It has been a very busy couple weeks since the Lendit Conference on June 20th, but a recap is still in order, since I believe we will look back at the event as a watershed moment for the Direct Lending space (aka Peer to Peer Lending). First, the energy at the conference was amazing. There was an infectious optimism everywhere as if we were at the center of a radical shift in the Financial Services space. It reminded me of when Real Time Bidding (RTB) was created in 2008, and the Online Advertising Market turned the industry upside down overnight .
The conference was extremely well attended. Peter Renton and Dara Albright turned away many people who hoped to get in last minute. Overall, it was difficult to get a seat in the main conference room for most of the day.
Luckily, I was able to squeeze into the opening keynote by LendingClub CEO Renaud Laplanche. His speech was focused on “Transforming the the Banking System” and included a history of innovation and pointed out that often innovation has come from outside the traditional Banking system (Credit Card, ATMs, Mobile Payments). Also newsworthy was LendingClub’s partnership with Titan Bank and Congressional Bank, which points to a future where banks became investors on the Lending Club platform and walk away from originations and collections.
After the keynote, I spent time connecting with exhibiting exchanges (Fundation, SocietyOne, Funding Community, Realty Mogul, Endurance Lending Network, SoMoLend, QuarterSpot, CircleBackLending, and CommonBond). The diversity of companies launching these days is amazing.
At 11:25, Angela and I stepped up for our workshop “Optimizing Institutional Investing in Peer to Peer Lending”. We had over 30 people attend, and the workshop could not have gone better. Based on the questions we received, the attendees ranged from those just starting to research this space to experts with millions of dollars already invested. If you would like to see the deck, email me at firstname.lastname@example.org.
The remainder of the morning was spent at the Student Loans and P2P Small Business panels, both emerging and logical extensions of Lending Club and Prosper. The afternoon started off with a great VC and Data panel. I was not able to attend the Small Business direct lending session but I will have a follow up blog post on this group in the future.
The conference ended with an amazing Keynote by Ron Suber of Prosper titled “Powering the Future of Financial Opportunity”. I really liked how Ron highlighted the change in tone from the press. There has been a transformation from hating the space to realizing it is be a better alternative to banks for consumers and lenders. The second point Ron made was that last year, there was too much supply and this year too much demand. He believes that new asset classes will help increase supply this year to put the market back in balance. I think we will still see supply shortages through the end of the year, but this is normal for an attractive new asset class.
Ron then presented his 12 possibilities for the space in the next year. My money is on a couple coming true, but we will need to check back a year from now to see.
A true liquid secondary market
Risk free rate of return rises as fed funds rate rises making P2P returns less compelling
P2P platforms add many more higher risk, higher interest rate borrowers
New forms of data and analysis methods become available making underwriting, risk, and pricing even better
Loans posting in real-time throughout the day – Not set intervals
An insurance option where returns are lower but a minimum interest rate/return guarantee
Global multi asset class platforms emerge
Purchased by Marketplace business, social networks, or other technology companies… IPO?
P2P companies purchase their own bank charters
Credit card companies create a lower, fixed rate, amortized refinance solution for borrowers
Loans available in all states
Ron concluded with a reminder that we are still at the top of the second inning, in the early stages of this new industry. I wholeheartedly agree with this statement. The best days are yet to come.