Renaud LaPlanche went from trying to help people get a better rate on credit card debt to taking on the entire banking industry.
LaPlanche is the CEO of Lending Club.
Lending Club got its footing in the financial services industry by being one of the first startups to streamline the financing process online.
More recently, LaPlanche’s company has gone from being a peer-to-peer lender to a multi-faceted financing shop.
In the process Lending Club has added the financing capacity of 200 community banks. If all the banks Lending Club has partnered with were actually its own, LaPlanche says his company would be the fourth-biggest bank in America.
Now, Lending Club is acting more like a bank. LaPlanche is taking Lending Club into new areas like lending to small businesses, pitting his company against another financial technology company expected to debut soon on public markets: PayPal.
“It’s hard for a bank to make $US50,000 small business loan,” LaPlanche said in New York this week.
Lending Club is hoping that between its technology and regional banks’ desire to diversify their borrower base through its app, that it will be able to claim a bigger share of a debt market that has been slow to recover in the wake of the financial crisis.
But LaPlanche isn’t just going for small business loans that big banks have neglected in the last five years.
Next, the company will get into new lines of business including auto loans and mortgage servicing.
LaPlanche points out that one-third of car sales are between consumers, and not sold by dealerships. Attaching financing options not to the established automakers, but to the numerous websites that facilitate second-hand car sales opens Lending Club’s doors to millions of potential borrowers.
Getting into mortgage servicing will only build that base even further. There, LaPlanche thinks Lending Club can take a process that drags on for six to eight weeks and reduce it to two.
“The main improvement is in the user experience,” he said, referring to Lending Club’s ability to expedite the financing process.
LaPlanche sees the banking industry as one that’s still ripe for disruption. He came up for the idea for Lending Club in 2006, when he received concurrent statements in the mail from his bank. The first statement was for his credit card, and charged whopping 18% APR. The second, his savings. That was returning him a mere 0.5%.
In the years that passed, LaPlanche has seen his startup blossom into a company that debuted on public markets. Soon, his company will have worked on $US10 billion in consumer loans. The San Francisco-based entrepreneur admits he didn’t have the aim to overturn the entire banking sector in 2006 when he decided to form his company. Instead, he just wanted to cut into the massive spread big banks enjoy through their savings and loans businesses.
He knows that part of what has helped Lending Club could not have been foreseen.
“We were helped by the financial crisis a bit,” he acknowledges.
The financial crisis did not only provide data models to help Lending Club make better loans, it ushered in banking regulations that provide him an advantage that is not as easily accessed by companies like Goldman Sachs and consumer banks like Wells Fargo.