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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.

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...