Lending Club Review: The History and Future of Lending Club
In less than a decade Lending Club has gone from being a great idea to bringing themselves and the FinTech industry into the mainstream with their 2014 IPO. The platform has facilitated over $11 billion in loans since their launch in 2007 and has the company has been included on CNBC’s Disruptor 50 list and risen to #5 on Forbes list of America’s Most Promising Companies.
As Lending Club continues to revolutionize the banking industry, it’s worth taking a look at how the company came to be and how they’ve set themselves up for a successful future.
The Beginning: A Better Way to Bank
Shortly after selling a company of his to Oracle Corporation in 2006, Renaud Laplanche decided to take a six-month vacation. One day during this time off Laplanche found himself giving his credit card statement a closer look. It was then that he realized that if he were to carry the balance over to the next month he would be penalized with an 18% interest rate payment. At the same time he opened his savings account statement from the same bank and saw that he was only getting around 1% of interest back on his money.
From there Laplanche began brainstorming ideas for the company that would grow into Lending Club. Laplanche believed that the banking system could be far more efficient and transparent. By operating on the internet and matching up lenders and borrowers, Lending Club could keep their operating costs low to the benefit of all parties involved.
Lending Club launched in 2007 as a Facebook application before later starting their own site. As the company gained popularity they also found themselves on the radar of U.S. Securities and Exchange Commission (SEC).
Hurdles and Hiatuses
In 2008 Lending Club temporarily shut down to comply with the SEC. Instead of trying to defy the regulators, Laplanche decided to not only cooperate with them but also share his vision for what he believed Lending Club could be. In the end Lending Club became fully registered with the Commission and reopened six months after going on hiatus. As a result all loans issued on the Lending Club platform are now registered as securities.
On top of the regulations set by the SEC, Lending Club also has self-imposed regulations designed to ensure the best results for their investors. For example loans are only given out to applicants with credit scores over 660. Because of this stipulation and other filters, the company denies approximately 90% of applications leaving only the cream of the crop for investors to choose from.
Crowds Flock to the ‘Club’
As Lending Club facilitated more and more loans they also garnered more attention from larger and larger investors. While the platform was founded on the concept of peer to peer lending and bucking conventional banks, the company eventually found themselves receiving investments from institutions. Prior to going public, some of Lending Club’s most notable investors included T. Rowe Price and Google.
Never content with staying stagnant, Lending Club has consistently evolved. For one they’ve doubled the amount of loans they write every year since their inception. In 2014 they made their first acquisition with the purchase of Springstone Financial, which helped grow the company’s patient solutions division. Another area in which the company has grown immensely is small business loans. Today entrepreneurs can borrow up to $300,000 for their business using the Lending Club platform, allowing them to get the capital they need quickly and easily.
Since their IPO Lending Club has also entered into a number of partnerships to expand their reach even further. Early in 2015 the company announced a deal with Alibaba that would allow American companies to borrow money on the Lending Club platform in order to buy goods from China via Alibaba. A short time later the company formed a partnership with BancAlliance that made Lending Club loans available to customers at over 200 community banks across the country. Most recently they’ve teamed with warehouse club giant Sam’s Club to offer small business loans to club members.
The Future of Loans
At the TechCrunch Disrupt NY 2014 event Laplanche told moderator Leena Rao that, “I think we’ve just scratched the surface of what can be achieved. We really believe we have an opportunity to transform the entire banking system.” Similarly Laplanche has stated that he’d like to expand Lending Club into other areas of credit and loans including credit cards, home mortgages, and student loans. This trajectory has already been set by the company’s expansion of their small business loan offerings (recently raising the maximum loan from a $100,000 to $300,000), patient financing services, and other areas of financial need.
Eight years ago Renaud Laplanche had an idea. Today he has a company valued at upwards of $7 billion. If Lending Club continues down the path they’re blazing there’s no telling what they’ll be able to accomplish and the financial world may never be the same.
This article was originally published on LendingClubIPO.com