The marketplace lending industry, particularly in the US, has always sat in a transient grey area between banking and tech firm, providing lending services while also preaching 'disruption', as Silicon Valley firms are fond of doing.
While the industry's image as the ethical and trendy alternative to banking was a great route to publicity in the industry’s infancy, marketplace lending ought to be well enough established for platforms to sell themselves on their core lending business.
At the LendIt Europe conference this week there was plenty of talk on the sidelines about the continuing negative headlines surrounding US lender SoFi.
Since its launch, SoFi has presented itself as the iconic lifestyle lender for millennials. It promoted decent refinancing rates for students with large potential future incomes, alongside dating services, career networking and a month’s supply of free avocado toast for its mortgage borrowers.
With life insurance and mortgage options also on offer, it marketed itself as a one stop financial shop for its 'members'. At SoFi, privately held, VC-funded and in no sense a cooperative, customers are nonetheless branded 'members'.
But it has been rocked by a series of damaging allegations against the company’s CEO and founder Mike Cagney.
These have severely dented its reputation, forced the resignation of Cagney in September and may have done serious harm to firm’s appeal.
The resignation of Cagney is a blow for the industry following the LendingClub scandal last year but despite the tribulations at SoFi show there is a divergence between the damage done to its chosen public image and the fundamental performance of its credit.
Despite the negative headlines engulfing its management, investors still bought an ABS offering from the company last week.
They bought the deal because fundamentally it was backed by good credit with solid underwriting on loans made to high quality borrowers.
That's a fine set of selling points, and it ought to be enough for other marketplace lenders.
It may seem vanilla, it may even seem boring, but platform lenders shouldn’t be seeking to steal headlines with gimmicks, they should be concentrating on using their clear technological prowess to continue to improve lending standards and to deliver returns to those investing directly or through ABS bonds.
“Judge thyself on thy lending” should be the commandment of the platform lending industry as it continues to evolve. In financial services, boring is a virtue.