength and the foundation to continue to lead for the long term.