LendIt USA 2017: Pragmatic optimism

LendIt USA 2017, the largest conference in FinTech lending, wrapped up on March 7th in New York City. The conference followed a tumultuous 2016, with challenges including a scandal at top marketplace lender Lending Club, waning investor demand for marketplace loans and worrying loan performance metrics.

The opening keynote speaker, Lending Club’s CEO Scott Sanborn, started the conference with an obituary for 2016. Still, the mood was optimistic, with the industry positioned to learn from mistakes and seek pragmatic growth going forward. By strengthening the partnerships between FinTech lenders and banks, expanding the market to serve more people across the credit score spectrum and improving on the current lending options with new products and innovations, lenders can do just that. Here, Claude Lawrence, Senior Research Analyst, highlights key takeaways from the conference.

More bank partnerships

Lending Club’s Sanborn suggested there are still plenty of opportunities for FinTech lenders to partner with banks and other financial service providers, namely by outsourcing some of the aspects they are particularly good at, including speed in verification, decisions and dispersals. FinTech lenders could parse out these skills and sell them to other firms under a software-as-a-service (SaaS) model. Propser’s Ron Suber also mentioned the SaaS model to increase bank and FinTech partnerships and announced Prosper’s new $5B loan securitization deal with investment bank Jefferies.

Financial inclusion

The Financial Services Institute cited a study which found that 92% of Americans prioritize financial stability over having more money, and suggested that FinTech lenders have a responsibility to offer tools that help customers manage their finances. Quick access to funds is also important as Even Financial, an API that connects customers to marketers, found that for every day it takes a loan to be approved and scheduled for disbursement, 6% of potential applicants abandon their applications.

Upstart wants to expand access to prime credit to more customers, noting that only two in five Americans have access to prime credit and 80% of Americans have never defaulted on a loan, suggesting that more consumers should be getting prime loan offers than are currently.

New products and developments

• Lending Club wants to look at artificial intelligence to more accurately match rates with borrowers. Right now, that process is still manual and costly with room for accuracy improvements.
• Credit Karma wants to take the wealth of information it has on its users, combine it with its near perfect customer verification, and allow customers to accept loans directly within the Credit Karma app. Loan applications would be filled out already with the terms and rates established, allowing the customer to see the loan offer and accept it with just a swipe or fingerprint.
• Goldman Sachs celebrated its Marcus launch, highlighting that the loan has cheaper rates, zero fees, and perks such as the ability to skip a payment (after 12 consecutive on-time payments) and its 100% human call center. When asked if the investment bank had plans to enter into more consumer products, the Marcus president offered that “wherever we see a pain point for consumers, we will explore our options to fix it.”
• American Express is aggressively using its closed loop data to improve its merchant financing pricing and options. This year, the issuer had a large booth dedicated to merchant finance.
• Facebook said the marketers that are most successful at targeting financial products on its platform use a lot of their own customer data. This is not to directly target the individual, but a group of people that closely share their attributes. Facebook’s FinTech lead said that around 80% of targeting on Facebook is done with businesses bringing in their own data.

Claude Lawrence is a Senior Research Analyst with Comperemedia. His areas of focus include Credit Cards, Personal Lending and Banking.