Ron Suber is one of the best known names in the marketplace lending world and a staunch champion of the future of online lending. For many years, Suber was President of Prosper – a leading platform that targets the consumer lending sector – mainly for refinancing expensive credit card debt.
In mid 2017, Suber left his executive role at Prosper and become the “President Emeritus” and an advisor to the company. In the ensuing months he traveled the world and evangelized about the benefits of Fintech. From Paris, to Melbourne, to different cities in China, Suber could be seen speaking about online lending trends and the golden age of Fintech.
Last fall, Crowdfund Insider caught up with Suber when he shared his thoughts on his “rewirement” – Suber’s term for the gearing down that takes place when you depart the intense environment of building a business. While rewirement (he already owns the domain) may be a temporary status before the next big thing comes around, Suber’s new existence is not about relaxing so much it is more about working for himself and providing value where he can to emerging Fintech firms.
One of the firms Suber is counseling is Credible, a platform that provides a new spin on connecting borrowers to loan originating platforms. Suber is the Chairman of the Board of Credible where he can share his many years of experience in both traditional and alternative finance. Credible, notably, recently completed an Initial Public Offering (IPO) but skipped over the US and selected the land down under instead. Shares now trade in Australia on the ASX after raising $50 million in the public offer.
At the end of last month, I caught up with Suber by telephone. I asked him about his thoughts on 2017 – specifically on the online lending industry – a sector of finance that is going through a period of change and perhaps revitalization.
[clickToTweet tweet=”#OnlineLending is going through a period of change and perhaps revitalization #Fintech” quote=”#OnlineLending is going through a period of change and perhaps revitalization #Fintech”]
Suber believes that many of the “adults” have entered the community and there is a lot more talent in the industry perhaps as much as they have ever had.
“[People] from the banking industry from the tech industry. We have grown up,” said Suber. “We had some people that were great from the early days but were not good for long term growth. There has bee a major turnover in the leadership at many of these companies. My call is that companies are focusing on cash flow, profitability and EBITDA for the first time. Earnings on GAAP basis … I think that is great for the industry. You are seeing companies generate cash. [In the past] Prosper did $400 million in month and it lost money. Now it is doing, say $200 million a month and it is making money. They are being run to be profitable businesses. That is the takeaway from 2017.”
Suber says that today, Prosper makes money every quarter. They have $100 million on the balance sheet and it gets higher every month. But as Prosper stabilizes several new challenges are entering the online lending space. If you look at Marcus, Goldman Sachs online lending platform, it is going gangbusters AND it has access to cheap capital at around 1% – something that gives it a bit of an advantage. So can the early entrants compete with the new shiny called Marcus? Suber says they definitely can but it will be a challenge.
“The answer is they can compete but they better figure out how to lower their cost of capital in 2018 and that is across all of the asset classes. The advantages of committed low cost capital cannot be beaten over time,”shared Suber. “If you look at some of the reports from the Hedge Funds and other Asset Managers, the returns are coming down. That is why the cost of capital needs to come down. That is true for every platform. They need to find more bank like capital.”
[clickToTweet tweet=”The advantages of committed low cost capital cannot be beaten over time #OnlineLending #MarketplaceLending” quote=”The advantages of committed low cost capital cannot be beaten over time #OnlineLending #MarketplaceLending”]
Suber says online lending platforms must be talking to the banks, pension funds, endowments, doing joint ventures, and more. International capital may be an option.
“We are seeing lots of money coming in from Asia to buy loans now. More than ever,” added Suber.
But can platforms like LendingClub and Prosper survive the incoming onslaught of new entrants? LendingClub, a reporting company, has had a tough two years as its stock has tanked while Wall Street looked elsewhere for growth.
“I think they can,” said Suber. “One of the other challenges is lowering cost per acquisition per borrower. Cross selling products are critical in 2018. Just doing consumer loans is not enough. You need to expand into other products in 2018, one product is not enough. You have to do it well and profitably. And that is what the Street is looking for … who can expand products and really do it not just issue a press release.”
The other challenge may be coming from big tech. This has already happened broadly in China with the likes of companies such as Alibaba. In the US, we are seeing a growing presence of big tech, like Amazon, Square or PayPal, effectively providing online lending in a low cost, user friendly basis.
“If you look at Amazon, they are already in business lending,” said stated Suber. “The businesses where they host the inventory – they are the natural lender. They have done billions of dollars in lending already. It would be a no brainer for Amazon to say borrow here for the consumer. Look at Square. Look at PayPal. They have gotten to the consumer to borrower and lend. Venmo has been remarkable for PayPal. Big tech has an opportunity. This is the golden era of Fintech. The winners are not yet defined but clearly it could be Alibaba, Apple, Amazon, PayPal, Facebook, Google etc.”
[clickToTweet tweet=”The winners are not yet defined but clearly it could be Alibaba, Apple, Amazon, PayPal, Facebook, Google etc #Fintech” quote=”The winners are not yet defined but clearly it could be Alibaba, Apple, Amazon, PayPal, Facebook, Google etc #Fintech”]
Shifting gears a bit to the political landscape and Suber is says he is bullish in the current climate and firmly believes online lending platforms are well prepared to weather any downturn. He believes interest rates will continue to inch up but marketplace lenders will match the rise. And besides, credit card rates are rising even faster.
So what is in store for 2018?
Suber says the first six months of rewirement have been completed in 2017. He is very excited for the next six months. He has been on the corporate speaking circuit sharing his experience to others outside the Fintech world. He has been sharing his story of lending, entrepreneurship and all of the ups, and the downs.
Suber has invested in 20 or so Fintech firms and he is advising in at least 10. He says three of these companies will have big announcements in the first quarter of 2018.
“I think there are some great entrepreneurs that will win big. I have two new companies I have recently invested in that I will announce soon. I am very excited about these companies and very bullish on the future.”
Suber says you are either as excited as you ever were about Fintech and online lending or totally scared – depending on where you sit.
“Me, I am excited as I have ever been,” stated Suber.
[clickToTweet tweet=”You are either as excited as you ever were about #Fintech or totally scared – depending on where you sit” quote=”You are either as excited as you ever were about #Fintech or totally scared – depending on where you sit”]