LendingClub leaves the peer-to-peer lending space
Dive brief:
- LendingClub, effective Dec.31, is phasing out the peer-to-peer (P2P) retail platform that allows consumers to invest in fractions of loans issued by the company, he said in a statement. securities deposit Last week.
- The move represents a turning point from the 14-year-old company’s original vision, as it prepares to become a banking holding company in the midst of its $ 185 million acquisition in february of the Radius Bank.
- The acquisitions have helped drive other P2P lending players out of the space. Metro Bank, for example, announced in August that it acquisition of RateSetter, a British P2P lender. Meanwhile, Goldman Sachs in May bought Folio Investments, which provided a secondary market where investors could buy and sell notes. Folio interrupted this market in August.
Dive overview:
About 17% of LendingClub loans, which borrowers often use to consolidate credit card debt, were funded by retail investors in June, a four-year high, according to american banker. Despite this, LendingClub has moved away from P2P investing and institutional investing, largely for its higher volume.
“It is very difficult to extend lending through crowdfunding,” said Ravi Anand, managing director of ThinCats, a British alternative lender which ended its personal investments in December, according to Fintech Futures. “P2P was the answer at one point in the aftermath of the financial crisis.”
The Radius deal, which is expected to close by mid-2021, gives LendingClub a path to a banking license – an end goal that has also given British FinTech Zopa a reason to get out of the P2P loan this year.
Another factor: LendingClub has increased its minimum threshold for opening an account from $ 25 to $ 1,000.
“As the fintech industry has moved away from P2P lending since 2016, LendingClub’s decision to shut down its P2P retail platform marks the end of an era,” Matt Burton, Founder of FinTech Orchard, told Peter Renton last week. Renton co-founded the LendIt Fintech online lending conference. Orchard, specializing in the development of technologies and analytics for online lending, was acquired by Kabbage in 2018.
“Unfortunately, in a forward-looking banking setting, it is not economically practical for LendingClub to continue to offer tickets,” the company told investors in an email Wednesday. “So we had to make the difficult decision to withdraw the Notes platform as of December 31, 2020.”
LendingClub has indicated that it is looking to develop new products that “retain the peer-to-peer spirit” of the Notes platform. The company announced that it would launch a high-yield savings account that would initially only be available to its existing retail customers, who would be able to automatically transfer money weekly from their accounts. ‘investment.
However, Renton told American Banker, “They just lost a lot of goodwill with this investor base.”
