Learnings from Lendit USA 2015
Last week was the Lendit conference, the largest gathering to date for companies and people involved in the marketplace lending ecosystem. Following Lendit events in San Francisco, London, and Shanghai, the conference returned to New York, the place of its birth in 2013. In the past 2 years, much has changed, and in many ways, one can see the evolution of the marketplace lending movement overall by looking at the most salient aspects of this year’s Lendit.
The industry has grown, and so has its largest conference
At the first Lendit, there were approximately 350 people. At this year’s event, there were 2,493 people in attendance, causing the organizers to need to close down registration 3 days before the event. The conference took place across 3 floors of the Marriott Marquis Hotel, a massive venue used for some of New York’s largest conferences, among which Lendit now ranks.
Marketplace lending is no longer “alternative finance”
While marketplace lending is still a small fraction of total lending worldwide, its massive growth and rising profile mean that it is no longer truly outside the mainstream. This is not an alternative to mainstream finance. Rather, it represents the next generation of finance and a meaningful evolution in the way capital is allocated within our economy.
The movement is global
Lendit USA involves much more than just the USA. At this year’s conference, there was a massive international contingent. This was perhaps best exemplified by the existence of an entire track devoted to China and the significant presence of some of China’s largest marketplace lenders, including China Rapid Finance, Lufax, Dianrong, CreditEase, and 9F. Live audio translation from English to Chinese was also available for many of the conference’s major presentations. Several panels and other conversations also speculated on when the major U.S. originators will decide to expand overseas, which seems sure to happen.
The banks are doing more than just paying attention
Given the growth of the sector and the recent public offerings of LendingClub and OnDeck, marketplace lending has become a real area of focus for many people and groups at the world’s largest financial institutions. While for years, many considered this new way of doing business to potentially be a passing fad, banks now seem to want to join the party rather than risk being left behind. At this year’s Lendit, banks were present in force: appearing on panels, sponsoring the conference, and hosting dinners and parties. There were even some major bank-related partnership announcements, including LendingClub’s partnership with Citi.
Out of the shadows and into the sun
In the past week, we saw the emergence of a new concept: Sunlight Banking. Complete with its own hashtag (#sunlightbanking), this is the notion that technology, transparency, and trust are key to the development of a more efficient and effective financial system. Orchard’s Bill Ullman wrote a blog post – Here Comes the Sun – introducing this concept and explaining how it will transform financial services for the better.
The industry is the subject of serious research
Marketplace lending has grown both in size and importance to the point that it is now the subject of major research efforts. At last week’s conference, there were numerous academic researchers gathering information, and of course, there are plenty of wall street analysts who are now covering LendingClub and Prosper as public companies. Orchard also unveiled a white paper written by Jeremy Todd: The Essential Eight Best Practices to Marketplace Lending Investing, which details how institutional investors and managers can best approach investing in the space.
Influential policymakers view this industry as a source of hope
While some may have worried about those who see any change to the financial system for only its threats or risks, two of this country’s most influential economists spoke at Lendit of the ability for this industry to positively affect the economy. Larry Summers, a member of multiple presidential administrations and a current LendingClub board member, predicted that online lenders could soon achieve a 30-40% market share in consumer lending, and even 70% in small business lending. Karen Mills, former head of the Small Business Administration, explained how difficult it is for small businesses to obtain a loan through traditional sources and how online lenders have now become the fastest-growing segment of small business lending.
Overall, this Lendit conference represented the industry’s coming of age. Marketplace lending is no longer alternative. It is the next generation of finance, and last week was its coming out party. We at Orchard were proud to sponsor and play a role in this momentous event.