InvestingMarkets & Economy

Why online lending is still stuck in analog

Lending Club cratered this week, but the cause had nothing to do with its e-status
  • E-commerce focuses on price, as there is no other angle -- no local reputation (or vulnerability after bad service), no tires to kick.
  • Online has been just another means of access, the lending part unchanged, until some entrepreneurs tried to apply crowdfunding principles.
  • Technologists, bless their brave hearts, have been in a constant and massive effort to reinvent all of commerce, to see if online works better than the old way. Frequently, we’re left with businesses just as they were.

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Oh, the pleasure taken by an old guy at a new tekkie pratfall! Schadenfreude, the Germans call it. Too bad about Lending Club. Shed a crocodile tear. The history of online lending I am old enough to remember early electrons: my grandparents raised their voices on the phone proportionate to the physical distance to the other party; and when calling “long distance” kept egg timers by the phone to stay under three minutes. (Could we please make texting a “toll call”?) The first online lending appeared about 25 years ago, about the time we got our first email addresses. Then or since, anybody can make a loan online, in the sense of gathering information, approving and closing. But online sounded cool. Just as “untouched by human hands” in the 1950s replaced the prior benefits of “hand-made.” So, lenders appeared as websites, not just e-facilitation of ordinary lenders. What makes e-commerce different? E-commerce focuses on price, as there is no other an...