The Customer Effect

Everywhere you look, problems for marketplace lending

  • marketplace borrowers getting tapped out
  • Chinese lender requests nude pics as collateral
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Everywhere you look, problems for marketplace lending
Just when it seems like things can’t get worse for the marketplace lenders, well, they can. Reuters highlights a growing problem: Many online lenders have failed to detect the “stacking” of multiple loans by borrowers who slip through their automated credit processes and end up applying for multiple loans. Bill Kassul, a partner in Ranger Capital Group - which has about $300 million invested in marketplace lending and business lending - told Reuters that stacking has become a concern in the last two years and poses a “big risk” to investors. Never fear, though, there are some simple fixes can keep the stackers out, but current practices don’t seem to instill confidence (at least, optically). Timothy Li, CEO of MaxDecisions, helped build out the underwriting practices at some of today's top online lenders. He thinks there are some definitive behaviors that lenders can pick up on to prevent stacking. "Real time detection of bursts of applications being filed across lead generators to name one," he said. "These bursts are tell tale signs of a customer or a publisher taking out or presenting multiple offers to the consumer." Many of the problems that drove the news cycle around Lending Club and Prosper in the last few weeks, experts tell us, can be seen within the context of how the marketplace lending industry has evolved from single end-to-end service platforms to a networked ecosystem. "We are 100% confident that this networked ecosystem will replace the incumbent vertically integrated bank model, even if we cannot see exactly which ventures will thrive and in what timeframe," wrote Bernard Lunn.

Lending across the pond

Aside from a massive ponzi scheme, it looks like things are holding up better in Asia. China isn't only dominant in online lending, it's also the biggest market for fintech - the world just doesn’t know it yet. Chinese companies, ranked by market cap, dominate fintech with 4 of the top 5 fintech companies in the world. The largest company, Alibaba’s Ant Finance, recently closed the world’s largest private funding round for an Internet company at $4.5 billion.

Who needs FICO when you've got nude selfies?

Some alternative lenders are taking non-FICO credit scoring to a whole new level. Some Chinese online lenders accept nude photos as collateral. Think about it -- it's an ingenious idea. An online lender convinces (desperate) borrowers that they can secure a line of credit by sending in a revealing photo. Pay back your loan, and, well, we'll just make that photo disappear (seriously??). If you don't pay back your loan, we'll just post that naked selfie you sent us to the social webs for your friends, families, and colleagues to ogle. Just wow...but I bet you pay back that loan.

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