Lendit USA

Lendit USA

Posted 23 April 2015.

LendIt USA is the largest annual gathering of the online lending community, with thousands of participants from around the world attending the conference in NYC last week.

Most of the big names in peer to peer lending were attendees and guest speakers, including our own CEO, Neil Roberts.

Always an event full of fantastic insights and significant announcements, the conference was a roaring success. Here are some of our highlights.

Technology is king

There was a significant focus by many presenters on the powerful potential of technology in the financial sector.

The point was emphasised by Renaud Laplanche, CEO of Lending Club – who also announced a new partnership with Citi, one of the top three banks in the US.

Ron Suber, President of Prosper, whose address was described as both hopeful and sobering, discussed both how far the peer to peer lending industry has come, and the challenges that are ahead. His presentation is available here, and well worth a look.

But argubly the biggest highlight of the conference was Larry Summers’ keynote address.

As a world reknowned economist, former Secretary of the Treasury under the Clinton administration, former Director of the National Economic Council under the Obama administration and current member of the Board of Directors for Lending Club, the largest P2P platform in the US; his reputation is such that when Larry Summers speaks, the entire financial industry listens.

I think the conventional financial sector has, in important respects, let all its main constituents down over the last generation.

Opening with some pretty hefty and sombre numbers, Summers stated U.S. GDP this year is 10% lower than anticipated as of 2007 – a percentage that equates to $1.6 trillion and $20k lost annually for the average family of four in the US.

Finding the failures in the traditional system – and thus the opportunities for success – requires us to ask some questions that we don’t ask as often as we should, and to genuinely consider the answers.

What is the function of the financial system in a modern economy?

Summers’ answer is this: to connect those wishing to delay consumption and save their money – perhaps for retirement, or to buy a house – with those who have use for those resources – for home loans, public infrastructure, etc. Connecting savers with borrowers.

When that connection is not being made we see lower interest rates and lower levels of investment, like the U.S. is at present.

Is it meeting the needs of borrowers?

Summers’ answer to this question is a resounding “no”. Small business lending in the U.S. has flatlined, despite small business being the source of employment for around 50% of the employed population. Home ownership is down considerably, with home loans less readily available. Student loans show the same trend.

Is it meeting the needs of investors?

Once more, Summers’ answer is “no”, with investments falling “way short” of market returns – a great number of people around the world losing the majority or the entirety of their investments to mainstream financial institutions. And savers aren’t making any money either.

Technology-based businesses have the opportunity to transform finance over the next generation.

It’s hard to argue with Summers when he emphatically states that it’s time for “the creation of a financial system that will work more viably for savers and borrowers, and will work more viably for the benefit of the economy.”

Technology has the potential to revolutionise the traditional financial system, and address the respects in which it has failed. It can lower friction, lower cost, increase the availability and effective use of data, and increase customer satisfaction.

Online lending platforms that successfully utilise technology to this effect, have the opportunity to be massively successful. We’ve already seen Lending Club, Prosper and many other peer to peer lending platforms start and continue to achieve this success.

How do we do it?

These sobering facts and inspiring thoughts are all well and good – but how should they be put into action? Here’s Summers’ closing thought:

“When I think about the magnitude of the problems, and they are many, and I think about what I had a chance to see somewhat closely – the tendency towards dysfunction, the occasional ossification of tradition in Washington – I know that while the right public policies are hugely important, that the task of renewal of our financial system is not primarily one for public policy. It is primarily one for entrepreneurial innovation.”

It’s a powerful thought that Harmoney and the rest of the peer to peer lending industry have taken to heart. We highly recommend watching the video of his presentation above, or read Larry Summers’ Keynote address in its entirety.