online lending 2 - s3-us-west-2.amazonaws.com · online lending generates 400bps in operating costs...
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Online Lending 2.0
The Current State and Future of Online Lending
By Renaud Laplanche
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The Last 10 Years: A Slow March Into the Mainstream
“Websites are allowing person-to-person loans, cutting out the middleman.”
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Now Nearing Completion
“I see the growth of online lending and marketplace lenders as the natural evolution of banking itself.” Noreika said.
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Why Online Lending Works
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Online Lending Platforms Operate at Lower Costs
Online Lending Generates 400bps in Operating Costs Reduction vs. Traditional Lenders
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More Complete Data Set Enhances Underwriting
Bank account data
Credit Score
Credit History
Debt to Income Ratio
Traditional Lenders
Credit Score
Credit History
Online footprint
Bank account data
Debt to Income Ratio
Utility Payments
Online Lending
Credit Score
Credit History
Online footprint
Bank account data
Debt to Income Ratio
Utility Payments
Location Data
Free Cash Flow
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Delivering Attractive Investor Returns
Source: Wall Street Journal. Data as of 10/6/2017.
Current Fixed Income Yield Comparison
Upgrade S&P US IG Barclays US Govt/Credit US 10-year UK 10-year gov bond
1%2%
2%2%2%3%3%
5%
8%
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And Attractive Yield/Maturity Through Securitization
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Mostly Uncorrelated to Other Asset Classes
Source: Garret/Galland Research
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87% CAGR
Fast Growing Appetite from Borrowers & Investors
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Prediction #1
The growth of online lending will accelerate in the next 15 months
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The Next 15 Months
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Initial Opportunity is Expanding: CC Balance Rising
US Consumer Credit Card Balance Outstanding
820
865
910
955
1,000
2012 2013 2014 2015 2016 2017
845857
891
910
940
995
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But Mortgage Debt Is Declining
Debt Service to Income Ratio: Mortgage vs. Other Consumer Debt
3.00
3.75
4.50
5.25
6.00
2012 2013 2014 2015 2016 2017
Mortgage Consumer
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Driving Overall Debt Service Ratio to All-Time Low
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Enabling Sustained Economic Growth
The current economic expansion is 99-month old. The expansion cycle before last lasted from March 1991 to March 2001, a full 120 months.
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The Emergence of Online Lending 2.0
Modern Architecture / Microservices
Cloud Computing Big Data Blockchain Protocol
Technolo
gy
Lower Operating Costs & Faster Dev Cycle
Better Underwriting Models
Stronger Compliance, Transparency & Data
IntegrityBenefi
t
Greater Affordability & Convenience
Greater Predictability & Liquidity
User Im
pact
Borrowers Investors
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Prediction #2
An organized secondary market for online loans will emerge in the next 15 months
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Product Innovation
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The “Unbundling” of Banking: 1998 through 2015
Banks
Lending DepositsPayments Asset Management
Personal Finance
Lending Club Prosper OnDeck Kabbage
PayPal Stripe Square
Marqeta
Wealthfront Betterment
Wealthsimple WiseBanyan
Credit Karma Mint
Acorn Digit
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The Great “Re-bundling”: 2015 - 2020
Lending PaymentsAsset
ManagementPersonal FinanceDeposits
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Credit Monitoring & Education Empower Consumers
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Prediction #3
Continued re-bundling will give birth to at least one
major consumer product innovation in next 15 months
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Disclaimer
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