Record Number of Banks Want to Partner with Lending Club

Lending Club might be through the woods, thanks to banks.

Banks made up a “record” 40% of the lender’s almost $2 billion originations for the quarter, up from 31% last quarter, according to Lending Club CEO Scott Sanborn.

Sanborn said on the company’s earnings call yesterday:

Banks continued to ramp their purchasing as a major component of our diversified sources of capital. These partners remain a key differentiator for Lending Club. Their presence is a testament to the strength of our control environment and they are an important enabler of low rates for high quality borrowers.

Bank participation hit its lowest (for the past 12 months) in the third quarter of 2016 — 13% of the total $1.9 billion originations — and has been on a steady increase ever since. The origination volume for the lender hit $2.7 billion in 1Q16, and has fluctuated slightly below $2 billion from then on.

Sanborn cited the company’s increased focus on data analytics as another driver for the quarter, noting that its “data collected over a decade of lending is a unique competitive advantage.”

Increased access to data or otherwise, 40% of the company’s total $2 billion in originations for the quarter is not a small number. Banks seem to be regaining confidence in the alternative lender, despite tumultuous recent history (like the departure of Lending Club founder Renaud Laplanche, and his subsequent founding of a shiny new alternative lender called Upgrade).

Bank participation in the company’s success for the quarter was augmented by its continued focus on its marketplace strategy.

According to Sanborn, the company will continue to develop its marketplace strategy, and will not be pivoting to a direct-to-banks lending model. “[Lending Club’s] technology-powered marketplace model not only distinguishes us from online lenders and traditional banks, but is a more innovative, cost-effective, and efficient way to deliver affordable credit to borrowers, and solid risk adjusted returns to investors,” Sanborn said on the call. “Lending Club fundamentally changed the game for the deployment of capital and access to credit.”

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Grace Noto is Associate Editor of Bank Innovation. She has an MA from the University of Essex, as well as BA in English and a BA in Journalism from SUNY New Paltz. Prior to joining Bank Innovation in the summer of 2016, she worked on Electronic Products Magazine, an online publication surrounding technology and computer engineering, and has worked for other publications, including the Poughkeepsie Journal. She also writes in her spare time, and really needs more hobbies.

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