By Ryan Weeks on Wednesday 14 September 2016
CAN Capital CEO forced to spend “inordinate” amount of time explaining differences between his firm and fintechs.
It’s been a turbulent year for alternative finance providers, but that turbulence has been most apparent within the fintech/online lending sector – which many see as a sub-segment of the broader alternative finance spectrum. The marketplace approach to funding loans has met with marked skepticism over the past six months – following such setbacks as the dismissal of former Lending Club CEO Renaud Laplanche, and a general cooling in investor demand.
But for balance sheet-based alternative lenders, the level of investor take-up within a marketplace sales programme is not a concern. Nor, indeed, are some of the other growing pains that have been encountered by their marketplace lending counterparts. “There is a tendency to paint every platform with the same brush, despite the lengthier track record of CAN Capital and some others.” Said DeMeo. “Nomenclature is important as a means of segmenting the 'non-bank' sector. CAN Capital sees itself as an alternative business finance provider, and perhaps shouldn't be lumped in with ‘fintech’.”
CAN Capital has now been running for 18 years, and has been running profitably since 2007. While that arguably places the company on a uniquely firm footing when compared to its peers within the wider fintech space, it also creates certain legacy challenges. “Technology's role is to make sense of the accumulated credit data. As an 18 year old business, CAN Capital has had to invest in tech continuously to stay ahead of the curve. The fact that the company is profitable – and has been since 2007 – is a key enabler here.“
But is it simply a matter of track record? Or is the marketplace lending model itself at the heart of what ails fintech? On the need for lenders to take balance sheet risk, DeMeo offered a measured view: “Quality of asset understanding is highest among those platforms that retain some balance sheet risk. But I can also see the benefits of diversification on the capital side, and the risks of being over-reliant on one or two funding source(s).”