The Lending Club case study discusses the system and processes of the company. It also looks at the threats faced by the company over time and how it has addressed these challenges to protect both its investors and borrowers.
Matthew Saucedo and Robert Siegel
Harvard Business Review (E597-PDF-ENG)
May 06, 2016
Case questions answered:
- Why is Lending Club needed?
- Are their approval process and pricing fair?
- What are the implications for regulators?
- How could the activities be structured in a better risk/reward manner?
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Lending Club Case Answers
Introduction – Lending Club
Lending Club became an American peer-to-peer lending corporation based in San Francisco, California. It was the primary peer-to-peer lender to check in its services as securities with the Securities and Exchange Commission (SEC) and to provide loan buying and selling on a secondary market.
At its top, the company became the world’s largest peer-to-peer lending platform. The employer claims that $15.98 billion in loans were originated via its platform as much as December 31, 2015 (“About Us | Save With Lendingclub”).
The purpose of the paper is to discuss the different aspects of this case study.
Why is Lending Club needed?
The Lending Club is one of the sites for availing personal loans online. The online site is one of the reputable destinations for the customer online.
The company offers general services to its customers. These are the special borrowings or credit card debt consolidation. The whole process involved in their services creates a peer-to-peer marketplace loaning process.
This peer-to-peer marketplace loaning process works by matching or connecting the borrowers with probable investors who are keen on investing or providing funds.
Through this system, both borrowers and investors benefit through the transaction process. The borrower who needs funding at the time of emergency gets funding. The investor who provides funding gets to profit from their investment in the form of interest.
Are their approval process and pricing fair?
The pricing process of the Lending Club is fair.
Initially, the company followed Zopa’s model. In this model, the investors provided money in CDs, which was then given as a small loan to the borrowers. However, the link between the borrower and lender was indirect in this kind of system. Hence, it covered up the transparency of the process.
This was quite a challenge for the company. Over time, the company explored other systems for its pricing process. Eventually, it came up…
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