In times of economic uncertainty, many people turn to credit cards to help make ends meet — but high interest rates can derail those plans and put the financial futures at risk. According to Scott Sanborn, CEO of LendingClub, 40% to 45% of Americans carry a credit card balance, and as inflation continues to boost costs and interest rates, many Americans are in more debt than ever before.
LendingClub, the only full-spectrum fintech marketplace bank, empowers its members to pay down high-interest debt, save money, and take control of their finances.
What makes LendingClub stand out from other, more traditional banks? In a recent episode of “Welcome to the Arena,” ICR’s Tom Ryan spoke with Sanborn about this and LendingClub’s triple-digit growth, accessible services accessible, and how they provide a great experience for both new and repeat customers.
LendingClub primarily aims to help customers lower the cost of their debt — but that’s just the beginning of the experience.
“Once we have that cost of credit lowered, we want to be able to use the banking experience to help them stay on top of it and manage that spending,” Sanborn says. This comes in the form of alerts about high spending, options for saving, and additional refinancing opportunities. Over time, this “flywheel” effect — where small wins build over time — has created real value for both shareholders and customers.
Because LendingClub never operated physical branches, it doesn’t have to contend with the organizational siloes and legacy technology systems that many traditional banks struggle with today. “We’re digitally native,” Sanborn says. “We’re able to construct a contextualized, personalized experience powered by data and machine learning.”
This model comes at the right time, as the COVID-19 pandemic accelerated the prioritization of mobile banking. Conversely, just five years ago, the primary reason people chose their bank was the location of the branch.
LendingClub offers a streamlined and automated digital experience. About 50 percent of the company’s users are repeat customers, which Sanborn attributes to an exceptional customer experience from day one. The company also recognizes the value of retaining customers and aims to reward and incentivize them accordingly. “[Repeat customers] bring a lower acquisition cost. They bring better credit performance. So, we’re going to pass that on to them in the form of a lower rate, and we’re going to make their experience seamless,” Sanborn says. “And that brings people back.”
In 2021, LendingClub acquired the digital bank, Radius Bancorp, which empowered the company to expand its offerings and deliver a more integrated customer experience. “It was transformative, both financially and strategically,” Sanborn says. Rather than pay banks to issue loans, LendingClub now captures that value by pulling their own loans and holding a portion of them, rather than selling them to third parties. “It basically eliminated a bunch of expenses and added a whole new revenue stream in the form of interest income,” he shares.
That acquisition enables the company to better serve both investors and borrowers. “Our status as a directly supervised institution dramatically increased our appeal as a counterparty for loan investors,” explains Sanborn. By aligning their interests with those of their loan buyers, LendingClub has proven that they are going to be good stewards of their capital.
For borrowers, the bank opens up new opportunities. Sanborn provides the example of auto loan refinancing. LendingClub might, for instance, be able to save a borrower $80 a month on an existing car loan. Now, they can offer to put half of that into a savings account and let it accumulate. “By the time you pay off your loan, you’re going to have five grand in savings,” he explains. “There are opportunities for us to broaden what we do for the customer and move beyond just that loan transaction.”
With that acquisition and its impressive growth, LendingClub has built a successful marketplace that helps its members improve their financial situations and meet their goals. To hear more about LendingClub’s business model, differentiators, and future plans, listen to the full podcast episode.