Fintech Fireside: Missed Opportunities, And the Challenge of Drawing the Right Conclusions [Video]
Few things are worse than seeing a great opportunity blow right past you. In this episode of Fintech Fireside, Peter Renton and Glenn Goldman discuss the “big miss” that will have lending platforms kicking themselves later. From leaving individual investors in the cold, to ignoring their own data, fintech companies can risk missing the forest for the trees — or the mountain for the goats, as Glenn explains. Click here to catch up on past episodes of Fintech Fireside, or subscribe to our YouTube page.
“For this industry really to get to scale and be considered a true asset class, we have to have an easier way for the average, individual investor to access it. No one wants to go and pick loans at Lending Club, or Prosper, or Funding Circle or what have you — that is just outside the expertise or the interest of the average investor. What we need is professional money managers and hedge funds to come on board and invest in the platforms…and allow easy access to the average investor.
“When you sign up for your 401(k) at work, you should be able to run down the list and choose marketplace lending as one of your options. We are not there yet, and I think we still have a ways to go. There’s supposed to be a couple of funds launched this year, but they haven’t gotten off the ground yet, and I think that is an area that we really need to develop to get to the next level.”
“I spend a lot of time thinking about, directionally, where risk is shifting. Is there more risk in lending going forward? Is there the possibility of a credit correction driven by economic factors, or just driven by the fact that there’s a lot of capital flowing into this space?
“There’s a great place for folks to look to figure that out — and that is your own data. The big miss for me is missing out on that realization, and missing out on the opportunity to mine your own data to identify trends. A couple of examples. We’ve recently seen an increase in submissions, and that is typically a very good thing. For platforms where cost of acquisition and lifetime value of the customers are the two biggest arbiters of success and scale, growth and submissions should be viewed purely as a good thing.
“When I match that [internal data] up against some of the macroeconomic indices such as Paydex and Case-Shiller in terms of regional real estate and small business hiring, we’re seeing a lot of those submissions coming in from areas of the country that are showing signs of softening.
“What that tells is is it that not all submissions are necessarily created equal. And that conclusion came simply as a result of matching up what we’re seeing from a macroeconomic perspective with our own data. Being willing to see that and identify that and call that out when there’s so much pressure to grow takes a lot of discipline…
“As management teams and as business leaders, we have to be willing to look at our data and challenge it and second-guess it. Because it’s only one thing to have great data. The real tough part is to have the fortitude to draw the right conclusions when they might not necessarily be the most favorable.”