Banking Fintech

What the P2P industry can learn from Lending Club’s failures

What the P2P industry can learn from Lending Club's failures. Image: g0d4ather, Shutterstock.com
Written by Ian Anderson

Lending Club’s failures may have let the industry down, says Ian Anderson, but there’s an upside that P2P could benefit from.

Entrepreneurs that have set up a successful business and entered a period of explosive growth have learnt three key lessons the hard way:

  1. Operational clumsiness will bite you hard.
  2. Relinquishing your input in key decision making will be seriously challenging.
  3. Your leadership shortfalls will always come out in the end.

Renaud Laplanche, Lending Club’s former CEO and founder, is one such victim. It’s tempting, very tempting in fact, for journalists who thrive on ‘I told you so’ copy to jump on Lending Club’s lack of internal controls, the founder’s decisions and business naivety, and give Lending Club (LC) a good kicking.

Lending Club grew fast. It attracted financial household names as board members, wooed VCs, built mind-boggling valuation, was number five on the Forbes ‘most promising’ list, rode the wave of fintech (that it doesn’t really belong to), and loads more besides. Yes, Laplanche screwed up and he’s gone, and yes the company’s reputation is taking a massive hit right now, and the news of the US DOJ subpoena is going to add to this misery. But before we get too carried away, no one can argue the fact that Lending Club has been a substantial driver in terms of developing a fledging industry while at the same time showcasing alternative and innovative approaches within the financial services realm, something that the industry was crying out for since 2008. Lost in the noise was the fact that Q1 results for LC were quite good, and records were set with the first $1bn month.

LC’s failures in the short-term have let the industry down, and trust will have to be rebuilt. However, ultimately this is good for the P2P industry; it’s a sign of an overdue need to begin maturing, to be more accountable and to focus on ‘total operational integrity’ that every platform needs at the core of its business.

To quote Matt Burton, CEO of Orchard: “We believe that marketplace lending as a business model is here to stay, and that events like this – unfortunate as they are – present an opportunity for everyone to demonstrate that they provide a safe, responsible, compliant and sustainable model that’s built for success during up times and down.”

Image: g0d4ather, Shutterstock.com

About the author

Ian Anderson

Ian Anderson has a successful track record in building and growing businesses, often in challenging environments, with ‘first to market’ products across a number of sectors, including fintech, equities, corporate communications, and investor research. He is co-founder and COO of ArchOver, the fastest-growing P2B business lending platform in the UK, and author of Real Relations, Virtual World.

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