After a Really Bad Month, FinTech Begins to Get Back on Track

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After a Really Bad Month, FinTech Begins to Get Back on Track

There’s really no sugar-coating the fact that the past few weeks have been pretty bleak in the world of FinTech. At the beginning of May, Prosper announced that it would be laying off 28% of its workforce and would even be subleasing some of its office space. That announcement hurt the already aching stock of other lenders. Yet that wasn’t even the worst of it.

Less than a week later marketplace lender Lending Club released mixed news when, at the head of what was actually a strong earnings quarter, the company announced that their CEO and founder Renaud Laplanche had resigned. To be sure Laplanche was not only the face of Lending Club but really the peer to peer lending sector as a whole. As a result lots of ink has been spilled lately about the future of peer to peer lending and whether the industry is now in jeopardy.

Despite a few apocalyptic think pieces there is now evidence that Lending Club and the marketplace lending sector as a whole is weathering the storm. Late last month the Singapore-based Shanda Group announced that it had purchased an 11.7% stake in Lending Club saying that the company “represented an attractive investment opportunity.” Additionally the company is said to be continuing talks with Citigroup regarding the bank purchasing some of the platform’s loans. This was confirmed by a Citi spokesperson who said, “we are productively engaged with Lending Club on a number of fronts.”

On top of those encouraging deals there are many who have come to the defense of Lending Club and expressed their long-term optimism. For example, in an opinion letter printed in The Wall Street Journal, Gilles Gade said, “Lending Club retains quality management and it appears the board exercises appropriate oversight that we believe should allow it to handle its challenges.” He went on to say, “We are confident, however, that both Lending Club and marketplace lenders’ response to these recent events will make the industry stronger in the long run.”

Of course with Laplanche’s resignation has come a renewed interest in regulation and ensuring that FinTech lenders are operating properly. That might sound scary to some but it’s important to remember this is nothing new to Lending Club, who back in 2008 actually shut down for six months in order to fully explain their model to the Securities and Exchange Commission (SEC) before moving forward. The company has also partnered with other FinTech firms in an effort to have the industry self-regulate including the formation of the Marketplace Lending Association (along with Prosper, Funding Circle and others) and signing onto the Small Business Borrowers’ Bill of Rights.

Yes May 2016 was a very bad month for peer to peer lenders, but the events of one month can’t take down what has been over eight years of work and growth. While the sector might not exactly be back to normal it is getting back on track thanks to new investors and continued support from older ones. At the end of the day expect the FinTech industry to be stronger going forward and prove doubters wrong just as they always have.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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