It’s Time for Marketplace Lending to Evolve, Prosper President Says

SAN FRANCISCO — The marketplace lending industry is no longer an alternative financial industry, Ron Suber, president of Prosper Marketplace, told attendees at Lendit 2016 Monday, and is heading towards becoming a full-fledged asset class.

“Marketplace lending in no longer an alternative investment, it’s no longer alternative fixed-income, it is an established fixed-income asset class,” Suber said. “This is about building a business that lasts, and in order to do that, we must be commercial, we must be institutional, and we must have the quality so that the biggest investor, and the bigger partners come on board with us.”

Although the industry has seen significant growth over the past year alone, Suber said, there are “very important” key components left to focus on.

“We need a secondary market. We need liquidity — we need to make this happen,” he said “And we’re working very closely as an industry with Orchard and others to create that liquidity and create that change in price.”

Even more important than that though, is a focus on underwriting – the “secret sauce,” as Suber called it. “Underwriting is still the most important thing we do,” he said. “More important than borrower acquisition, and even more important than capital markets.”

Prosper, and other marketplace lenders have “awesome analytics and data,” but it’s important to focus on finding borrowers that fit into a lender’s credit model, with the right price, at the right time, he said.

And finally, it’s important to remember that no industry, marketplace lending included, can survive and evolve without an ecosystem, Suber told attendees. Open systems thrive, closed systems don’t work, he said.

“We must stay transparent, and we must stay open to thrive,” he said. “While there might be 300 marketplace lenders here, and 3,000 in China, they’re not all going to make it. I don’t know which ones, but certain ones aren’t going to make it. It’s natural, it’s supposed to happen.

Learn more about the tech and disruption in the industry at Auto Finance Innovation 2016, May 11 in Fort Worth, Texas. Visit www.autofinanceinnovation.com