Fintech Fireside: “Rays of Sunshine” in Marketplace Lending, With Peter Renton [Video]
After getting gloomy about missed opportunities last week, it’s time to look on the bright side. In this week’s installment of our Fintech Fireside video series, Lend Academy founder Peter Renton and Credibly CEO Glenn Goldman explain how marketplace lending has helped to create a healthier and more transparent lending ecosystem, thanks to its advantages in efficiency, accessibility, and safety.
“If the core of the system was marketplace lending, we would not have had a financial crisis,” Peter argues. “There certainly wouldn’t have been a need to bail out any of these companies, because there’s no inherent leverage in the system that could bring it down.”
“We’re basically creating a financial system for moving capital from investors to borrowers in the most efficient way that’s ever been done. And I think if you were to just scrap the financial system and start over, what you would probably do is what we are doing today…
“The millennial generation is the largest generation in history, and it is going to be driving this industry over the next decade. And thankfully, what we have in our industry is a way that’s more efficient…For a 25-year-old to think, ‘I’m going to go to a bank and sit down for an hour and a half with a bank officer, and he’s going to ask me for all this paper documentation, that’s just ludicrous. That’s something my parents did, that’s something my grandparents did. I would never do that.’
“And I feel like we are here providing the answer to that 25-year-old, ‘You don’t have to do that. There’s a better way, there’s a more efficient way, there’s a friendlier way to do it,’ and we’re providing that.”
“We have the opportunity to make capital available to folks who previously didn’t have access to capital. And also, the ability to lower people’s cost of funds, and to create more discretionary income. The notion of paying 25% on a revolving credit card shouldn’t be. If you really had a more efficient model, you should be paying 15%. And that’s a lot of what the marketplace space has opened up. And so where does that extra 10% of interest go? It goes to savings, it goes into driving GDP, and creating more economic value.
“The ray of sunshine from my perspective, is that we are held to virtually the same standard as a bank would be in terms of compliance and disclosure. When we signed the partnership, they gave us a stack of papers just about two feet high and said, ‘This is your new compliance management system. Put it in place, and we’re going to audit it in 90 days, and then we’re going to have a third party come in and audit it 30 days after that. And here is your reporting requirements, and here are the things that we need to approve as part of this partnership.’
“That has certainly allowed us to raise the level of our game. We had to have an infrastructure which creates a level of transparency, not terribly different than as if we were a bank on our own.”
“I think it’s safer for the financial system, that [a] bank may leverage eight or ten times, whereas marketplace lending is 1:1. Sure, there might be some leverage facilities that some of the funds have. But typically, the leverage is modest anyway, and so you’re getting more of this 1:1. It’s a safer financial system than what’s developed over the last 20 years.
“We saw in ’08 and ’09, what could happen. If the core of the system was marketplace lending, we would not have had a financial crisis. There certainly wouldn’t have been a need to bail out any of these companies, because there’s no inherent leverage in the system that could bring it down.”
Busting The Myth of ‘Unregulated’ Alternative Lending, With Peter Renton [Video]
Marketplace Lending, Ten Years Later [Video]
Fintech Fireside: Missed Opportunities, And the Challenge of Drawing the Right Conclusions [Video]