Scott Sanborn Discusses the Future: On Demand Credit

June 16, 2017

A decade ago we set out to re-imagine the banking industry. We started by making credit more attractive for borrowers and investing more rewarding for investors. As we grew we transformed the banking system into a frictionless, transparent and effective online marketplace that helps people achieve their financial goals.
On our 10-year anniversary, we sat with our CEO to discuss the future of credit and online lending. Check out the full interview below!

Q: We’re going to dive right in, Scott. What is the world of credit going to look like in ten years?

I envision a future where we [consumers] manage our own credit. Credit will be on-demand, transparent, frictionless and mobile. We should own it, control it and know what drives it. If we are aware of what drives our credit score and understand our credit behavior and saving patterns, we can take steps to improve our own financial life. That’s a powerful thing.

Q: What will change ten years from now in the lending environment?

What we are moving towards in the consumer-experience space is, what’s the emotional reaction you want from the consumer and what’s that experience that delivers that? Which goes far beyond an affiliation or an association with a brand.
For example, when people go to get a mortgage, they’re not looking for financing; they’re looking to buy a home. But, if you really push that forward, it’s that excitement of home ownership which finance enables. That’s what we really want to get to. And, then, everything else around that – pricing and convenience – are features and the outcome we’re looking for is how that individual actually feels about that interaction or their experience.

We have made huge leaps and bounds forward in how credit is extended, but, it’s still a pretty basic way of thinking about how a person is likely to repay a debt. Today, we look at data from a credit bureau, which is a few weeks old. We then make decisions like, “I expect you to be able to pay this debt down over the next few years,” but your circumstances are likely going to change and I’ve already made my call a few years ago. We need to think about this in real time. So, for example, I would want to know, at any moment in time, how much credit I can extend to you, not just because of who you are, or what your credit history says, but also, because of what you are doing now. Now, we have the tool and the computing power to be able to capture that information and make use of it. That is exciting.

Q: What does this mean for the marketplace?

We are on the brink of unleashing the potential of the marketplace. We’ve broadened the range of investors – adding asset managers and banks – which gives us scale, resiliency and the ability to serve even more borrowers.
Right now, we have enough demand and supply from our investors and a clear borrower demand to create real value. We’ve started down the path of adding more products beyond personal and business loans for borrowers that help solve real problems. Last year, we added auto refinancing because it’s the second-largest purchase most people make and to date, we’ve saved people $1,500 on average1. Our ability to line up a diverse range of investors, who have different risk appetites, means we can say “yes” to more people.
In the future, those that are extending credit to you will be able to deliver the right risk tolerance based on your data and specific needs. We know you’re more than your credit score and that there might be certain life events that don’t reflect your ability or willingness to repay that could bring your score down. By evaluating the whole person, beyond numbers, we can extend credit at an attractive rate, that’s a powerful model.

Q: What consumer trends are you following and how does LendingClub fit in?

Well, there are a couple of trends that are emerging, that will shape how we think about engaging with our customers.
The first, people want experiences and what really matters is how they feel when they engage with an institution, a product, or a service. And, that really changes the way we think as a company.
The second, and this is much more profound, is the nature of work itself is changing as automation, robotics, the Internet of Things, artificial intelligence and machine learning become more mainstream. What we are finding is that new categories of work are emerging.

It sounds crazy, but, machines are doing much more of what we do, and that’s going to change things dramatically for companies engaging in this ecosystem. There are new jobs, which exist today, that didn’t exist ten years ago and I can’t even begin to imagine what that looks like 10 years from now.
Let’s look at taxi drivers in London, as an example. Taxi drivers were a very precious commodity because you needed to study for three years before you could drive a cab in London. Today, with GPS, every person with a driver’s license can drive an Uber. So, you suddenly change the nature of work. These people are making good money, they are credit worthy and financial institutions have no idea how to think about that. In that scenario, as we think about extending credit, we need to think differently when assessing an Uber driver’s credit worthiness. How do you think about extending credit to a GPS? As we think about continuing to innovate in the credit space, we have to keep a pulse on how work itself is changing.
The third trend is people want instant gratification, immediate access and a personalized experience. People are looking for more control; they’re looking for a better experience; they’re looking to feel good about themselves, not just in how they are treated, but, also, in how they’re able to help other people. The way we are thinking about addressing this and really harnessing it, is in how we deliver our product.

1Based on an average payment savings calculation of customers who refinanced their existing vehicle loan through LendingClub from January 1, 2017, through May 1, 2017. Claim does not include customers who choose to extend the number of remaining payments on their auto loan.

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