Hot Button Issues in Online Lending
Hot Button Issues in Online Lending panel at LendIt USA 2015, with Mike Cagney, Co-Founder & CEO of SoFi; Bobby Mehta, former President & CEO of TransUnion; Hans Morris, Managing Partner of NYCA; and moderator Nigel Morris, Managing Partner of QED Investors.
Credit facilitation has been very attractively enabled by technological tools, remarked Hans Morris of Nyca Partners at the top of the discussion on 'Hot Button Issues in Online Lending'.
Mehta drew attention to how incremental changes to loan underwriting practices impact the growth and quality of the marketplace. Mike Cagney, of leading student loan refinancers, SoFi corroborated that the liquidity that is so generated is what stimulates online lending, rather than performance.
Current regulations mean that online lenders like Sofi are able to benefit from the spread in lending rates for students at, for example, Stanford and San Jose State Universities, in a way that traditional banks are unable to.
In the view of Morris, the biggest test of resilience will be any chaos in the marketplace, not interest rates, as only 11 institutions provide 90% of the credit in the US. Behta suggested the best buffer against the credit cycle is the development of operational capabilities, particularly in relation to customer service.
Morris also highlighted the need for competitive advantage in the origination of online lending services, via such mechanisms as branding and the imperative to be transparent and fair in actual loan decisions.
Looking to the future, Morris posits that the inevitable increase in compliance and regulation will stymy the market, but perhaps offset the implicit danger of rapid growth at a huge scale. His main concern was the possibility of fraud in the origination of loans that could freeze the market if it were to approach 20%.
Mehta reiterated that improved operational capabilities would secure the future of the industry.