3 ms·
To be fair, it is labelled a Cynic's Guide for a reason... I agree that LendingClub (and others, like Funding Circle) would be separate model from the ones lis
by joosters 11y ago
To be fair, it is labelled a Cynic's Guide for a reason...
I agree that LendingClub (and others, like Funding Circle) would be separate model from the ones listed in the article. Passing risk onto others and being paid a commission for the job of finding buyers & sellers. It's a little like his business model #4 but setting up a new exchange rather than using an existing one.
That said, these 'alternative investment' style companies haven't yet been tested. What will happen when the next downturn arrives, and lenders get hit with massive losses?
- tim333 11y agoI guess you could argue Transferwise and Stripe fit in "model #7. Getting your act together with respect to an industry standard where the industry has conspicuously failed to do so" which he's positive about.
- notahacker 11y agoMy guess is that for many of the equity platforms, it won't take until the next downturn... Being a shovel seller in a gold rush is profitable enough whilst it lasts; the bigger worry is that it's not unheard of for UK regulators to decide that retail customers deserve compensation for financial products which were inadequately explained and a really bad deal, and put the vendor on the hook for it. I can almost imagine the next wave of robocalls from claims consultancies...
- joosters 11y agoYeah, there's a load of these p2p lending companies in the UK, some of them even describing themselves as 'savings' schemes rather than as speculative investment. That kind of language is asking for trouble. The business model even has remarkable similarities to some of the fundamental problems that aggravated the last mortgage collapse: the people who are credit rating these investments (i.e. the companies like Lending Club, Funding Circle, Zopa, RateSetter, Saving Stream and so on) are not the people taking the risk. So there's a great chance that the credit ratings will turn out not to be robust enough. IMO these companies should be forced to invest some of their own money in each of their lending offerings.
- jackgavigan 11y ago> Passing risk onto others and being paid a commission for the job of finding buyers & sellers. That's basically what investment banks do (and people are pretty cynical about it).
- joosters 11y agoTheir occasional massive losses would hint that they don't always do a good job of passing on the risk.