Founded in 2007 as one of the first fintech companies, LendingClub has been a pioneer in transforming traditional lending into an efficient online marketplace. Our transparent platform has proven to be valuable to both borrowers and investors, allowing us to grow into the largest online lending platform in the country.
As we look back at the company’s 10-year history, LendingClub’s Chief Capital Officer Patrick Dunne provides insights into the company’s mission, consistent innovation, and outlook on the next 10 years and beyond.
Q: When you reflect on the history of LendingClub, can you tell me why you’re excited about the company—what gets you out of bed in the morning?
I like doing new and different things and feeling like I’m helping people—and I understand the value we’re driving at LendingClub.
I’ve been in financial services throughout my career. I’ve always been in a position where we’ve used technology, innovation, and new ideas, to serve our customers well and I’ve always felt good about it. I feel like we’re doing that at LendingClub. We are, through technology, enabling the possibility for investors to get returns while helping borrowers save money.
Our mission is very visible—helping thousands of borrowers and investors every day. We can see how much we’re saving borrowers on their monthly payments and, at the same time, see the return investors are making on their LendingClub Notes, which can help them save and build wealth in various ways like saving for retirement. It’s a really fulfilling way to spend your career, feeling like you’re making change and innovating in a way that’s helping people in a meaningful way.
That’s what helps me get up in the morning. It also certainly helps that I’m dealing with a lot of great people. You’ve got to like who you’re working with and you’ve got to feel good about what you’re doing—we have that here at LendingClub, which is a fantastic thing.
“This is our 10-year anniversary, yet I feel like we’re just getting started.”
Q: This innovation you’re talking about is essentially a whole new investment category. What’s it like to create something new in such an established industry?
I think that’s absolutely correct—we’re creating a new way to access an asset class that, in a lot of ways, didn’t used to exist for most investors. So, it’s something new, which takes a little time for people to understand. Once they do, they realize the potential to earn solid returns. It takes time to get that adoption, but we’ve already seen it from individuals to large institutions and banks. I think over time, we’re going to see more and more adoption as this industry grows.
This is our 10-year anniversary, yet I feel like we’re just getting started because there are a lot of opportunities for new investors to discover this asset class.
One of the complaints I often hear from large investors is they’d like more of it because our asset solves challenges they have in generating returns. They’ve had a positive experience investing through LendingClub and they’d like to see us do even more, which is a nice problem and challenge to have. I think, over time, as this industry grows, we’re going to see more and more investors come into it like large pension plans that need to generate yield to match against what they’re trying to save for their clients’ retirement. I can also see insurance companies and asset managers being attracted to the asset class. It’s a product that solves needs for almost any type of investor, whether it’s an individual, investment advisor, large pension plan, or a bank, it provides a solution. So, that’s why I think it’s been very attractive for our investors.
I’ve been involved with other asset classes and categories that have been disruptors in the past. Take index investing for example, 20 or 30 years ago people didn’t really think about it, and now it’s a large part of most people’s asset allocation, including individuals and large institutions. ETFs were very small in 2000, then gradually gained more and more adoption from a whole range of different types of investors. It’s now a multi-trillion-dollar industry that became mainstream and I think marketplace lending will as well.
There are new innovations, new asset classes, and new asset categories that occasionally get created that serve a purpose—to solve a need for investors, and the adoption grows. It’s nice that LendingClub Notes can appeal to so many different types of investors, simultaneously serving individuals and institutions.
Q: And for investors—can you comment on their feelings about marketplace lending, any concerns they may have?
Investors share a lot of the same concerns: How much risk do they want to take? What are they saving for? How much money do they need when they retire? These are questions that all investors ask themselves. Even institutions ask: “How can I help my clients save for retirement?”
These are all common concerns, especially in today’s environment where interest rates are very low and you can’t just put your money in bonds and think that it’s going to help you save all the way to retirement.
Our goal is to help them problem solve. Right now, we’ve created access to an asset class that can deliver solid returns that may be very difficult to find elsewhere, that may be uncorrelated with what investors can find elsewhere, and that can help solve some of those concerns investors have around their ability to save for retirement. Remember, people are living longer, which is a great thing, but getting our money to live as long as we do nowadays is a concern. As you have the benefit of great healthcare and the ability to live longer, you want to match that up with a plan for your retirement that helps you live well, longer.
We feel good about the asset we’ve created to potentially provide returns investors can achieve throughout their lifetimes. Whether it’s retirement or paying for college or weddings for their kids, our investors are looking at how they can afford future expenditures, and our marketplace lending platform provides them the ability to pursue that.
There are a lot of different ways we can continue to add value for investors, while we’re also adding a lot of value for borrowers looking for credit and the ability to lower their monthly payments by refinancing higher interest debt. It’s a great way to build on both sides of the platform, to save borrowers money while also helping investors save for their futures, including retirement.
Q: Why do you think investors see value in the LendingClub platform versus other investment avenues?
Investors’ concerns are generally about generating returns and managing risk. And, our LendingClub investors’ concerns are no different. On the LendingClub platform, investors can select the grades, terms and interest rates of their Notes, so we offer them the ability invest in a way that aligns with their specific return objectives and risk tolerance.
I think investors want to be able to have that flexibility to tailor a solution to their needs. Whether they want to invest for the long or short term via retirement or taxable accounts, or whether they have a high or low risk tolerance, LendingClub’s investment platform offers that flexibility. There are different investment avenues investors can go through to find that, but, what’s great about our platform is we provide full transparency. Investors know that they’re part of a platform that is funding someone’s loan and helping them save money on their monthly payments. It’s a great relationship because borrowers have a need—like credit card debt they want to refinance at a lower rate—and our investors provide capital to serve that need while serving their own purpose, to invest and earn a solid return.
Q: Regarding consumer trends in the financial world, what will affect the lending and borrowing dynamic?
It’s a low-yield environment, so investors, whether small retail investors or large institutions, want to find a combination of return and yield and are typically having a hard time finding it under these circumstances. Here at LendingClub we’ve created a new way to access an asset class that may provide that solution for certain investors. It creates the opportunity for solid returns and a potential yield that can help people manage their retirement savings and invest for the long term.
Keep in mind people are living longer so their retirement could end up being longer than anticipated. For some investors looking to earn income through their retirement, finding yield from fixed-income assets has been a challenge for the last 10 years or so. LendingClub provides an option for income seekers looking to invest for their futures. Retail investors looking to invest for their retirement can use our platform to do this by investing in Notes, and some institutions use LendingClub on their clients’ behalf to work toward their clients’ retirement goals.
Q: Can you talk about where you see the category going in 10 years and into the future?
So, where are we going in the future? Well, right now, we offer a very valuable marketplace that provides an opportunity for borrowers to receive loans and investors to receive interest on their LendingClub Notes. You could take this platform we’ve developed in a lot of different directions. There are a lot of different ways to provide value for borrowers or other people looking for credit, and to investors, who are looking to invest in opportunities for the future. The personal loan business is where we started but now, for instance, we’re facilitating auto loans. There are a number of other things we could offer to help borrowers while also helping investors. It really is an efficient, two-way marketplace that has value for both sides and puts LendingClub in a position to solve challenges for investors and borrowers. It’s a unique position to be in and one that offers a tremendous amount of scale in where we could take the business.
It’s an exciting time at LendingClub and the proof of concept has certainly been proven to be extremely valuable for both sides. As I’ve said before, we’re 10 years young and there are a lot of different ways that we could take this during the next 10-to-20 years and multiple decades beyond.
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