User:EFlynn at LendingClub/LC Biz Model Draft

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Business model

Past business model

From 2007 through the end of 2020, LendingClub offered a peer-to-peer lending service.[1][2] Customers who needed personal loans would undergo a screening process that involved a credit check, an evaluation of their credit history, and, in some cases, the vetting of their income or employment data.[1][3] If the borrower was approved, LendingClub's banking partner would issue the loan, which would transfer ownership to LendingClub.[4][5] LendingClub would then list the loan on its marketplace.[4][5] Interest rates on these loans ranged from 6.7 to 35 percent per year, and no loan was larger than $40,000.[3][6] The company made individuals loans available to its investors, who could choose to fund a portion or all of it, with the possibility to make a return on their investment as the loan was paid back with interest.[5][7] Almost the entirety of LendingClub's income was generated by origination and servicing fees.[3][8]

At the end of 2020, LendingClub shuttered its peer-to-peer lending service.[2]

Current business model

As of 2022, the company operates as a marketplace bank.[9][10] It generates income from origination and servicing fees from loans sold on its marketplace.[11][12] The company also makes money by holding a portion of loans on its balance sheet and earning interest as those loans are repaid.[11][12] It continues to offer personal loans to consumers, which are often used to pay off auto or credit card debt.[13][14]

When LendingClub acquired Radius Bank in February 2021, LendingClub acquired a banking charter and gained the ability to extend loans to customers by itself, without the need to partner with a bank.[9][15] Through its LCX platform, the company bundles loans and sells them to institutional investors.[16][17] In 2021, LendingClub sold $8.1 billion worth of loans to institutional investors and kept $1.8 billion of unsecured consumer loans on its balance sheet.[12]

LendingClub also functions as a digital bank, offering traditional banking services such as savings and checking accounts, and certificates of deposit.[18][19] The bank also offers commercial banking services.[20][21] As of March 2022, its balance sheet reflected $615 million worth of commercial loans and equipment leases.[21]

References

  1. ^ a b Lieber, Ron (February 4, 2011). "The Gamble of Lending Peer to Peer". New York Times. Retrieved June 3, 2022.
  2. ^ a b Calvey, Mark (October 13, 2020). "LendingClub pulls plug on peer-to-peer lending". San Francisco Business Times. Retrieved June 3, 2022.
  3. ^ a b c Michaels, Dave; Levy, Ari (September 6, 2013). "Wall Street joins the peer-to-peer loan party". Washington Post. Retrieved June 3, 2022.
  4. ^ a b Michaels, Dave; Kiernan, Paul (August 9, 2021). "Crypto's 'DeFi' Projects Aren't Immune to Regulation, SEC's Gensler Says". The Wall Street Journal. Retrieved June 3, 2022.
  5. ^ a b c Mullaney, Tim (December 11, 2014). "LendingClub is really only crowdfunding lite". Marketplace. Retrieved June 3, 2022.
  6. ^ Murray, Sean (March 5, 2016). "Lending Club Loan Size Cap Raised to $40,000". DeBanked. Retrieved June 3, 2022.
  7. ^ Levine, Matt (August 27, 2014). "Lending Club Can Be a Better Bank Than the Banks". Bloomberg. Retrieved June 3, 2022.
  8. ^ Lorenzetti, Laura (August 27, 2014). "Lending Club, the world's largest peer-to-peer lender, files for an IPO". Fortune. Retrieved June 3, 2022.
  9. ^ a b Lang, Hannah (December 31, 2020). "OCC approves LendingClub acquisition of Radius". American Banker. Retrieved June 3, 2022.
  10. ^ Owusu, Tony (October 28, 2021). "LendingClub Stock Leaps on Earnings Beat, Year Guidance". The Street. Retrieved June 3, 2022.
  11. ^ a b Berkowitz, Bram (May 2, 2022). "Down 35% This Year, This Fintech Stock Is a Buy". The Motley Fool. Retrieved June 3, 2022.
  12. ^ a b c Kazanins, Jevgenijs (January 30, 2022). "LendingClub Q4 2021 Earnings: transition to the Marketplace Bank model continues as planned". Popular Fintech. Retrieved June 3, 2022.
  13. ^ Kenkare, Pallavi (May 29, 2022). "Best Personal Loans for Bad Credit for June 2022". CNET. Retrieved June 3, 2022.
  14. ^ "Auto Loan Refinancing". LendingClub. June 3, 2022. Retrieved June 3, 2022.
  15. ^ Armstrong, Robert (March 17, 2021). "Investors warm to Lending Club, the fintech that became a bank". The Financial Times. Retrieved June 3, 2022.
  16. ^ "Interview with Valerie Kay, the LendingClub exec redefining the marketplace lender - Business Insider". Business Insider. 2019-12-06. Archived from the original on 2019-12-06. Retrieved 2019-12-16.
  17. ^ Green, Rachel (October 14, 2019). "LendingClub plans to connect institutional investors to borrowers with its new digital marketplace platform LCX". Business Insider. Retrieved June 3, 2022.
  18. ^ Streeter, Bill (August 3, 2021). "CEO Reveals Plans for LendingClub's Unique Fintech+Bank Model". The Financial Brand. Retrieved June 3, 2022.
  19. ^ "Personal Banking". LendingClub. June 3, 2022. Retrieved June 3, 2022.
  20. ^ Prior, Jon (June 8, 2021). "LendingClub builds on Radius Bank acquisition with exec moves". American Banker. Retrieved June 3, 2022.
  21. ^ a b "LendingClub Expects Modest Growth of its Commercial Lending Business". DeBanked. May 1, 2022. Retrieved June 3, 2022.
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