The ex-Lending Club chief is back with a new firm and some bullish predictions.
You can't blame Renaud Laplanche for taking a fairly low profile over the past 18 months. Since leaving Lending Club, the marketplace lending unicorn he co-founded and led, back in the heady days of April last year he has had to deflect a media bombardment trying to establish the facts around his clouded exit. In addition, Laplanche has again set up a new outfit - Upgrade - and is feeling rather bullish over the near term for the broader fintech industry.
The Lending Club debacle, the details of which you can find here, led some to question whether contagion was setting in from market participants that would de-rail not only the lending segment of fintech but the broader industry of disruption to financial services. Neither of these predictions have been realised with both online/P2P/marketplace lending in broadly good health and fintech showing ever more signs of mainstream adoption alongside venture capital funding.
Nonetheless growth in lending origination levels is not what it once was, but Laplanche believes that by the end of 2018 growth could well pick up again to its stellar levels of previous years. That is one prediction Laplanche delivered, in a characteristic branded gilet (Upgrade rather than Lending Club of course), at Lendit Europe 2017 today.
"The growth of online lending will accelerate in the next 15 months," Laplanche said. He says demand for consumer loans is likely to stay high over this period due to the somewhat precarious economic conditions of the US economy,” he said.
The entry of new players to online lending such as Goldman Sachs will help this growth, he says, but also the underlying economic conditions favour renewed growth for lower cost loans.
“Credit card balances have been going up pretty quickly, with growth rates of 5 per cent representing a $50bn growth annually,” he said.
Of course, this does not give much thought to how well the industry could scale and keep investors onside, with high quality returns and lending.
The below graphic shows Lending Club’s numbers over the past five years. The big leap in originations shown between 2014-16 came at a time of much lower returns for investors suggesting that in some way, in many commentators eyes, greater growth in scale may have been at the expense of credit quality.
In addition, Laplanche says over the same 15-month period, however, a meaningful secondary market will develop for online loans.
”We have talked about it enough and now it is time,” he said.
Long predicted, this has moved on in the past year but is still very much in its infancy. He believes a host of new tech will deliver this ‘lending 2.0’ ecosystem. This includes cloud computing, big data as well as blockchain protocol.
“All of these new technologies will help in further reducing operating costs and further bringing down the cost of credit. It should also improve underwriting. This will have significant user benefits both from the borrower and investor side,” he said.
He says the use of third party data verification will be an important part of this as “the data is necessary for securities to be more liquid," he said.
Lastly, Renaud predicts that the great ‘unbundling; of financial services through individual fintech segments will result in occurrence of a ‘rebundling’ of markets such as wealth management, payments, lending and personal finance also by the end of 2018.
“Continued re-bundling will give birth to at least one major consumer product innovation in next 15 months.”
What exactly that will be, however, he does not say.