Ron Suber serves as the president of Prosper, “America’s first online lending platform,” and brings more than 20 years of experience within the industry to the table. Recently, Lending Times had the opportunity to chat with Suber about the current state of the FinTech industry and where he thought it was heading. His insight and analysis may prove helpful for those individuals seeking a better understanding of the transition between traditional and marketplace lending.
The First Two Phases of FinTech
Suber began by saying he believes there are four phases of the FinTech Industry. The first phase began with establishing FinTech as a recognizable concept in what Suber calls the “Period of EAU: Education, Awareness, Understanding.” As with most pioneering ideas and industries, the biggest hurdle is often “fear of the unknown.” Suber comments that when the industry was getting off the ground, both industry insiders and the public reacted hesitantly to the idea of borrowing and lending on the Internet, which for most sounded “like a Ponzi scheme.” Phase One sought to establish FinTech as a legitimate course forward for lending.
Phase Two of FinTech took place early last year, according to Suber, when large finance and technology companies, as well as banks, started taking a sincere interest in marketplace lending, moving FinTech and online lending from what Suber had called a “novelty” to an “interesting new niche” in his 2015 LendIt Closing Keynote speech. Large companies and banks “sent their innovation teams and senior leadership to see all of us and find out what and how we were doing everything.” Alternative data and lending companies were no longer seen as competition but rather as potential partners for financial companies and institutions.
Phases 3 and 4: FinTech Today and the Optimistic Future
“Phase Three is now,” Suber says. Online lending platforms are going public, banks are trying to figure out how to partner with alternative lending and data companies, and regulation of the industry has begun. In this current phase, the impact of marketplace lenders has grown too great to be ignored or brushed off by the larger banks and companies. Several partnerships have formed this year between online lenders and banks, including Prosper and LendingClub with WebBank, OnDeck with JPMorgan, and Kabbage with Santander. While there has been a certain amount of leveling off to the skyrocketing growth of this industry, there is still much progress to come.
Morgan Stanley reported in June 2015 that marketplace lenders “could command $150 billion to $490 billion globally by 2020.” This kind of optimism leads to Suber’s Phase Four, where he predicts that there “will be rapid mergers, acquisitions, and full adoption into the main stream.” Often in his speeches and interviews, Suber compares the path of FinTech to that of Uber or AirBnB. These companies change the way the world sees transportation and lodging, and FinTech innovators have the ability to do the same for lending. Suber believes that the future of FinTech is “true ubiquity.”
Suber’s Five Lessons Learned in 2016 for Marketplace Lending:
The future of FinTech looks bright, but, as always, the path there is riddled with obstacles. As the president of Prosper, Suber has been asked by several organizations around the world to speak about his experience within the industry and what he has learned from this past year. He has shared some of this insight with Lending Times with the following five lessons from 2016:
- “We can’t do it alone.” Going back to the idea of EAU, Suber urges people in the industry to build trust and work together with both consumers and banks. Companies need to work in “transparency” with regulators, banks, and the public in order to thrive. “Education, Awareness, and Understanding” is an ongoing mission for the FinTech future.
- ”You better have awesome partners.” Similar to lesson #1, Suber’s lesson #2 is about building trust; not just with those outside the company, but with those inside the company, as well. Partners, advisors, leaders, and BOD need to work together “through good times and bad.” This may be read as an allusion to the rocky road LendingClub experienced this year, but Suber leaves this lesson open for all FinTech companies to consider.
- “Focus on what’s critical to improving your KPIs, your OKRs and your path to success and profitability.” Suber recognizes that there are many hurdles and diversions that stand in the way of success for FinTech companies, but some of the most detrimental of these impediments are disguised as brilliant ideas. “There are shiny objects in all of our offices, projects that looked and sounded cool at some point” but these projects don’t actually work, suck up valuable resources, and/or are unnecessary. In order to succeed, these distractions must be acknowledged and eliminated.
- “Our reputations take years to build and just a few minutes to tarnish.” Brand plays an important role in the FinTech world. A few years ago, no one knew what marketplace lending was, let alone a company that specialized in the field. LendingClub was soaring in popularity, growth, and profit before the scandal broke earlier this year. Unfortunately, LendingClub was not the only company to feel the backlash of distrust; LendIt founder Peter Renton called the news about the scandal “really bad” for the entire industry. Companies like OnDeck and Suber’s Prosper had to fight to rebuild the confidence of the public.
- “Victory goes to the ones who change and adjust” Suber often claims in his speeches and interviews that in the end, FinTech is about helping people, serving the public. Marketplace lending was born from innovation and must continue to innovate in order to survive. “It’s all about The Pivot,” Suber says. Forming partnerships with banks, complying with regulations, and helping a greater number of people borrow and invest responsibly can only be achieved by constant evolution.
While the path that lies ahead for FinTech may have its perils, there is a bright future to move towards. The industry will continue to move closer to Suber’s Phase Four as it continues to evolve for the needs of the consumer and innovate to create a steadier lending environment. It is apparent that will be a greater number of partnerships between marketplace lenders, data companies, compliance agencies, and financial institutions in the future.