By Maria Elm | February 16, 2022
LendingClub has become synonymous with peer-to-peer (P2P) lending since its 2006 launch. But now, the company is diving into the cutthroat US neobank market—and CEO Scott Sanborn thinks it has all it needs to thrive there.
In an interview with Insider Intelligence, Sanborn lays out how the pandemic has made mobile a permanent habit for US banking customers, and why this gives providers an opportunity to develop next-gen offerings. He unpacks how LendingClub is taking advantage of this new landscape—like buying neobank Radius Bancorp (the deal closed in February 2021). He also dives into why he believes LendingClub’s P2P roots give it a key advantage in the fiercely competitive US neobanking market.
The following has been edited for clarity and brevity.
Insider Intelligence (II): What digital engagement trends do you think will have the biggest impact on lending and banking?
Scott Sanborn (SS): The pandemic has really accelerated trends in digital. It’s pushed consumers away from choosing a bank based on branch location and toward choosing a bank based on mobile, and it’s forced them to really engage with the mobile experience. I think that’s a permanent change in behavior we’re going to see.
And that gives digital players an advantage—those who can invest in the technology—to deliver a strong customer experience. When people have a mechanism in their hands that they’re checking daily, or at least several times a week, you’re gathering a lot of data. You’re seeing what’s happening with their expenses and with their income, and you’re able to use some of the latest [data analytic] techniques to predict what their needs are going to be. And you have a way to communicate with them about how you can help them, because they’re checking in with you all the time.
II: How will LendingClub evolve to take advantage of those trends?
SS: Our roots are in helping people lower the cost of their credit, using our marketplace model. We bring together a big ecosystem of lenders who compete for assets across the credit spectrum. But we have also acquired a digital bank, and that acquisition does a lot of things for LendingClub. Most notably, it completely transforms the financials of the business. It knocks out a lot of costs, brings in a lot of revenue, and strategically allows us to do more.
We can broaden what we’re doing on the lending side, and find other places to help people save on the cost of credit. We’ll move beyond lending, into spending and saving. Most fixed expenses like housing, education, and healthcare are going up—and we can be a real partner for our customers, acting in their best interests, identifying opportunities for savings, and presenting those in a seamless, integrated way. That’s the roadmap in front of us.
Our net promoter scores (NPSs) are in the 80s, and our customers want more from us. Eighty-three percent of our customers say they want to do more with us, and 90% say they would consider us to be their digital bank. So that’s where we’re headed.
We feel like we’ve got the best of both worlds: We’ve got the profit and the resilience of a bank, and the growth and agility of a fintech. Our vertically integrated model lets us capture more revenue than a fintech because we have—in addition to fee-based revenue—interest income coming in, and we’re not paying other banks to do the work for us. And, unlike a bank, we're not carrying legacy processes, infrastructure or branches, and that allows us to innovate at a pace that matches consumer needs.
II: With very low entry barriers to launching digital banks, and potential disruptors like super-apps, how do you think the regulatory environment will adjust?
SS: There’s been a lot of innovation, and it’s heating up. And, for the most part, it’s for the benefit of the consumer. Based on public statements from the key financial regulators, you can see that they’re looking at these developments and trying to find ways to expand the regulatory perimeter and get visibility into these new models. Just because you’re not a bank doesn’t mean you don’t need to be aware of your requirements for fair lending, for anti-money laundering, and all the rest.
We’re at an inflection point right now where I expect more attention and energy will be given to how these trends are playing out—for example, the Consumer Financial Protection Bureau (CFPB) is looking into buy now, pay later (BNPL) providers. That’s a natural development as these things have scaled, and regulators want to understand what risks they pose to consumers and the financial system, and to make sure that they’re governing accordingly.
For a deeper dive into where mobile factors into consumers’ banking choices—particularly for Gen Z and millennials—check out our “US Mobile Banking Benchmark.”