Lending Times | Lauren Twardy | Oct 26, 2016

Ron Suber serves as the president of Prosper, “America’s first online lending platform,” and brings more than 20 years of experience within the industry to the table. Recently, Lending Times had the opportunity to chat with Suber about the current state of the FinTech industry and where he thought it was heading. His insight and analysis may prove helpful for those individuals seeking a better understanding of the transition between traditional and marketplace lending.

The First Two Phases of FinTech

Suber began by saying he believes there are four phases of the FinTech Industry. The first phase began with establishing FinTech as a recognizable concept in what Suber calls the “Period of EAU: Education, Awareness, Understanding.” As with most pioneering ideas and industries, the biggest hurdle is often “fear of the unknown.” Suber comments that when the industry was getting off the ground, both industry insiders and the public reacted hesitantly to the idea of borrowing and lending on the Internet, which for most sounded “like a Ponzi scheme.” Phase One sought to establish FinTech as a legitimate course forward for lending.

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Phase Two of FinTech took place early last year, according to Suber, when large finance and technology companies, as well as banks, started taking a sincere interest in marketplace lending, moving FinTech and online lending from what Suber had called a “novelty” to an “interesting new niche” in his 2015 LendIt Closing Keynote speech. Large companies and banks “sent their innovation teams and senior leadership to see all of us and find out what and how we were doing everything.” Alternative data and lending companies were no longer seen as competition but rather as potential partners for financial companies and institutions.

Phases 3 and 4: FinTech Today and the Optimistic Future

“Phase Three is now,” Suber says. Online lending platforms are going public, banks are trying to figure out how to partner with alternative lending and data companies, and regulation of the industry has begun. In this current phase, the impact of marketplace lenders has grown too great to be ignored or brushed off by the larger banks and companies. Several partnerships have formed this year between online lenders and banks, including Prosper and LendingClub with WebBank, OnDeck with JPMorgan, and Kabbage with Santander. While there has been a certain amount of leveling off to the skyrocketing growth of this industry, there is still much progress to come.

Morgan Stanley reported in June 2015 that marketplace lenders “could command $150 billion to $490 billion globally by 2020.” This kind of optimism leads to Suber’s Phase Four, where he predicts that there “will be rapid mergers, acquisitions, and full adoption into the main stream.”

Often in his speeches and interviews, Suber compares the path of FinTech to that of Uber or AirBnB. These companies change the way the world sees transportation and lodging, and FinTech innovators have the ability to do the same for lending. Suber believes that the future of FinTech is “true ubiquity.”

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