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The Lending Club Saga From a Different Point of View: For the Larger Good

In this article, I will talk about two main points. The first is whether the Lending Club issue is an isolated event or if it reflects upon the lending industry largely. Can it really be generalized? And the second point is the responsibility that growing (maturing) startups have to realize. After all, the regulatory and compliance rigor that banks indulge in is not that wrong—it’s a necessary evil. Online lenders need to build protection for all the stakeholders that traditional lenders maintain.

Let me start with a minor third point which I wanted to make in this context. The other two points are far more important (IMO)—after this paragraph, the rest of the article will be about them. In the famous TV series Silicon Valley, the newly hired CEO of the hypothetical startup (Pied Piper) is an industry veteran. He was hired after the founder was downplayed and outvoted by the VC with a majority stake (now). So against the founder’s will, this new CEO says that the product of the company is not the tech platform, or the founder himself—it’s the stock. If the stock performs well, everything else is secondary. The founder does not agree but can’t do much against the CEO and the VC. After Lending Club’s stock price nose-di ...

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