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A day after Google's investment in On Deck Capital hit the press, Google announced they had invested $125 million in Lending Club as they march towards an IPO next year.
Thanks to Isaac Stern of Yellowstone Capital for sending this to me:
http://blogs.wsj.com/digits/2013/05/...-lending-club/
good point syndicatemaster. I think what's important here is google getting aggressive on lending platforms.
Better watch out David...they're gonna give you a run for your money!Quote:
Originally Posted by Capital Stack
Actually their entrance into small business lending is imminent. That's pretty important.
http://www.lendacademy.com/lending-c...ing-operation/
Great find Gini CoQuote:
Originally Posted by Gini Co
Some very interesting takeaways:
"Experienced p2p investors know that the small business category on Lending Club is one of the worst performing categories of all – significantly underperforming debt consolidation loans. So doesn’t that mean it is a bad idea? I would answer no to that question. The people taking out “small business” loans on Lending Club today are really taking out personal loans and using it for small business purposes. What Lending Club is talking about here is creating a completely new underwriting model where the loan is made to the business not the individual."
Cute. I wish they were chasing us, reality is we are on their tailQuote:
Originally Posted by Chambo
Problem with P2P is the DA and AG are constantly watching them. They don't seem to care about B2BQuote:
Originally Posted by syndicatemaster
They're not chasing you....they are going to swallow you up and spit you out. Tammy better polish off her resumeQuote:
Originally Posted by Capital Stack
Google is one of the few companies I would like to see stay away from our industry. Hard to say for sure whether this is a step in that direction or not. Time will tell. The majority of growth in our industry relies on PPC and organic search results. Having Google as a competitor is probably the last thing we should wish for.
All the manipulation of SEO would be flushed down the toilet. Google will just put themselves top of everyone, all the timeQuote:
Originally Posted by Finance1
Right when we thought we were going mainstream! Lets see how this plays out!
Were doing OK to date smart ass. Experiencing explosive growth. And i can safely our platform today is one of the leaders in the market. Seems like captap from what i saw at ETA was automating with true offer, stips and esign, but will be targeting face to face sales.Quote:
Originally Posted by Chambo
In next two quarters you'll see CS marketing on google a 5min UW with offer, contract esign, and upload stips. So i can tell you with confidence, although not in comparison to google we will be taking a piece of the market share for platform driven origination's.
5 minute UW? ?!? for Real? THIS I have to see! If you can actually make it happen, I'll be the first to post and congratulate you
Stay tuned we have been integrating all the data points into our 1workforce. One last platform that reads merchant bank accounts daily will be completed in 5 weeks. From there we'll wright a program using the data and UW rules were looking to target.
i dont know about google, but, Paypal finished their beta test phase in the UK and now are entering the US market. Would be a direct competitor to Kabbage. The pilot will come from "Paypals online spot credit unit- Bill me later" which Ebay bought in 2008. Bill me Later gets funding from.....WEB BANK- a utah chartered bank.
Paypals partner lender in UK is called United Kapital.
Paypal already has experience in providing payment services to thousands of ebay based merchants.
ODC/NLBL are also chasing this vertical to.
Doesn't WEB BANK fund New Logic? So now WEB BANK is behind New Logic and Bill me Later?
Yes, but the relationship is more about compliance than anything else. Fed charters make is much much easier to do the loan thing. OnDeck used metabank in certain states and now they switched to Bank of Internet. ARF used Mission Valley and some other bank I can't remember. New Logic had to expand asap on the heels of OD. Going at it without bank backing is a compliance nightmare in many States and it takes a long time to be able to offer all 50. It's a shortcut and the banks involved basically make money for "free".Quote:
Originally Posted by Scott Williams
Scott, actually Webbank is a not an fdic but has an industrial bank charter in Utah. They don't fund anybody directly, but act as funder of record on loans for Newlogic, and others, because of loan regs. Their not actually the money but the servicing the loans.
ARF was the first to my knowledge to go to banks and be their exclusive servicing agent. they have direct sales reps and manage/underwrite and coinvest in each deal with banking partners. this was done to avoid usury issues as well. contracts are all on banks name. now we go many years later to on deck doing this and now new logic with webbank. it really is the only way to do loans in a regulatory environment in all 50 states. There is speculation other banks are looking at entering a relationship with a mca to do the loan setup as well. As with anything, if it is thriving and profitable, others will jump on the bandwagon. the difference here is the entry point is much more difficult to find a bank relationship to do this like ARF/ODC/NLBL have done. Whereas the mca product became a shelf product and anyone with money could do it and call the common name processors to split fund i.e. wild west. the loans have become a large portion of the overall business day to day and from what i hear, represents over 50% of CAN's business today and we all know the growth ODC has experienced with it. ARF didnt take their platform to the next level like ODC/NLBL did in terms of funding anywhere near the volume or industry base. The two giants today with bank relationships to do loans in all 50 states are NLBL and ODC. There will be more IMO as time goes on and others figure it out.
The issue with using a bank charter to service a product like ODC and New Logic is that those companies are now subject to regulatory review. The OCC and state bank regulators have, by extension, the right to review, audit and inspect any 3rd party relationships. So in theory the OCC could go to CAN or ODC offices for an audit. The regulatory bodies also have the right to tell the bank to terminate any 3rd party relationships at their discretion.
Quote:
Originally Posted by Capital Stack
Great point JBQuote:
Originally Posted by jbrown
it is a good point, however, if you rely on licensing in each state, you will find that there are 10+ states that will not work, limiting your loan product to certain states only. unless there is another way to avoid usury, you have to go through a chartered bank. That is why some companies who are carrying a loan product cannot lend in states such as TX and FL to name a few.
also, on the earlier post, Web Bank is indeed an FDIC.
http://www.webbank.com/
good find, i stand corrected thought that charter was different than an fdic
I think the bigger picture of banking reform has a lot to do with the growth of the MCA/Loan industry. It's ironic for me in some ways. I'm an ex-mortgage banker. I ran a good shop for 8 years before being pushed out because of increased costs, smaller margins, and endless regulation. Dodd-Frank destroyed the small mortgage broker/banker industry. It happened so swiftly that nobody could have seen it coming. It was an unintended consequence for the most part but nothing can change the outcome now. The consolidation in the industry is still continuing and the big winners of course are the big banks. The same folks that the regulation was supposed to "corral" ended up handing them the industry on a platter.
The same bill that destroyed mortgage lending for "the little guy" is helping our industry immensely. Capitalization requirements among a slew of other regulations will continue to make banks risk averse well into the future. For now, we have little to fear in regards to the big boys seeing opportunity and grabbing our market. The ONLY businesses that banks want to lend to are ones that do at 25M or more in annual revenue. Even 25M is the bottom of the food chain to most banks. I think the average loan/mca is somewhere around 30-40k or so. Probably not much more. There is zero institutional appetite for this stuff. And considering the MCA space began thriving when credit was fast and loose, it's a good indication for the viability of growth in this industry going forward.
Banks are currently capitalizing some of this industry and will mostly likely continue to increase investment but it's a clean hands approach. They clearly want someone else to handle the front lines and I can't see that changing anytime soon. If it didn't happen in 05-06 then there's no way it's going to happen in today's environment.
Another unintended consequence of Dodd-Frank is increased pressure on the margins of small to med sized banks. IMO- what we may see is more involvement from smaller banks trying to add to revenue streams by offering the same types of arrangements that webbank, bank of internet, metabank, mission valley, etc are currently doing. If this were to happen it could only help the industry grow. Yes, there will be more players out there but the untapped pool of under served businesses is huge. There's quite a bit of growth potential. Bank's willing to "license compliance" in exchange for servicing/management fees is likely going to be on the rise for the next couple of years.
Google will not be giving out any loans. It has billions of Gmail accounts. If it wanted to get into merchant lending here's what it does:
1. Wait for the SEC to finalize rules regarding the ability for non-accredited investors to purchase securities in businesses.
2. Build a platform. I'm pretty sure one of the thousands of 2 or 3 peson teams they have at Google have one completely built. Google has thousands of products we will never see, who knows, this may be one.
3. Run a beta. It has the largest e-mail list in the world, so they can make an announcement there.
4. Optimize.
5. Launch.
6. Own alternative lending.
I am not so sure that is the play Google is after, but I wouldn't be surprised. I think they're after the data - based on past behavior, but this could be a double whammy.
Google makes a lot of moves, not all of them you can take at face value. Remember their mission is to organize the worlds' information. That's a mission that should take another few lifetimes to accomplish.
Google Ventures is run by Kevin Rose (Founder of Digg). The "first" dot.com golden boy of the late zeroes. The relationship between Google Ventures and Google Inc., is one where Kevin and his team have been charged to separately find, and incubate the best ideas - outside of Google. Kevin Rose doesn't answer to Larry or Sergey. He answers to his own board.
OnDeck are Geniuses.
OnDeck is right not to focus on making a profit from lending money. They were brilliant to spend millions on data scientists. I remember seeing exactly what they saw back in 2009... I didn't have the team, they did.OnDeck gets it. It's not about profit from loans. It's about the data. They knew they would have a paying customer for their data before they started their journey. Furthermore, Google would not risk it's own money.
MCA is sitting on a Gold mine... Those little pieces of paper you collect through yoru fax machine allow you to aggregate data that Google, Facebook, etc would salivate over... Those little pieces of paper you collect through the fax machine allow you to sort, analyze, and innovate.
Google is to be taken seriously but never at face value. Remember Google 411 - late 90's / early 2000's? They didn't launch that product to help you find phone numbers. They launched it to get voice data to make its' speech recognition technology work better. Huge and successful tech companies are always "head faking" their way to domination... These guys are billionaires. Billionaires do billionaire things.
Random though: OnDeck is probably one of the very few companies positioned to dominate direct (snail) mail. If you know who you should be mailing things to, and when, it's easy.