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How Lending Club Is Differentiating Itself From Other Online Lenders

By Omri Barzilay for Forbes

2016 has been a tough year for San Francisco-based Lending Club. Scott Sanborn, who took over as CEO and who’d served as the company’s COO prior, has taken drastic steps to get the company back on course. In less than a year, Sanborn cut and rehired 179 jobs and hired a new CFO, COO, general counsel and chief capital officer. In addition, the company launched a new auto refinance product and an investor mobile application, Lending Club Invest.

I sat down with Sanborn to learn more about Lending Club and how the company plans to expand beyond their current position as the largest personal loan provider in America through it’s online credit marketplace, where it connects borrowers and investors.

Omri Barzilay: Since stepping in as CEO and leading Lending Club out of a tough 2016, what are you most excited about moving forward?

Scott Sanborn: Next month will mark Lending Club’s 10-year anniversary. It’s really exciting to look back at everything we’ve accomplished and the impact we’ve been able to make on people’s lives, yet knowing that we are just getting started. We’ve built a dynamic and efficient marketplace that delivers affordable credit to borrowers and solid returns for investors, is resilient to a variety of market conditions, and is scalable and extensible. For example, we’re looking at ways to expand access to our asset to even more types of investors through new products and new distribution channels. And, we just launched a new app for our retail investors, which gives them an easy way to manage their investment portfolios. For our borrowers, we’re continuing to invest in our technology to enhance our ability to deliver value and a great experience. Our most recent major product launch is auto loan refinancing, where we are saving consumers an average of 2.5% or $1300 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’re able to leverage technology to deliver savings and a seamless online experience to both borrowers and investors. We remove structural inefficiencies, giving retail investors unprecedented access to consumer credit that has delivered historical annual returns 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 that their FICO score has increased by 19 points after consolidating debt or paying off credit cards, which can help put them on a better financial track.

Barzilay: Lending Club is one of the pioneers in p2p lending but has moved to include more institutional investors. Are you still focused on the retail and individual investor segment?

Sanborn: Definitely. We are very committed to and focused on our retail investors. Our mission has always been to democratize access to consumer credit that was traditionally only available to banks and large institutions. Today we have more than 148,000 retail investors – more than any other online lender. Part of the evolution of our marketplace is growing and balancing the mix of investors – having the right mix of investors strengthens our marketplace 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 more ways to make investing even better for individuals. In fact, we just launched a mobile app, something we’ve been excited to share because we know this will provide an even better and more valuable experience for individual investors.

Barzilay: How is Lending Club different than 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 that we do comes from this goal and with the intention of delivering a great experience for everyone who comes to our marketplace. With 10 years of experience and incredibly powerful data and insight that informs us on our customers’ behaviors, choices and needs. We’re also able to calibrate this data into our models to price credit risk and better manage our marketplace and the success of both our borrowers and investors.

We also have an incredibly diverse base of investors funding loans on the platform which uniquely allows us to broaden access to credit. A traditional bank uses government-guaranteed deposits to lend to make a spread and can only give loans to a narrow spectrum of borrowers. Our credit marketplace attracts investors that span retail, asset managers, funds and banks, all with different risk appetites, to invest in loans across the credit spectrum so we can say yes to more borrowers. Our diverse investor base also means we’re not reliant on any one type of investor to fund our loans, so we have the agility to pivot funding channels to meet changing market conditions.

Barzilay: There are a lot of new players in the space. What do you think about the competitive landscape?

Sanborn: As a pioneer in online lending, we’re happy to see consumer demand drive growth in the industry. Lending Club has been competing with banks and new technology enabled entrants for a while – competition isn’t something new.

Barzilay: What do you think the biggest challenges are and how do you plan to overcome them?

Sanborn: We’re very focused on evolving our platform to continue to enhance our customer experience. Lending Club became a leader through constant innovation, exploring new efficiencies and seizing new opportunities in changing market conditions. As the industry and markets continue to change, we are taking on the challenge of evolving our platform, business and team. This way we’ll have the strength and foundation to continue to lead for the long term.

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