LFP015 – Special Episode! The Amazing Story of US P2P With Peter Renton of Lend Academy


This is a mega-episode Xmas present special for London Fintech Podcast listeners 🙂  The world of Fintech has changed forever with this month’s successful twin IPOs on the NYSE of Lending Club and On Deck – both with valuations in ten figures.  It’s certainly an epochal shift for Alternative Finance Lending & Borrowing (P2P) around the world.

UK Fintech does not exist in a vacuum and it’s important to understand how other markets are evolving.  Naturally in a world of globalisation the US market and New York in particular are perhaps the most important “must knows” for anyone on the UK Fintech scene.

Above and beyond that the story of the US P2P is a cracker – the more I drilled into it the more that “fact” turned out to be once again better than “fiction” – and in this case more entertaining in terms of the twists and turns on the road.

I am delighted to be joined today by a man supremely able to tell that story from many angles.  As a commentator on the scene Peter Renton has been blogging for several years about the US P2P scene – long before it was hot and fashionable.  As an investor he has been an active participant and experienced its evolution first hand.

From his initial personal interest has grown a range of businesses – Peter is the founder of Lend Academy, co-founder of Lend Academy Investments, and co-founder of LendIt Conference which albeit mostly active in the US, had a very successful recent conference in the UK (you can see some great videos of the UK P2P presentations here) and one this year in Shanghai.  He has written a short, free e-book on the US P2P market which is freely available for download here.  He – clearly a busy guy – also finds the time to fit in a great podcast on the US P2P scene (search for “Lend Academy” on iTunes/Android App).

We have a wide-ranging conversation about the history of US P2P, the present and possible futures. We also discuss similarities and differences with the UK P2P market, what the UK market should be grateful for – and we don’t actually discuss where it’s falling behind – but how many UK multi-billion IPOs were there in December? 😉

Threading through this is one of the best stories out there about US P2P.  Superficial surfers might be tempted to think its just “the same old” US tech success story. Partially maybe.  However “Fintech is not Tech” is one of my mottos and the US P2P has trodden one of the more challenging and thorny paths to the floor of the NYSE (where Peter was as a special guest of Lending Club).

As we know P2P was invented in the UK by Zopa in 2005.

Prosper was the first major US player closely followed by Lending Club.  Interestingly (and rather lost to the mists of time perhaps) their origins were very social in nature – so for example on Prosper you could post a photo of yourself, have online usernames and all that jazz. Lending Club launched as a Facebook App.  Now the majority of US P2P funding is institutional in origin – quite a journey.

The crash hit the US P2P scene very hard (in part due to exposures to lower rated borrowers).  There was a class action suit against Prosper.  These difficult times continued when the SEC nearly crippled the industry by insisting that every loan that passes through the platforms be registered as a security :-O [so when you hear that the UK bunch have it easy (far from hindering the government invests tax payers money in some of them…) remember that!].

This lead to a quiescent phase in 08/09 and there were fears for the future. Foundation Capital for example didn’t invest in the first round of Lending Club (they did in the second) due to fears that the industry might not survive.

Fast forward and we have IPOs and in Lending Club’s case an ex-Morgan Stanley CEO and an ex-Treasury secretary onboard.  They really have become the newest entrant to the establishment.

Peter and I discuss whether this is the “End of the Beginning” or “The Beginning of the End”.

Either way it’s certainly an epochal shift.

Anyway I won’t spoil the Xmas fun with some tedious bullet point list of the angles we discuss – it’s a rich Xmas pudding of a diet and plenty of fruit for everyone.

Xmas is a time for social conscience and thinking of folks less well off than oneself. Personally I have huge reservations about the sole guiding principle of modern corporatism – “limitless greed” – aka no level of profits is ever enough (I was at one bank doing a gig – it made $15bn profits which it decided “wasn’t enough” so sacked thousands of staff :-().  If you think that is “victimless” look at this staggering Oxfam chart tweet today on the incredible correlation between a society’s wealth inequality and its social/health problems. As I touch on in the episode when I first learned investment some 30yrs ago the market used to recognise both growth stocks and value stocks.  Now everything is supposed to be a growth stock (and partly as a result of that unemployment is mega (albeit NB P2P research has shown that P2P/SME lending/funding creates employment)).

Anyway all that is as it is and rather an aside 😀 … however I say it to make the point that I am no uncritical repeater of the de facto US tech mantra that (in effect) the focal point of economies should be billion dollar IPOs and yet more wealth asymmetry.

Notwithstanding those personal views it seems axiomatic to me that if “Fintech” is ever to be a real threat to the #OldFS establishment then it needs size and it needs scale.  You can’t take on the battleships of #OldFS with a sleek canoe and some fit paddlers 😀

The US P2Ps have not had it easy in any way – they had a tough underwriting start; they had law suits; the “system” threw huge burdens in their way. Somehow they came through all of this and overtook the country that invented it all.

I wonder why?  What do you think are the reasons? What do you think the UK P2P scene can and should take away from this fascinating story?


A Merry Xmas and a Happy New Year to all readers and especially listeners to the London Fintech Podcast 🙂

I will see you in 2015 when we will all find out what will happen to the hot and frothy cappuccino that has been UK Fintech 2014 style when the bubbles fade.

Will we be left with a small weak latte? Will it be a large strong one?

We shall see but I aim to keep serving up macchiatos on the LFP show 🙂

Go well.