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Remember LendingClub which was a money lending business that touted it's machine learning KYC & AML process would automate the overhead but what happened was it

Remember LendingClub which was a money lending business that touted it's machine learning KYC & AML process would automate the overhead but what happened was it just let a ton of people with non existent credit to grab money...that they will never pay back. Techcrunch, news, tv, they had it all. I'm not saying Robinhood is bad or anything but the business model and the valuation built on top of it is very questionable. It's almost like gravity does not exist anymore. It's all about making it across the IPO finish line and then it's like fuck what happens to everyone else because I've already got Monssack Fonseca shuffling my untaxable money.

MichaelGG 9y ago
They "lend" you money to buy assets they hold, up to 2x. There's essentially zero risk for them. They don't lend you money you can cash out to your account. You buy $1000 of stock with your cash. They say cool your account can now "borrow" $1000 from us to buy more stock. If your stocks start crashing, they margin call and get their money back. The assets are always in their account, no risk to them. The only real risk is probably fraud. Sign up with stolen account A, cash out to mule account B. This happens a ton and for small amounts no one is gonna follow up on it, so it's up to Robinhood to detect and prevent this ahead of time.
dragonwriter 9y ago
> Remember LendingClub which was a money lending business that touted it's machine learning KYC & AML process would automate the overhead but what happened was it just let a ton of people with non existent credit to grab money...that they will never pay back. Last I checked, Lending club still had strong returns, even after their fees, for investors (though somewhat less attractive then the figures would suggest since it is taxable as personal income rather than capital gains), and a sub-5% default rate. This characterization seems to be pure fantasy.
- brilliantcode 9y ago
  https://seekingalpha.com/article/4009799-lending-club-online-lender-trouble https://seekingalpha.com/article/4009799-lending-club-online...

MichaelGG 9y ago

They "lend" you money to buy assets they hold, up to 2x. There's essentially zero risk for them. They don't lend you money you can cash out to your account. You buy $1000 of stock with your cash. They say cool your account can now "borrow" $1000 from us to buy more stock. If your stocks start crashing, they margin call and get their money back. The assets are always in their account, no risk to them. The only real risk is probably fraud. Sign up with stolen account A, cash out to mule account B. This happens a ton and for small amounts no one is gonna follow up on it, so it's up to Robinhood to detect and prevent this ahead of time.

dragonwriter 9y ago

> Remember LendingClub which was a money lending business that touted it's machine learning KYC & AML process would automate the overhead but what happened was it just let a ton of people with non existent credit to grab money...that they will never pay back. Last I checked, Lending club still had strong returns, even after their fees, for investors (though somewhat less attractive then the figures would suggest since it is taxable as personal income rather than capital gains), and a sub-5% default rate. This characterization seems to be pure fantasy.

brilliantcode 9y ago
https://seekingalpha.com/article/4009799-lending-club-online-lender-trouble https://seekingalpha.com/article/4009799-lending-club-online...