Accelerando! - Online Lending's Nearly Magical Rise

Yvan De Munck |

For all intents and purposes, things continue to heat up in online lending land.

With the granddaddy in the business – Lending Club – now publicly traded, we see more and more people coming out of the wood work, with comments all over. From very negative to very positive, but at least it leaves no one sitting on the fence.

As the stock has been under pressure (until recently), the company has been announcing some very transformational deals, to which the stock price has reacted positively – recovering from an $18.3 low to a current $21.5 (disclosure: I do not own Lending Club Corp. ($LC) stock; I am a lender on the Lending Club platform). So what are we talking about?

First off, the company will report its maiden results, as a public company, on February 24 – after the close. Needless to say, these numbers will be scrutinized. Until recently, the company was disclosing its monthly loan issuance numbers, well, every month. They stopped doing so as they were preparing for the IPO, and will now continue to do this on a quarterly basis. Therefore, later this month, we will have an update on what was done in Q4, and it’s going to be interesting. As a reminder, herewith the numbers we know from Q3: (source: lendingclub.com)

Total_Loan_Issuance.jpg

 

Lending_Club_Charts.jpg

 

(for a reminder of the difference between linear and exponential growth, check out Peter Diamandis’s BOLD here)

Getting back to the announcements that have been made in the first quarter of this year, on January 15, Google Inc. (GOOG) and Lending Club announced they are partnering to deliver a new business financing program. From the press release: "This first of its kind program enables Google to invest its own capital in the growth of its partners," said Renaud Laplanche, founder and CEO of Lending Club. "This is a new delivery model for financial services; this program opens up many possibilities for Lending Club partners to enable credit for consumers and business owners."

Big and Bold

On February 3, Alibaba Group Ltd. (BABA) and Lending Club announced they would form a strategic alliance to provide US businesses with innovative financing solutions. From that press release: “…a strategic, multi-year partnership making Lending Club the exclusive solution for point of sale business financing for up to $300,000 for Alibaba.com's millions of US business buyers.”

Bigger and Bolder

On February 9, Lending Club partnered with BancAlliance, a national consortium of 200 community banks. As one of the CEO’s from a member bank testifies: "By partnering with Lending Club through BancAlliance, our bank can offer access to a responsible product to our customers while at the same time acquiring assets with which we are very familiar and that offer higher returns than many alternatives. As a former regulator, I also appreciate having access to the legal, regulatory, compliance and credit experts at BancAlliance that helped us vet the Lending Club program."

Biggest and Boldest

And this is just in the first quarter alone! So whatever comes out of the results later this month, volatility in the stock is all but guaranteed. What is also guaranteed, however, is that this is a monster in the making, with a lot of cash on hand to rapidly grow organically, externally, internationally and through partnerships with critical players, enabling the company to continue to scale dramatically – from linear, to exponential growth.

The other day, I had the chance to be at a breakfast meeting with, and talk to Chris Skinner, the author of “Digital Bank,” and a prolific thought leader about financial services. Skinner is mostly known over in Europe (he’s UK based), but increasingly, also in our neck of the woods. In his words, “…there is no such thing as universal banking anymore…”, and all the parts of the value chain are being disrupted. As I have been arguing in an earlier contribution, talking about the BFC factor, Lending Club continues to be the posterchild for financial services disruption – in their case, focused on consumer and small business lending. So what's next? Look for the company to expand internationally, announce more strategic partnerships, become much more active in mobile, and why not, start rolling up some of the other players.

It’s game on, people. Sit back, (don’t) relax, and enjoy the ride.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BABA Alibaba Group Holding Limited American Depositary 93.28 0.97 1.05 9,177,566
LC LendingClub Corporation 5.53 -0.10 -1.78 8,233,834
GOOG Alphabet Inc. 789.29 12.87 1.66 1,821,914

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