Lendit Rewind

Panelists include: Greg Hersch, Florence Capital; Erik Leseman, Aegon; Ping Zhu, Verus; Catherine Beard, Blueprint Capital Advisors; Moderator: Paul Lisiak, Metropolitan Equity. Understanding how asset allocators view the space is something a lot of online lenders and fintech companies want to grasp; the panel at LendIt USA 2017 with asset allocators discussed their thoughts on fintech generally and the alternative yield market; traditional fixed income has become less attractive and so more investors are looking at where they can get greater yield for their investment; there is a thought that normalization of interest rate policy globally will ultimately resolve itself in an unpleasant way; alternative yield is a new asset class so selling to the big institutions has been a challenge; it really comes down to finding the right group within the institution and selling it as the right type of asset; knowing your market appetite is also key, such as in Europe where their are negative yields and public markets

By SoFi's Paul Fielding Online lenders don't have a deposit base to lend out money, so they need to look at different forms of capital sources and Paul Fielding of SoFi talked about these options at LendIt USA 2017; they break up the investor pool into a few different buckets; investors looking to buy whole loans, their securitization shelf that has thus far done over 20 securitizations and direct capital from banks; understanding the right fit for the right investor and how that fits into the capital buckets is the key; while taking questions Paul discussed the recent formation of 1940 Act funds and believes the likes of BlackRock and AllianceBernstein could move into the consumer whole loan market as pensions begin to look at playing in the space; he also talked about the ABS markets being fickle, but in his view all markets are fickle and investors will look at allocation strategies.

Panelists include: John Schrader, Duff & Phelps; James Wu, MonJa; Moderator: Gary Simanson, Endeavor Capital Management. Panel discusses how to determine the valuation of loans and in turn how to value funds which hold loans; over the last four years loan methodologies have changed from bank accounting (holding loans at par value and holding a reserve against expected losses) to using fair value; the most prevalent approach is a discounted cash flow analysis; this shift happened as more investors entered this space and funds got larger; James Wu of MonJa and John Schrader of Duff & Phelps dig into the details of fair value and how to comfort investors who are looking to invest in this space.

Panelists include: Lou Dipalma, Garnet Capital Advisors; Geoffrey Kott, Cross River Bank; Perry Rahbar, dv01; David Fontanilla, Madison Paige Capital; Paul Mangione, Fort Schuyler Advisors, LLC; Moderator: Gregory Nowak, Pepper Hamilton LLP. The creation of a secondary market for marketplace lending loans has been a hot topic recently; if a robust secondary market existed many believe more pension plans, registered mutual funds and other institutional investors would participate because loans would have a price and there would be liquidity for investors; currently marketplace lending loans trade on an over the counter market where many of the panelists currently participate; the panel explores whether whole loans are securities, why that matters and dives deep into the key aspects of a secondary market: price discovery, connecting buyers and sellers and fulfillment.

Millennial Focused Consumer Lending & Lifetime Customer Retention with Stephen Dash of Credible Labs Inc. Moderated by Dakin Campbell of Bloomberg. Understanding the millennial customer is a key for most lenders in the market today and Stephen Dash of Credible explains how his firm handles this challenge during his fireside chat at LendIt USA 2017 with Dakin Campbell of Bloomberg; identifying who the millennial is and how they consume information will help you to tailor your products to this group; 25% of consumers today fall into the millennial category and Credible believes a strong, focused product set will help them to service this generation efficiently; before looking to sell other types of services you must first build a relationship with them, trust can be eroded in an instant; ensuring a compelling value proposition is the key and fully understanding what the customer needs will help you to hold that customer over the lifetime; ultimately customers are co-owned and you can help to make sure you

Panelists include: Morgan Edwards, CommonBond; Noah Cooper, Darien Rowayton Bank; Zander Rafael, Climb Credit; James Keller, College Ave Student Loans; Moderator: Henry Morriello, Arnold & Porter Kaye Scholer. In 2016 the student loan securitization market increased compared to 2015 and in 2017 the market has already been off to a good start; the panelists discuss the reasons for this trend of increased issuance including knowledge, confidence and a default rate of just 3 bps; in the case of the refinance product, supply has created the demand; panel also comments on the current regulatory landscape and the FFEL program (Federal Family Education Loan Program) which guarantees student loans; on the whole loan side, the panelists talk about the interest from investors, why they are deploying capital to the student loan market and the kind of returns they can expect; finally the panelists talk about risk retention and the importance of fintech in the origination of assets.

Panelists include: Diwakar Choubey, MoneyLion; Dave Tomlinson, BorrowersFirst; Camilo Concha, LendingUSA; Matt Albrecht, Uplift Financial; Moderator: Larry Chiavaro, First Associates Loan Servicing, LLC. Understanding the products that work for you as a consumer is a key question all borrowers ask themselves; at LendIt USA 2017 the panel entitled Consumer Lending Leaders of Tomorrow discussed some of the up and coming platforms in the market today; LendingUSA focuses on point of sale financing to offer installment loans for expenses like a medical procedure, Uplift Financial uses 600 million pieces of data to tailor the best loan product to you from their network, MoneyLion provides financial wellness advice to help the consumer better understand the loan that fits their situation and BorrowersFirst uses their technology to offer a low cost product to their borrowers; these lenders have taken the time to understand consumers so they can provide the type of variety people are looking for in a market that con

Panelists include: Brad Selby, Affirm Inc.; Brandon Wright, Zibby; Carl Bartsch, Klarna; Aaron Allred, Acima Credit; Wayne Crane, Summit Amerifirst; Moderator: Demetris Papademetriou, Middlemarch Partners. Point of sale finance is not new, but it has changed significantly over time; panelists share how point of sale finance was done 40 years ago and what it looks like today; companies are working with merchants in different ways to serve their customers at the point of sale through improved user experience, buying power and saving the sale; the panel talks about how they go about pitching retailers including how point of sale can help the 100 million consumers who have FICOs of below 700, a demographic that Zibby serves; unique models represented on the panel are Acima Credit’s lease to own product and Summit Amerifirst’s product which finances home improvement loans through contractors.

By Insikt's James Gutierrez Providing credit to the underserved is something a lot of companies attempt to achieve; 138 million people in the US need access to credit and most of these individuals are concentrated in nine states; when it comes to credit there isn't a lot of options for non prime consumers; at LendIt USA 2017 James Gutierrez of Insikt discussed expanding access to credit where the consumer gets a personal touch to their experience; at his previous firm James offered face to face loans in Latino supermarkets to the underbanked; his experience there allowed him to bring that personal interaction to a digital platform without losing the intimate feel; Insikt is able to scale in a quicker fashion but still provide credit where the consumer knows they are getting an option that suits their needs.

Panel explores a diverse set of small business lenders based in Canada; topics covered include the differences of regulation, underwriting, and views on traditional banks between Canada and the rest of the world; Canada has five large banks which control a majority of the market which makes it hard to build a brand as an alternative lender; panelists answer how they can overcome this challenge and scale their business; they also share their thoughts on the current market opportunity and what the future holds for fintech companies in Canada.

Fintech innovation has been emerging in Latin America; LendIt USA 2017 featured a panel of Latin American market leaders moderated by Andres Fontao of Finnovista; panelists discussed what is happening in the Latin American fintech market and why there is an opportunity for fintech firms and specifically online lenders to be successful.

One of the more controversial items of the past year around the world has been the Brexit vote in the UK and at LendIt USA 2017 we hosted a panel of leading platforms to discuss what the vote has meant for their companies thus far; consensus opinion throughout the panel was that the campaign leading up to Brexit had a worse effect than the actually vote; most investors these platforms work with wanted Brexit, so the vote of leaving the EU was not a surprise to many platforms; origination volumes have rebounded since the vote and both small business and consumer markets are currently strong in the UK; during the campaign for Brexit a lot of uncertainty was in the market but that uncertainty and bad news was short lived; markets rebounded, the bad news cycles slowed and UK MPL platforms continue to show strength in the post Brexit world.

The China market is bigger than the US and they tend to move much faster; Emmanuel Daniel of The Asian Banker compares China today to 1971-1984 in the US when regulation was just beginning to be put in place; Credit China is an example of a successful P2P lender in China, now valued at $3 billion; Yew Kiat Phang speaks about the company, sharing how they initially were a traditional lender, constrained by capital and customers with single revenue streams; the company took a broad approach to fintech, first obtaining a third party payment license; company reported $12 billion in 2016 on their P2P lending platform; their payment gateway saw $30 billion in flow for 2016; Yew Kiat Phang shares other details on the company in the video.

Though fairly young, fintech in China has really taken off the last few years as Yihan Fang, CEO of Yirendai explained in her LendIt USA 2017 Keynote; when compared to other industries like insurance, fintech has shown a great deal of promise; payments have become widespread, online lending is growing steadily and new technologies like blockchain have taken off; this has allowed Yirendai to help the underbanked and create a credit data infrastructure; after a few high profile fraud cases the government has started to regulate the industry closely and the number of lenders has been consolidated; Yihan is optimistic about the future, she expects to be lending $15bn per year by 2020 and hopes to increase the average AUM of each high net worth investor on their platform.

The panel explores consumer litigation funding also known as pre-settlement funding, non-recourse funding or lawsuit lending; provides funding to plaintiffs who commonly have a personal injury case; money is used for life needs such as rent, mortgage, tuition, food etc. and is not a loan; LawCash has provided funding for around 100,000 cases and has been in operation since 2000; YieldStreet is an investment platform for investors to access these types of investments; other topics discussed are how litigation funding is uncorrelated, how deals are underwritten, transparency of companies in the industry and the evolution of litigation finance.

John Stein first looks to the past of investing in stocks with significant milestones such as the introduction of index funds, trade automation, and decreasing trading costs leading to the ability to be easily diversified; thus old models of charging people to trade or to be diversified don’t work; looking at the current and future trends John discusses that investors are now more responsible than ever for their own retirement and need advice; John Stein shares how Betterment is providing financial advice to more people; the company manages over $8 billion in assets and has 240,000 customers.

Offering products to retail investors is something a lot of online platforms have struggled with as they look for diverse funding sources; the panel at LendIt USA 2017 entitled: New Models of Raising Debt and Equity Funding: eREITs & More with Kendall Davis of Fundrise, Jilliene Helman of RealtyMogul.com and moderator Mesh Lakhani of Mark 2 Capital discussed one of these retail options; panelists focused on how they source deals, inbound versus outbound sales teams, and how you must learn to be selective when looking at dealflow; the eREIT is a good portfolio addition for investors, it is long term and lacks volatility; panelists also discussed their thoughts on the new Trump administration and future innovative ideas for their platforms.