$1M in loans in 100 days for LendingClub on Facebook, not too shabby
Thursday, September 13th, 2007
LendingClub just announced that they surpassed (barely) $1M in loans in their first 100 days of operating on Facebook.
For those of you not too quick with the math, that averages out to be $10,000 per day in loans. Of course, the trajectory is ramping up from $0 on day 1, so if we assume a linear growth trajectory (which given the chart LendingClub put out is pretty accurate), that works out to be $20,000 of loans on day 100. And then more the next day, and the next day, and you get the point.
Let me say that again, $20,000 in loans a day via the new Facebook channel with NO BANK INVOLVEMENT.
One question to think about is did these loans take away from loans that normally would have been done by a bank or credit union ? Or were these loans that would never have made it that far ? There were a total of 172 loans totaling just over $1M. Again, doing the math, the average loan was a little over $6000. This is not chump change, but also not that worthy of a bank getting involved in. Likely alot of these loans just never would have happened prior to the P2P lending phenomenon since the borrower would likely never had approached a bank in the first place.
Currently on LendingClub, there are already 683 registered lenders, meaning they have passed some qualification and know the risks.
Is this something for banks and credit unions to worry about ? Absolutley.
This has the classic tell-tale signs outlined in the great book Innovators Dilemma (by Clayton M. Christensen). The main point behind Innovators Dilemma is that when new things come out, they start small, and are hence universally poo-poo’d by the establish players. In the book, Christensen follows several industries where up and coming technology was ignored by big players because it was just a nit. Well, over a few years, that nit would each their lunch from the bottom up. It’s called a dilemma because the big players are wired to ignore these nits (after all, it may just represent 0.01% of the market at the start). They see the threat, but just can’t imagine it will ever amount to much. And then they get slammed, normally faster than anyone could every have imagined.
I think this LendingClub data should serve as a global wake up call for banks and credit unions. Now once everyone is awake, the next step is figuring out to make your own hay out of the p2p lending phenomenon.
Oh yeah, one more key point from Innovators Dilemma. You’d think a big player could just do the same thing as the small up and comer, and then just use their established place in the market to slam the small player. Ah yes, sounds great, but the problem is the new technology always has a lower cost and smaller margins, meaning the big player with their current business model and expense structure just cannot copy the small player without flat out losing money. And so the slow death spiral begins. If the big player is a 1 market company, this can literally be the beginning of the end. An example is SGI (Silicon Graphics), the vaunted Unix workstation maker of the 1990’s, literally wiped out in a few years by PCs, all the while, SGI thinking “PCs can never be workstations”.
