From LendIt USA 2017, held recently in NYC, this flip deck summarizes 18 of 36 Keynotes (CEO-level presentations) + one investor panel. More information is available on LendIt's website.

1. LendIt USA 2017
March 6 & 7
NYC
Synopses of Attended Sessions

2. Preface
Ralph
Daloisio 2
• The
5th annual
LendIt
conference
was
held
at
the
Jacob
Javits Center
in
NYC
on
March
6th and
7th
• Around
5,800
people
attended
• There
were
11
“tracks,”
of
which
up
to
9
were
occurring
simultaneously– making
it
impossible
for
one
person
to
cover
the
entire
conference
• This
deck
of
slides
summarizes
18
of
the
36
keynote
addresses
and
panels,
+
one
breakout
panel
• Slide
inlays
come
directly
from
the
presenters
themselves
• Added
bullet-­‐point
comments
reflect
notes
I
took
to
record
the
points
being
made
by
presenters
• Words
appearing
in
“[
]”
are
my
own
comments,
but
these
have
been
kept
to
a
minimum
• Slide
#8
lists
all
36
keynotes,
and
highlights
the
ones
summarized
in
this
deck
• Slides
#9
thru
#11
contain
my
conclusions
(to
be
read
at
your
own
peril,
if
read
at
all)
• Slides
#12
thru
#14
contain
the
“Top
Takeaways”
from
the
sessions
covered
• I
hope
you
find
some
useful
information
in
what
follows

3. Table
of
Contents (1/2)
Ralph
Daloisio 3
Topic
or
Presenter(s) Page Numbers
Historical
Number
of
Attendees
and
Exhibitors 5,6
LendIt USA
2017
”Bandwidth”:
Categories,
Topics,
and
(Number
of
Sessions) 7
List
of
Keynote
Sessions
and
Panels 8
My
Conclusions (read
at
your
own
peril) 9-­‐11
Top
Takeaways 12-­‐14
Scott
Sanborn, President
&
CEO,
Lending
Club 15
Ash
Gupta,
President
of
Global
Credit
Risk
and
Information
Management
at
American
Express 16
Nigel
Morris,
Managing
Partner,
QED 17-­‐19
Rob
Frohwein,
CEO
&
Co-­‐Founder,
Kabbage 20-­‐24
Ram
Ahluwalia,
CEO,
PeerIQ 25-­‐31
Investor
Insights
Panel:
Every
Originator
Will
Launch
a
Fund 32
Anthony
Hsieh,
CEO,
LoanDepot 33-­‐39

4. Table
of
Contents (2/2)
Ralph
Daloisio 4
Topic
or
Presenter(s) Page Numbers
Ron
Suber,
President,
Prosper 40-­‐43
Thomas
Curry,
Comptroller
of
the
Currency 44-­‐47
John
Sculley,
Vice
Chairman,
Lantern
Credit 48
Ken
Lin,
Founder
&
CEO,
Credit
Karma 49-­‐56
David
Girouard,
CEO,
Upstart 57,58
Rabobank,
Snehal Fulzele and
Marcel
Gerritsen 59-­‐61
Richard
Cordray,
Director,
CFPB 62-­‐66
Peter
Renton,
Chairman
&
Co-­‐Founder,
LendIt 67-­‐71
Jackie
Reses,
Lead,
Square
Capital 72
NovaCredit,
Winner
of
PitchIt 2017 73
Matt
Burton,
CEO
&
Co-­‐Founder,
Orchard 74-­‐78
Multiple
Participants,
Where
is
Alternative
Financing
Heading? 79-­‐82

5. LendIt
USA
Attendance
(Historical)
375 975
2,500
3,500
5,800
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2013 2014 2015 2016 2017
LendIt2USA2Attendance
#"of"Attendees
Ralph
Daloisio 5
Source:
“The
LendIt
Story.”
deBanked Magazine January/February
2017

6. LendIt
USA
Exhibitor
Participation
(Historical)
18
47
112
177
210
0
50
100
150
200
250
2013 2014 2015 2016 2017
LendIt0USA0Exhibitors
#"of"Exhibitors
Ralph
Daloisio 6
Source:
“The
LendIt
Story.”
deBanked Magazine January/February
2017

7. LendIt
USA
2017
“Bandwidth”:
Categories,
Topics
&
(#
of
Sessions)
Keynote
Sessions
Innovation
in
Lending
Innovation
in
Real
Estate
The
Fintech
Universe
Bank
Technology
The
Investor’s
Perspective
Company
Demos
Global
Perspective
Policy
&
Regulation
Financial
Inclusion
Training
for
Staff
DAY
1
(19)
Small
Business
Lending
(8)
Block-­‐
chain
(4)
Investor
Insights
(7)
(25) (8) (8) (8)
Sales
and
Mrkting
(4)
Insur-­‐
Tech
(4)
Fund
Manager
Pitches
(14)
Tech &
Ops
(4)
DAY
2
(17)
Credit
and
Under-­‐
writing
(9)
Digital
Mort-­‐
gages
(4)
Digital
Wealth
Manage-­‐
ment
(4)
Bank
Partner-­‐
ships
(4)
Autos,
SLs,
Equip.
Etc.
(7)
(20)
Consum-­‐
er
Lending
(8)
Resi-­‐ &
Commer-­‐
cial Real
Estate
(4)
Fintech
AI
&
Biomet-­‐
rics
(3)
Digital
Banking
(3)
Fund
Manager
Pitches
(15)
Ralph
Daloisio 7

8. List
of
Keynote
Speeches
and
Panels
(All
Held
in
the
Special
Events
Hall)
Summaries
Contained
within
are
Highlighted
in
Yellow
KEYNOTE DAY
ONE
MARCH
6TH DAY
TWO MARCH
7TH
1 Welcome Remarks
(Brustkern,
Jones,
and
Renton) Welcome
Remarks
(Renton)
2 Investing
in
the
Future
(Sanborn) Blockchain Revolution
(Don
and
Alex Tapscott)
3 Innovation in
Credit
Granting
with
Big
Data
(Gupta) The
End
of
the
Beginning
(Jenkins
and
King)
4 If
I
Were to
Start
a
Bank
Today,
This
is
What
it
Would
Look
Like
(Morris) Cognitive Computing
&
AI
are
Transforming
Financial
Services
(Walter)
5 Alternative Lending
is
Dead,
Long
Live
Data
(Frohwein) China
Fintech
Opportunity
to
the
World (Hai
and
Guo)
6 Why
Securitization &
Online
Lending
are
So
Important
(Ahluwalia) Unstoppable
Trends
in
Online
Lending
(Breslow)
7 Fintech:
The
View
from
Congress
(Congressman
McHenry) Scaling the
Movement
of
Financial
Inclusion
(Jung)
8 The
Future of
Advice
(Stein) Investing
with Impact:
Digital
Wealth
with
a
Conscience
(Walia)
9 Modern Lending:
Today
&
Tomorrow
(Hsieh) How
Marcus
is
Altering
the
Online
Lending
Landscape
(Talwar & O’Connell)
10 Trade
Finance
on
the
Blockchain (Htite) The
Marketplace
Lending Global
Overview
(Renton)
11 Online
Lending:
An
Industry
Built
to
Last
(Suber) Tech
Chat:
The
Role Lending
Can
Play
in
Empowering
More
Businesses
(Reses)
12 Financial
Technology
Innovation
&
the
Federal
Banking System
(Curry) Pitchit @
LendIt
Winner’s
Company
Demo
(Sigel)
13 The
Intersection of
Technology
and
Consumer
Credit
(Sculley) Expanding
the
Tent
for
Both
Investors
and
Originators
(Burton)
14 From
Wild to
Healthy
Growth:
China
Fintech
(Fang
&
Cao) Three
Years
Out:
Where
is
Alternative
Financing
Heading?
(5-­‐Person
Panel)
15 Personal
Loans:
The
Keys
to
Success (Lin) Pitchit @
LendIt
Audience Winner’s
Company
Demo
(Sigel)
16 Is
Fintech
More
Fin
than
Tech?
(Girouard) Taking
the
High Road:
There’s
a
Lot
Less
Traffic
There
(Wang)
17 Innovation
at
the
Edge:
Banks
Transition
to
Hybrids
(Fulzele &
Gerritsen) Closing
Remarks (Renton)
18 The
Latest
M&A
Trends in
Fintech
(McLaughlin
and
Ciporin)
19 Fintech
Innovation:
The
View
of
the
CFPB
(Cordray) Ralph
Daloisio 8

9. My
Conclusions
(read
at
your
own
peril) (1/3)
• The
threat
of
the
“titans
of
tech”
(Amazon,
Google,
Facebook,
etc)
stampeding
over
the
nascent
Fintech
industry
is
overblown,
baring
an
act
by
Congress
and
the
current
Administration
to
undo
the
Bank
Holding
Company
Act
which
clearly
separates
banking
and
commerce.
(Walmart
has
been
trying
to
expand
into
banking
for
years
with
minimal
inroads.)
And
given
the
ties
between
the
current
Administration
and
Goldman
Sachs
(the
best
marriage
yet
between
technology
and
banking),
it’s
only
a
distant
possibility
at
best.
• There
is
a
lot
of
”smoke
and
mirrors”
around
alternative
data’s
predictive
qualities.
• Good
science
often
leads
us
to
counter-­‐intuitive
results.
Beware
of
what
“feels
right.”
• More
independent
and
scientific
rigor
is
needed
to
validate
conclusions
drawn
from
new
sets
of
data.
• If
alternative
data
results
are
coming
from
someone
who
is
trying
to
offer
a
better
mousetrap,
there’s
an
inherent
bias
already
that
needs
to
be
overcome.
Ralph
Daloisio 9

10. My
Conclusions
(read
at
your
own
peril) (2/3)
• Traditional
bureau
scores
are
“behavioral”
estimates
that
rank-­‐order
riskiness
among
the
universe
of
borrowers
for
whom
a
score
can
be
assigned.
There
are
three
issues
here:
1. They
don’t
provide
a
complete
picture
of
a
borrower’s
willingness
and
ability
to
repay.
Better
information
is
needed
to
estimate
default
probabilities,
loss-­‐given
default,
and
default
correlations– all
of
which
are
necessary
to
efficiently
price
credit
portfolios.
2. People
have
been
learning
how
to
“manage”
their
bureau
scores.
(Credit
Karma
now
report
>
60
million
users,
which
equates
to
>
31%
of
the
scorable adult
population.)
A
system
observed
is
a
system
disturbed.
3. The
bureaus
are
under
political
pressure
to
advance
“financial
inclusion.”
New
approaches,
such
as
FICO’s
45-­‐day
“De-­‐dupe”
window
that
allows
shopping
for
a
mortgage
loan
to
count
as
only
one
inquiry,
may
change
the
behavior
of
the
bureau
scores
themselves.
Ralph
Daloisio 10

11. My
Conclusions
(read
at
your
own
peril) (3/3)
Ralph
Daloisio 11
• The
incursion
of
tech
into
information-­‐heavy
businesses
(e.g,
finance
and
insurance)
will
transform
those
industries
even
more
so
than
robotics
have
transformed
the
manufacturing
industries.
Tech
can
automate
paper
and
paper-­‐based
decisioning in
a
way
that’s
cheaper,
faster,
and
better
than
outsourcing
manufacturing
to
the
world’s
cheapest
labor
pools.
• Those
with
the
best
data
(not
the
most
data)
and
most
insightful
algorithms
will
have
the
advantage.
• The
industry
is
young,
mercurial,
and
unstable.
There
is
ample
opportunity
to
facilitate
maturity,
dependability,
and
stability.
• The
next
phase
of
growth
may
very
well
be
disruptive
to
the
disruptors
as
many
thinly
capitalized
entrants
fail
to
advance
to
the
next
level.
• The
financial
economy
will
evolve
the
way
the
individual
financial
consumers
(savers
and
borrowers)
need
it
to
evolve,
and
not
the
way
those
in
temporary
“control”
of
their
money
want
it
to.
Give
the
borrowers
and
savers
what
they
really
need
to
prudently
manage
their
current
finances
and
build
a
pathway
to
higher
levels
of
financial
success,
and
one
can
make
money
while
delivering
a
social
good.
After
all,
it
is
Main
Street
investing
and
lending
to
Main
Street.
Wall
Street
just
connects
the
two
sides
of
Main
Street.

12. Top
Takeaways
(1/3)
• Unsecured
consumer
MPLs
have
been
cutting
credit
and
raising
prices
to
counter
higher-­‐than-­‐
expected
losses
(Sanborn)
• The
next
recession
will
see
many
failures.
Stress
testing
into
the
forward
environment
will
be
essential
to
capitalizing
on
risk
and
opportunity.
Model
for
3x
base-­‐case
losses.
(Gupta)
• Heavy
frontier
investments
flowing
into
decision
science,
artificial
intelligence,
and
machine
learning (Gupta)
• Banks
offer
resiliency
(capital
and
liquidity)
and
Fintech
offers
flexibility,
but
each
is
operating
at
its
own
“fragile
extreme”
(Morris)
• Widespread
layoffs
in
online
lending
indicates
that
companies
are
not
as
“techified”
as
they
claim.
Technology
native
firms
don’t
need
to
dismiss
staff.
(Frohwein)
• Securitization
satisfies
the
5
traits
of
high-­‐quality
capital:
1)
Non-­‐recourse,
2)
Separate
credit
risk,
3)
Match-­‐funded,
4)
Low
cost,
and
5)
Diverse
pool
(Ahluwalia)
• Look
for
innovations
in
funding
vehicles
that
will
draw
in
larger
pools
of
institutional
and
retail
capital
(Mortara,
UBS)
Ralph
Daloisio 12

13. Top
Takeaways
(2/3)
• LoanDepot is
the
2nd largest
non-­‐bank
lender
in
the
marketplace
industry
and
it
has
less
than
2%
market
share.
Hence,
we
are
still
in
the
very
early
innings
(bottom
of
1st/top
of
2nd)
(Hsieh)
• Of
the
$12.6
trillion
in
consumer
debt
outstanding,
71%
of
it
is
mortgage
related,
making
it
the
single
largest
addressable
market
in
consumer
finance.
(Hsieh)
• The
5
keys
to
future
success,
in
2017:
1)
Loan
performance,
2)
Data
transparency,
3)
Platform
profitability,
4)
Customer
acquisition,
and
5)
Automation
(Suber)
• The
OCC
has
the
clear
legal
authority
to
issue
“Fintech
charters.”
The
charter
will
not
be
supervisory-­‐
lite
and
will
not
be
granted
to
applicants
with
predatory
or
abusive
lending
businesses
or
applicants
seeking
to
combine
banking
and
commerce
activities.
(Curry)
• We
no
longer
live
in
“linear
times.”
We
live
in
“logarithmic
times.”
Change
is
occurring
in
larger
amounts
over
shorter
time
periods,
and
the
effects
are
compounding.
(Sculley)
• We
are
about
to
see
a
huge
change
in
consumer
credit.
Banking
services
will
be
delivered
to
banking
customers
in
fundamentally
new
ways.
Many
companies
will
participate.
(Sculley)
Ralph
Daloisio 13

14. Top
Takeaways
(3/3)
• The
most
interesting
change
is
the
potential
for
machine
learning—White
Box
vs
Black
Box,
where
White
Box
=
transparent,
human
readable.
Non-­‐linear
symbolic
regression
(“NLSR”)
is
the
best
information
technology
for
processing
the
incredible
“exhaust”
of
consumer
data
being
generated
by
banks– and
banks
use
only
1%
of
their
data
exhaust
today.
(Sculley)
• 80%
of
Credit
Karma’s
60
million
users
are
active
on
mobile.
Increasingly,
consumer
borrowers
are
accessing
via
mobile
and
not
desktop.
(Lin)
• Lenders
can
win
market
share
by
offering
(1)
approval
certainty,
(2)
price
transparency,
and
(3)
simplicity.
(Lin)
[Most
borrowers
are
not
lawyers
or
bankers.]
• China
has,
[get
this],
over
2,448
P2P
lenders,
and
this
number
is
down
from
its
peak
in
2015
(Renton)
• MPLs
targeting
small
businesses
can
do
what
banks
can’t:
lend
to
the
28
million
businesses
in
the
US
which
need
a
simpler
way
of
borrowing
<$500,000
(Reses)
• Online
lending
is
expected
to
grow
from
$40
billion
today
to
$1
trillion
by
2020.
(Burton)
• There
will
be
more
businesses
folding
than
starting.
If
VCs
stop
funding
unprofitable
companies,
they
will
have
no
alternatives.
(Carroll)
Ralph
Daloisio 14

15. Scott
Sanborn,
President
&
CEO,
Lending
Club
• 60%
of
Lending
Club’s
business
is
refinancing
credit
card
debt
with
amortizing
loans
• Customers
report
saving
25%
over
their
credit
card
option
• Expansion
into
“Innovative
Micro-­‐Services”
(e.g.,
identity
verification,
loan
pricing)
• Can
be
offered
from
existing
Fintech
business
models
• Some
tech
firms
will
carve
market
niches
in
one
or
more
innovative
micro-­‐services
• 3
key
marketing
determinants
when
originating
consumer
loans
1. Will
you
give
me
a
loan?
2. How
much
will
it
cost?
3. How
hard
are
you
going
to
make
it
for
me?
Ralph
Daloisio 15

16. Ash
Gupta,
President
of
Global
Credit
Risk
and
Information
Management
at
American
Express
• Heavy
investments
are
being
made
in
decision
sciences,
machine
learning,
and
artificial
intelligence
• AmEx
has
1,500
data
scientists
spread
across
the
company
• Non-­‐bank
suppliers
of
funds
(endowments,
pensions,
insurance
companies,
and
SWFs)
could
enter
in
a
big
way
to
ally
with
Fintech’s
market-­‐share
grab
from
banks
• Getting
traditional
investors
into
new
asset
classes
being
approached
in
new
ways
is
a
real
challenge
• The
Next
Recession
• MPL’s
should
be
modeling
for
3x
current
credit
loss
in
the
next
recession
• Lots
of
the
post-­‐crisis
lenders
will
fail
in
the
next
recession
• Planning
and
organizing
for
this
will
be
highly
rewarding
• Stress
testing
into
the
forward
environment
is
critical
to
positioning
for
risk
and
reward
Ralph
Daloisio 16

17. Nigel
Morris,
Managing
Partner,
QED
• Banks
and
Fintech
are
operating
at
unsustainable
“fragile
extremes”
• Banks
have
capital
and
liquidity
trapped
within
an
inflexible
business
model
• Fintech
has
flexibility
that’s
restrained
by
a
lack
of
capital
and
liquidity
• Each
needs
to
move
closer
to
the
other
• Since
the
Great
Recession,
banks
have
not
covered
their
post-­‐crisis
average
cost
of
capital
• Striking
the
right
balance
between
Resilience
(Banks)
and
Flexibility
(Fintech)
is
“devilishly
difficult”
Ralph
Daloisio 17

18. Nigel
Morris,
Managing
Partner,
QED (1/2)
Ralph
Daloisio 18

19. Since the
Great
Recession
of 2008,
banks
have not
covered
their post
crisis cost
of equity
capital
Nigel
Morris,
Managing
Partner,
QED (2/2)
Ralph
Daloisio 19

20. Rob
Frohwein,
CEO
&
Co-­‐Founder,
Kabbage (1/5)
• The
question
most
Fintech
Alt
Lenders
asked:
Can
we
fill
the
void
left
by
banks?
• The
question
most
Fintech
Alt
Lenders
should
have
asked:
Why
aren’t
the
banks
filling
the
void
left
by
banks?
• Asking
the
wrong
question
left
them
racing
for
growth
in
customers
and
capital
• Most
online
lenders
started
their
business
the
day
they
made
their
first
loan
• 4
Expense
Categories
• Acquisition
and
Utilization
• Bad
Debt
• Capital
• Other
Operating
Expenses
• The
Fintech
Alt
Lenders
can’t
generate
a
lower
cost
of
capital
than
banks,
but
they
can
fundamentally
change
financial
services
if
their
technology
can
materially
lower
one
of
the
other
3
expense
categories
Ralph
Daloisio 20

21. Rob
Frohwein,
CEO
&
Co-­‐Founder,
Kabbage (2/5)
• The
biggest
piece
of
technology
offered
by
most
Fintech
Alt
Lenders
is
the
online
application
• There
is
nothing
special
about
the
online
application
• NextCard debuted
the
online
application
in
1999,
over
17
years
ago.
• Many
online
lenders
had
to
layoff
employees
at
the
slightest
sign
of
trouble
• Digitally
native
lenders
would
not
have
to
cut
staff
• Kabbage answered
the
right
question
by
concluding
that
banks
cannot
profitably
service
small
business
customers
• Kabbage connects
to
its
100,000+
small
business
customers
through
APIs
with
daily
data
updates
• Kabbage forged
bank
partnerships
with
3
leading
Global
Banks:
ING,
Santander,
and
Scotia
Bank
Ralph
Daloisio 21

22. Rob
Frohwein,
CEO
&
Co-­‐Founder,
Kabbage (3/5)
• Early
on
Kabbage required
borrower
consents
to
access
their
API
data
on
an
continual
basis
as
an
ongoing
lending
condition
• Banks
need
to
identify
a
more
cost
effective
way
to
serve
individuals
and
small
businesses
• A
focus
on
leveraging
technology
for
growth
and
funding
will
not
create
a
sustainable
partnership
with
banks
• Companies
that
understand
how
to
reduce
the
costs
of
acquisition,
bad
debt,
and
operations
will
build
long-­‐lasting
partnerships
with
banks
• There
has
been
mass
adoption
of
Kabbage’s data
infrastructure
globally
by
banks
• Kabbage will
build
more
vertically
directed
products
leveraging
its
existing
data
infrastructure
to
align
each
of
marketing,
business
development,
risk,
payments
&
collections
• Partnership
success
requires
one
to
solve
issues
banks
have
Ralph
Daloisio 22

23. Rob
Frohwein,
CEO
&
Co-­‐Founder,
Kabbage (4/5)
Ralph
Daloisio 23

24. Rob
Frohwein,
CEO
&
Co-­‐Founder,
Kabbage (5/5)
Ralph
Daloisio 24

25. Ram
Ahluwalia,
CEO,
PeerIQ (1/7)
• PeerIQ’s core
competency
is
a
data
and
analytics
provider
focused
on
MPLs
• A
lack
of
data
and
performance
history
is
making
it
difficult
for
ratings
agencies
to
project
expected
losses
(EL).
This
can
be
seen
in
the
divergence
in
EL
estimates
from
different
raters
(20%
in
a
latest
SoFi deal)
and
split
ratings
(IG/Non-­‐IG).
[I
would
add
ratings
shopping,
which
is
still
occurring.]
• Discrete
differentiation
across
multiple
platforms
• More
retail
friendly
products
• Movement
towards
a
3rd
party
ecosystem
for
data
verification,
loss
estimates,
etc.
• Credit
bureau
data
is
highly
predictive
• Acquisition
channel
is
usefully
predictive
too
• Benchmarking
is
important
Ralph
Daloisio 25

26. Ram
Ahluwalia,
CEO,
PeerIQ (2/7)
Ralph
Daloisio 26

27. Ram
Ahluwalia,
CEO,
PeerIQ (3/7)
Ralph
Daloisio 27

28. Ram
Ahluwalia,
CEO,
PeerIQ (4/7)
Ralph
Daloisio 28

29. Ram
Ahluwalia,
CEO,
PeerIQ (5/7)
Ralph
Daloisio 29

30. Ram
Ahluwalia,
CEO,
PeerIQ (6/7)
Ralph
Daloisio 30

31. Ram
Ahluwalia,
CEO,
PeerIQ (7/7)
Ralph
Daloisio 31

32. Investor
Insights
Panel:
Every
Originator
Will
Launch
a
Fund
• Every
asset
should
have
3
ways
of
being
funded
(Glenn
Goldman,
CEO
of
Credibly)
• Cross
River
is
prepared
to
keep
skin
in
the
game
by
retaining
what
is
being
originated
for
their
lender
partnerships.
Now
important
for
Cross
River
to
create
its
own
fund
and
would
look
to
partner
with
a
third-­‐party
fund
manager.
Big
question:
Asset
origination
vs
asset
management.
Should
the
twain
remain
connected
or
better
to
separate?
(Gilles
Gade,
Founder,
CEO
&
Chairman,
Cross
River)
• Players
don’t
consider
the
cost
of
not
having
diversified
and
the
need
for
permanent
capital
funding as
insurance
against
the
illiquid
periods.
West
Coast
less
concerned
about
diversity
and
sustainability
than
East
Coast.
(Jeff
Mortara,
UBS)
• Big
bid
for
yield
from
pension
and
sovereign,
but
they
are
looking
for
big
ticket.
Publicly
traded
pass
through
with
retail
participation
will
be
a
generic
optimal
structure
to
emerge
in
the
coming
years.
(Jeff
Mortara,
UBS)
• Money360
utilizes
a
traditional
Reg D
Private
Fund
exempt
from
the
‘40
ACT.
Designed
to
be
as
tax
efficient
as
possible
to
appeal
to
as
broad
a
swath
of
investors,
and
that
allows
leverage
to
be
added
to
the
capital
structure
to
lower
cost
of
capital.
(Dan
Vetter,
COO,
Money360)
Ralph
Daloisio 32

33. Anthony
Hsieh,
CEO,
LoanDepot (1/7)
• The
industry
is
still
in
its
very
early
stages:
the
“bottom
of
the
1st”
or
“top
of
the
2nd”
inning.
LoanDepot is
the
2nd largest
non-­‐bank
lender
in
the
marketplace
industry
and
it
has
less
than
2%
market
share.
• Since
the
2008
peak
of
$12.7
trillion,
consumer
debt
fell
to
a
low
of
$11.3T
in
2012.
It
has
taken
8
years
to
get
back
to
2008
levels,
standing
at
$12.6T
in
2016.
• Mortgage
debt
as
a
%
of
total
consumer
debt
has
fallen
from
79%
in
2007
to
71%
in
2016.
• When
the
market
“pivots
back”
to
residential
real
estate
finance,
those
marketplace
lenders
that
can
service
a
multi-­‐line
business
will
be
in
a
stronger
position.
• LoanDepot operates
a
“state
licensing
campus”
internally
to
manage
their
state
licensing
requirements
and
support
their
>1,000
LOs
who
collectively
hold
over
10,000
state
licenses.
• Non-­‐banks
must
be
very
smart
about
following
the
money
supply,
acknowledging
where
we
are,
and
sourcing
the
capital
necessary
to
fund
the
platforms.
Ralph
Daloisio 33

34. Anthony
Hsieh,
CEO,
LoanDepot (2/7)
Ralph
Daloisio 34

35. Anthony
Hsieh,
CEO,
LoanDepot (3/7)
Ralph
Daloisio 35

36. Anthony
Hsieh,
CEO,
LoanDepot (4/7)
Ralph
Daloisio 36

37. Anthony
Hsieh,
CEO,
LoanDepot (5/7)
Ralph
Daloisio 37

38. Anthony
Hsieh,
CEO,
LoanDepot (6/7)
Ralph
Daloisio 38

39. Anthony
Hsieh,
CEO,
LoanDepot (7/7)
Ralph
Daloisio 39

40. Ron
Suber,
President,
Prosper (1/4)
Ralph
Daloisio 40

41. Ron
Suber,
President,
Prosper (2/4)
Ralph
Daloisio 41

42. Ron
Suber,
President,
Prosper (3/4)
Ralph
Daloisio 42

43. Ron
Suber,
President,
Prosper (4/4)
Ralph
Daloisio 43

44. Thomas
Curry,
Comptroller
of
the
Currency (1/4)
• The
OCC
supervises
1,400
national
banks
and
federal
savings
associations
that
account
for
2/3rds
of
the
assets
held
by
U.S.
banks
(ie,
>$11
Trillion)
and
nearly
2/3rds
of
all
credit
card
balances.
• He
specifically
notes
the
power
of
the
Fintech
industry
to
“expand
financial
inclusion”
to
bring
“those
who
are
unbanked
and
underbanked
into
the
fold,
and
too
many
of
those
individuals
are
concentrated
in
low-­‐ and
moderate-­‐income
communities
that
are
often
the
most
vulnerable
to
financial
difficulty
and
predatory
practices.”
• The
OCC’s
initiatives
are
centered
around
the
concept
of
”responsible
innovation,”
defined
to
mean
“innovation
that
meets
the
evolving
needs
of
consumers,
businesses,
and
communities
in
a
manner
consistent
with
sound
risk
management
and
is
aligned
with
a
company’s
overall
business
strategy.”
For
Fintech’s
that
would
pursue
a
special
purpose
national
bank
charter,
this
includes
”rigorous
controls
and
governance
to
ensure
[they]
comply
with
applicable
laws
and
regulations,
provide
fair
access
to
[their]
services,
and
treat
[their]
customers
fairly.”
Compliance
and
risk
management
should
be
built
into
the
company’s
DNA
as
early
as
possible
in
the
evolution
of
their
business.
• The
OCC
has
and
will
continue
to
take
measures
to
support
and
foster
“responsible
innovation.”
Ralph
Daloisio 44

45. Thomas
Curry,
Comptroller
of
the
Currency (2/4)
OCC
Milestones
Towards
the
Special
Purpose
National
Bank
(“SPNB”)
charter
for
Fintech
Companies:
ü March
2016: Issues
“Perspective
on
Responsible
Innovation”
ü June
2016: Convenes
a
Forum
on
Innovation
ü October
2016: Issues
Framework
for
Responsible
Innovation
ü October
2016: Establishes
the
Office
of
Innovation
ü December
2016: Announces
Charters
for
Fintech
Companies
ü December
2016: Issues
Final
Rule
Governing
Receivership
for
Uninsured
National
Banks
ü March
2017: Issues
Draft
Licensing
Manual
for
Fintech
Charters
Ralph
Daloisio 45

46. Thomas
Curry,
Comptroller
of
the
Currency (3/4)
Other
Key
Points
from
Comptroller
Curry’s
LendIt
USA
2017
Speech:
• There
is
no
doubt
the
OCC
has
the
legal
authority
to
issue
SPNB
charters.
Authority
is
enshrined
in
the
National
Bank
Act.
Naysayers
are
patently
wrong.
• The
OCC
has
been
issuing
national
charters
to
banks
with
limited
purposes
for
decades– both
insured
and
uninsured.
• The
OCC
has
the
staff
and
competencies
necessary
to
supervise
Fintech
SPNBs
• The
SPNB
is
not
a
“ticket
to
light-­‐touch
supervision”.
It
will
include
• Regular,
on-­‐site
supervision
by
trained
and
highly
professional
examiners
• Assessment
of
whether
the
bank
is
operating
in
a
safe
and
sound
manner
and
complying
with
laws
that
protect
the
consumer
and
the
banking
system
• Laws
that
apply
uniquely
to
national
banks
would
also
apply
to
Fintech
national
banks
• Appropriate
capital
and
liquidity
standards
• Federal
pre-­‐emption
is
not
unlimited
(see
next
slide)
• “OCC
will
not
approve
charter
proposals
from
any
company
that
plans
to
offer
financial
products
and
services
with
predatory
or
abusive
features”
Ralph
Daloisio 46

47. Thomas
Curry,
Comptroller
of
the
Currency (4/4)
• Federal
pre-­‐emption
is
not
unlimited
• State
laws
will
still
apply
in
the
following
areas:
• Discrimination,
Fair
Lending,
Debt
Collection,
Taxation,
Zoning,
Crime,
and
Torts
• Federal
laws
apply
to
national
banks
• Federal
Trade
Commission
Act,
outlawing
unfair
or
deceptive
acts
or
practices
(“UDAP”)
• OCC
has
taken
the
position
that
state
UDAP
laws
apply
to
national
banks
• State
banks
have
the
same
power
as
national
banks
to
export
the
usury
laws
in
their
home
state
(granted
by
Congress
in
1980)
• OCC
understands
the
importance
of
maintaining
the
longstanding
separation
of
banking
and
commerce
• Proposals
that
would
mix
the
two
would
not
be
approved
Ralph
Daloisio 47

48. John
Sculley,
Vice
Chairman,
Lantern
Credit
• We
are
living
in
“exponential
time”
where
timeframes
are
rapidly
shortening
for
change.
We
are
no
longer
in
“linear
time.”
• We
are
about
to
see
a
huge
change
in
consumer
credit.
Many
companies
will
participate.
The
most
interesting
is
the
potential
for
machine
learning—White
Box
vs
Black
Box,
where
White
Box
=
transparent,
human
readable.
• Non-­‐linear
symbolic
regression
(“NLSR”)— acquired
this
technology
from
a
commodities
trading
firm.
• Banks
are
generating
an
incredible
“exhaust”
of
consumer
data
and
using
only
1%
of
it.
Lantern
can
process
this
massive
amounts
of
data
through
a
NLSR
machine-­‐learning
platform.
• Lantern
is
a
White
Label
B2B2C
platform.
• He’s
amazed
by
how
much
talent
has
entered
the
industry,
and
globally.
• Bill
Gates:
We
will
have
to
“tax
the
robots”
because
tech
will
replace
human
labor.
• Lantern
will
be
launching
in
the
US
by
middle
of
this
year
with
their
White
Box
solution
to
consumer
credit,
with
partners
he
cannot
disclose.
• There
are
fundamentally
new
ways
in
which
banking
services
will
be
delivered
to
customers.
Ralph
Daloisio 48

49. Ken
Lin,
Founder
&
CEO,
Credit
Karma (1/8)
• With
60
million
members,
Credit
Karma
sees
almost
$4T
of
consumer
credit
(~25%)
• Credit
performance
has
been
deteriorating
among
online
lenders
• They
have
raised
APRs
and
tightened
underwriting
in
response,
causing
them
to
lose
market
share
• Increasingly,
consumer
borrowers
are
accessing
via
mobile
and
not
desktop
• There
is
a
need
to
utilize
alternative
data
sets
to
reduce
reliance
on
credit
bureaus
• User
data
can
be
captured
to
drive
insights
into
behavior
for
predictive
purposes
• Three
consumer
“pain
points”
to
solve
for
the
consumer
in
order
to
win
market
share
1. Certainty.
Give
them
certainty
of
approval
before
they
apply.
2. Transparency.
They
need
to
know
how
much
it
will
cost.
3. Simplicity.
Make
it
easy
for
them
to
engage
and
understand.
[Most
are
not
lawyers
or
bankers.]
• Use
UserX to
drive
a
differentiated
experience
and
drive
down
acquisition
costs
Ralph
Daloisio 49

50. Ken
Lin,
Founder
&
CEO,
Credit
Karma (2/8)
Ralph
Daloisio 50

51. Ken
Lin,
Founder
&
CEO,
Credit
Karma (3/8)
Ralph
Daloisio 51

52. Ken
Lin,
Founder
&
CEO,
Credit
Karma (4/8)
Ralph
Daloisio 52

53. Ken
Lin,
Founder
&
CEO,
Credit
Karma (5/8)
Ralph
Daloisio 53

54. Ken
Lin,
Founder
&
CEO,
Credit
Karma (6/8)
Ralph
Daloisio 54

55. Ken
Lin,
Founder
&
CEO,
Credit
Karma (7/8)
Ralph
Daloisio 55

56. Ken
Lin,
Founder
&
CEO,
Credit
Karma (8/8)
[Is
Unsecured
Personal
Credit
Efficiently
Priced,
or
are
Bureau
Scores
Poor
Predictors
of
Expected
Loss?]
Ralph
Daloisio 56

57. David
Girouard,
CEO,
Upstart (1/2)
• MPLs
are
not
meeting
the
definition
of
a
“marketplace”
(dynamic
pricing,
superior
liquidity,
near
zero
acquisition
costs,
and
network
effects)
• True
tech
disruption
is
“qualified
borrowers
have
easy
access
to
credit
at
rates
that
reflect
risk.”
We
cannot
be
further
from
this
today.
We
are
leaving
out
at
least
half
the
people
who
should
have
access
to
credit
and
those
with
access
to
it
are
paying
too
much
for
it.
• In
a
decade,
every
credit
decision
will
be
made
by
AI/ML
(more
data,
advanced
math,
real-­‐time
continuous
learning).
More
data
will
generally
prove
more
people
credit
worthy
than
not.
• Gradient
smoothing
and
gradient
boosting
are
supplanting
liner
regression.
These
technologies
are
being
used
in
Alexa
and
Autonomous
driving.
Discrete
version
releases
are
not
real-­‐time
continuous
learning.
• R2 for
FICO
is
41%
on
their
50,000
loans
(each
red
dot
represents
4,000
loans-­‐-­‐ shown
on
next
slide).
Upstart
had
54%
R2 in
their
May
2014
release,
which
improved
to
86%
in
Jan
2017.
Upstart
score
now
more
than
twice
the
R2 of
FICO.
Ralph
Daloisio 57

58. David
Girouard,
CEO,
Upstart (2/2)
Ralph
Daloisio 58

59. Rabobank,
Snehal Fulzele and
Marcel
Gerritsen (1/3)
• Rabobank
is
transforming
itself
from
a
bank
to
a
hybrid
platform
lender,
where
it
will
match
fund
alongside
a
variety
of
co-­‐investors
with
varied
investment
parameters.
• Rabobank
will
retain
51%
of
the
loan
and
“syndicate/distribute”
49%.
• Rabobank
is
a
good
candidate
for
this
transformation
• Founded
over
100
years
ago
as
a
cooperative
of
wealthy
farmers
to
lend
money
to
the
poorer
farmers;
• Currently
bank
2
of
every
3
SMEs
operating
in
the
Netherlands.
Ralph
Daloisio 59

60. Rabobank,
Snehal Fulzele and
Marcel
Gerritsen (2/3)
Ralph
Daloisio 60

61. Rabobank,
Snehal Fulzele and
Marcel
Gerritsen (3/3)
Ralph
Daloisio 61

62. Richard
Cordray,
Director,
CFPB (1/5)
• As
innovations
drive
new
services
for
consumers
and
transform
how
they
conduct
their
finances,
the
CFPB
wants
to
put
consumers
first
and
provide
them
with
more
tools
to
take
control
of
their
financial
lives
• The
CFPB
is
the
single
federal
agency
whose
sole
mission
is
to
protect
consumers
in
the
financial
marketplace,
which
includes
monitoring
rapid
changes
in
new
technologies
affecting:
• Transactions
• Lending
• Underwriting
• Money
management
Ralph
Daloisio 62

63. Richard
Cordray,
Director,
CFPB (2/5)
• Two
Overarching
Principles
1. A
level
playing
field
for
all
providers
of
consumer
financial
products
and
services.
All
market
participants– whether
large
banks
or
small
Fintech
startups– must
be
held
to
the
same
standards
of
compliance
with
the
law.
2. All
providers
should
make
sure
that
consumer
protections
are
built
into
emerging
products
and
services
right
from
the
start.
They
must
be
essential
elements
of
the
business
model.
• Three
broad
areas
of
focus
1. Project
Catalyst
2. Consumer
control
over
personal
financial
data
3. Benefits
and
risks
of
using
unconventional
sources
of
data
to
underwrite
loans
• The
information
consumers
need
to
make
decisions
about
their
economic
opportunities
must
be
accessible,
accurate,
and
reliable.
Ralph
Daloisio 63

64. Richard
Cordray,
Director,
CFPB (3/5)
• Project
Catalyst
• “Office
Hours”
program
where
the
CFPB
engages
with
startups,
nonprofits,
banks,
and
other
financial
companies.
• What
does
and
does
not
work
for
consumers
• Potential
challenges
facing
entrepreneurs
and
investors
• Two
examples
of
research
pilot
programs
• Pilot
program
for
consumer
savings
plan
• Early-­‐intervention
credit
counseling
pilot
• Trial
Disclosure
Waiver
Policy
• Design
and
testing
of
alternative
consumer
disclosures
via
new
technologies
and
innovative
approaches
• Goal
is
greater
transparency,
better
consumer
understanding,
and/or
reduced
costs
• No-­‐Action
Letter
Policy
• Intended
to
promote
novel
products
falling
outside
existing
regulatory
structure
• States
that
the
CFPB
does
not
intend
to
recommend
any
supervisory
or
enforcement
action
based
on
the
covered
innovations
for
a
defined
period.
Ralph
Daloisio 64

65. Richard
Cordray,
Director,
CFPB (4/5)
• Consumer
Financial
Data
• The
information
being
recorded
on
consumers
from
their
many
different
financial
accounts
(e.g.,
checking,
savings,
investment,
mortgage,
credit
card,
auto
loan,
student
loan,
etc.)
can
be
a
valuable
asset.
• Such
information
matters
as
much
or
more
to
their
financial
situations
than
the
dollars
they
actually
have
in
their
accounts
at
any
given
time.
• Request
for
Information
issued
in
November
2016
inquiring
about
the
challenges
consumers
face
in
accessing,
using,
and
securely
sharing
their
financial
records.
• Concerned
about
reports
that
some
institutions
may
be
limiting
or
restricting
access
unduly.
Ralph
Daloisio 65

66. Richard
Cordray,
Director,
CFPB (5/5)
• Alternative
Data
• CFPB
estimates
that
26
million
Americans
are
“credit
invisible”
(no
credit
history)
• CFPB
estimates
that
another
19
million
Americans
have
credit
histories
that
are
too
limited
or
have
been
inactive
for
too
long
to
generate
a
reliable
credit
score
• So,
45
million
Americans
are
credit-­‐removed.
For
them,
in
comparison
to
the
credit-­‐connected
(~190
million),
financing
their
lives
is
riskier,
takes
longer,
costs
more,
and
does
not
help
their
financial
futures
as
much.
• Adding
alternative
data
may
make
it
possible
to
open
up
more
affordable
and
accessible
forms
of
credit
for
millions
of
additional
consumers.
• February
2017
Request
for
Information
• Alternative
data
available
today,
and
the
advantages
and
disadvantages
in
using
it
• Alternative
data
and
technologies
of
the
future
• Main
topics
of
inquiry:
1. Can
alternative
data
help
lenders
better
assess
creditworthiness
and
open
access
to
the
credit-­‐removed?
2. Will
this
lead
to
more
complex
lending
decisions
for
consumers
and
industry?
3. How
will
the
costs
and
services
in
making
credit
decisions
be
impacted?
4. Is
alternative
data
error
prone,
and
how
difficult
will
it
be
for
consumers
to
identify
and
correct
the
errors?
5. How
might
the
use
of
alternative
data
violate
fair
lending
laws
or
create
other
risks
for
vulnerable
consumers?
Ralph
Daloisio 66

67. Peter
Renton,
Chairman
&
Co-­‐Founder,
LendIt (1/5)
• Profitability
is
now
the
focus
• Banks
are
going
to
become
ever
more
important
to
the
development
of
this
industry
• There
were
262
entries
for
LendIt’s
PitchIt.
NovaCredit won.
• US
Platforms
thinking
of
raising
$
should
be
in
China.
China’s
influence
is
growing.
• Biggest
US
stories
in
2016
• Lending
Club
challenges
• OCC
Fintech
Charter
• Goldman
Sachs
launches
Marcus
• The
first
lending
platform
failures
• Securitization
market
grows
• Industry
associations
get
some
traction
Ralph
Daloisio 67

68. Peter
Renton,
Chairman
&
Co-­‐Founder,
LendIt (2/5)
Ralph
Daloisio 68

69. Peter
Renton,
Chairman
&
Co-­‐Founder,
LendIt (3/5)
Ralph
Daloisio 69

70. Peter
Renton,
Chairman
&
Co-­‐Founder,
LendIt (4/5)
Ralph
Daloisio 70

71. Peter
Renton,
Chairman
&
Co-­‐Founder,
LendIt (5/5)
Ralph
Daloisio 71

72. Jackie
Reses,
Lead,
Square
Capital
• Vast
majority
of
the
very
small
businesses
in
the
US
want
loans
<$500,000
while
lenders’
minimum
is
$1,000,000.
• Documentation
is
too
complex
and
demanding
for
these
types
of
borrowers
(28
million
in
the
USA).
• With
2.1
million
merchants
on
the
Square
dashboard,
offers
are
displayed
and
within
3
clicks
and
within
24
hours
the
small
business
can
get
the
capital
it
needs
over
the
time
it
needs
it.
• Repayment
can
occur
through
daily
card
sales
which
matches
their
cash
inflow
to
their
debt
service
burden.
• $120B
estimated
in
pent
up
demand
for
small
business
loans
vs
maybe
$15
billion
outstanding
in
all
of
US
Fintech.
• Small
businesses
really
need
outsourced
services
for
credit
and
management.
• Square
earns
the
trust
of
their
merchants
from
the
very
beginning,
since
they
commence
the
relationship
with
merchant
card
services.
Shows
simple
and
transparent
figures
for
borrowings
that
foster
trust.
• In
2016
switched
MCA
product
to
a
loan.
Sellers
wanted
to
prepay
their
MCA
but
could
not
due
to
the
“product
design.”
• Feels
the
entire
industry
has
only
just
started.
Loans
have
been
around
for
hundreds
of
years
and
capital
fungibility is
high.
Speed,
Transparency,
and
Flexibility
have
only
recently
become
features
of
the
commoditized
product
of
lending.
• Rates
to
rise
due
to
GDP,
Employment,
Inflation…
but
Square
has
not
had
to
raise
rates
and
expects
overtime
its
cost
of
capital
will
decline
as
it
scales.
Small
business
is
less
yield
sensitive
in
the
economy.
[No
wonder.
APRs
are
huge.]
Ralph
Daloisio 72

73. NovaCredit,
Winner
of
PitchIt 2017
• 1st Place
in
a
field
of
262
entries.
• Took
1st in
both the
Company
Demo
Category
AND
the
Audience
Demo
Category
• Arose
to
address
a
market
need:
individual
credit
profiles
did
not
follow
the
individuals
as
they
relocated
around
the
globe.
• Local
lenders
could
not
or
did
not
want
to
lend
money
to
their
customer
in
a
foreign
jurisdiction
and
currency,
while
local
lenders
had
no
access
to
credit
bureau
information
for
use
in
making
local
lending
decisions.
• “Globetrotters”
were
“credit
paralyzed”.
• NovaCredit converts
localized,
immobile
systems
of
credit-­‐grading
individuals
into
a
global,
mobile
system.
• NovaCredit is
building
a
cross
border
credit
bureau.
• NovaCredit’s Passport
is
their
answer
to
assembling
data
from
multiple
credit
bureaus
around
the
world.
• Interacting
with
200
bureaus
around
the
world
now.
• NovaCredit has
emerged
as
the
“Switzerland”
of
credit
bureaus.
• Fully
reciprocal
system
allows
positive
and
negative
information
to
be
reported
cross
border.
Ralph
Daloisio 73

74. Matt
Burton,
CEO
&
Co-­‐Founder,
Orchard (1/5)
• Reading
headlines
from
last
year
gave
a
misleading
indication
that
the
industry
was
dying.
• Companies
are
ready
to
scale
now.
They
feel
they
have
the
underwriting
down,
the
people
in
place,
and
need
to
scale
to
profitability.
• 2014
was
the
emergence
of
the
asset
class.
2015
was
the
hype.
2016
was
the
bump
in
the
road.
• Believes
retail,
whole
loan
sales,
bank
participations,
and
securitization
will
grow,
especially
the
latter.
• Build,
buy,
or
partner.
Partner
is
the
cheapest
and
lowest
risk
approach.
• Still
just
the
beginning
of
a
real
shift
because
consumer
attitudes
and
behaviors
are
changing.
• The
industry
needs
more
bank
investors,
SWFs,
pension,
and
insurance
cos.
Credit
product
by
user-­‐type
(dentist,
restaurant,
etc)
is
driving
customization.
• Cumulative
platform
loan
originations
through
2016
>
$40
billion
(~$8
billion
small
business
and
~$32
billion
consumer)
• Cumulative
securitizations
of
marketplace
loans
through
2016
>
$11
billion
• There
are
now
>
500
participants
in
the
U.S.
marketplace
lending
industry
• New
assets
classes
are
creating
new
investment
opportunities
• Online
lending
is
expected
to
grow
from
$40
billion
today
to
$1
trillion
by
2020.
[Buckle
up?!]
Ralph
Daloisio 74

75. Matt
Burton,
CEO
&
Co-­‐Founder,
Orchard (2/5)
Ralph
Daloisio 75

76. Matt
Burton,
CEO
&
Co-­‐Founder,
Orchard (3/5)
Ralph
Daloisio 76

77. Matt
Burton,
CEO
&
Co-­‐Founder,
Orchard (4/5)
Ralph
Daloisio 77

78. Matt
Burton,
CEO
&
Co-­‐Founder,
Orchard (5/5)
Ralph
Daloisio 78

79. Multiple
Participants,
Where
is
Alternative
Financing
Heading? (1/4)
David
Klein,
CEO,
CommonBond:
• Very
excited
about
their
“401(k)”-­‐like
product
that
allows
employers
to
make
payments
on
student
loans
• 2
to
4
securitizations
a
year
at
AA
ratings
• 50/50
split
between
securitization
and
whole
loan
sales
• Structuring
forward
flow
agreements
with
banks
willing
to
accept
lower
returns
than
LP
investors.
Banks
will
buy
4%
to
7%
yielding
assets.
• 3
Cs.
• Capital.
What
are
the
long-­‐term
sustainable
sources
of
capital
outside
of
banks?
• Credit.
The
industry
has
not
gone
through
a
credit
cycle.
How
will
Alt
Credit
perform
relative
to
traditional
credit?
• Customer.
How
to
keep
customer
acquisition
costs
low
over
time.
This
answer
gets
into
brand.
How
to
move
from
a
silo
to
a
re-­‐bundling
that
keeps
customer
acquisition
costs
down.
[Strategy
will
be
customer
retention,
and
expanded
product
offerings
as
the
customer’s
financial
life
broadens
and
deepens.]
• Buckets
of
risk:
Credit,
Market,
Liquidity,
Political,
Regulatory,
Operational.
Can
control
operational
risk
well.
Capital
and
liquidity
risk
management
limited
by
available
risk
mitigants and
their
costs.
Common
Bond
is
looking
forward
to
prove
out
their
sustainability
during
a
downturn,
as
this
proof
would
drive
down
their
capital
costs
because
it
will
cause
big
players
with
marginal
investment
in
them
to
invest
larger
sums.
• Goals
are
to
sure
up
the
capital
base,
keep
credit
incredibly
strong,
and
lower
customer
acquisition
costs.
Ralph
Daloisio 79

80. Brendan
Carroll,
Senior
Partner
&
Co-­‐Founder,
Victory
Park
Capital
• 37
deals
since
inception.
$4B
invested
in
debt
and
equity.
• Equity
investor
in
Common
Bond.
• Industry
has
evolved
during
a
benign
credit
period.
• Whole
loan
sales
are
uncommitted
and
buyers
can
walk.
• Contractual
balance
sheet
facility
obliges
lender
to
lend.
• Their
investors
are
institutional
and
require
higher
returns
than
being
generated
by
the
originated
assets.
• Individual
states
control
consumer
rate
laws,
not
the
Federal
government.
If
CFPB
is
defanged,
state
laws
may
increase
to
fill
the
gap.
• Large
corporates
with
large
installed
customer
base
reluctant
to
lend
to
them
because
of
regulatory
uncertainty
and
strategy
shift.
• There
will
be
more
businesses
folding
than
starting.
If
VCs
stop
funding
unprofitable
companies,
they
will
have
no
alternatives.
• Half
the
country
as
defined
by
a
FICO
score
will
not
get
a
loan
from
a
bank.
LendUP and
others
like
them
have
better
options
than
PAYDAY
loans.
No
question
that
there
is
demand
for
the
product
but
lack
of
regulatory
clarity
is
chilling
that
market.
[Are
loan
options
“predatory”
or
necessary
and
constructive?
Where
to
draw
the
line?]
• 30%
of
their
volume
is
outside
the
US.
Looks
for
businesses
with
the
right
governance,
platform,
and
board.
Even
if
achieved,
the
currency
risk
is
great
for
VPC
to
have
full
confidence
around
this.
Looking
for
ways
to
eliminate
that
risk.
• Lower
our
own
cost
of
capital
to
get
our
businesses
to
grow.
Will
continue
to
look
outside
the
US.
Ralph
Daloisio 80
Multiple
Participants,
Where
is
Alternative
Financing
Heading? (2/4)

81. Gilles
Gade,
Founder,
CEO
&
Chairman,
Cross
River
Bank
• 18
Platform
engagements.
• In
the
business
of
risk
management,
not
risk
elimination.
• Buy
a
bank,
take
a
limited
OCC
charter,
or
partner
with
a
bank
to
solve
challenges.
“Bank
in
a
Box.”
• Industry
missing
regulatory
clarity.
Examiners
have
their
own
interpretations
as
different
examiners
can
see
the
same
items
but
reach
different
conclusions.
• No
agreement
among
regulators
on
how
to
best
address
the
unbanked
and
underbanked.
Same
fractured
dialogue
around
financial
inclusion.
• Payments
a
big
theme.
The
ability
to
make
cross-­‐border
payments
quickly
and
efficiently
is
not
available.
Western
Union
and
others
overcharging
for
this
service.
Further
improvements
in
payments
on
the
horizon
over
the
next
three
years.
The
regulatory
framework
(AML)
on
payments
is
a
lot
clearer
than
it
is
on
consumer
lending.
• Refuse
the
status
quo.
We
are
serving
the
disruptors,
so
we
need
to
be
a
disruptor
ourselves.
Ralph
Daloisio 81
Multiple
Participants,
Where
is
Alternative
Financing
Heading? (3/4)

82. Raul
Vasquez,
CEO,
Oportun
• 10
years
lending
$3
billion
to
thin
file
borrowers.
• Big
risk
is
if
consumers
get
hurt
by
alternative
lending.
• Expects
consolidation
in
the
industry
as
companies
struggle
to
deliver
sustainable
business
models.
What
will
be
their
unique
value
proposition
instead
of
feeding
at
the
same
trough?
• Entering
a
time
when
there
will
be
higher
degrees
of
income
and
expense
volatility
in
the
employment
world
(eg,
chatbots,
autonomy,
etc.)
• Recession
will
be
a
big
challenge,
especially
with
the
country
divided
as
it
is.
• Billions
of
people
underserved
globally.
Talla,
Branch,
and
other
companies
like
those
are
exciting
to
them.
• 232
physical
locations
across
6
states,
which
is
ironic,
but
their
customers
are
comfortable
in
cash.
“We
were
profitable
first,
scalable
first,
and
now
we
are
moving
into
mobile.”
Ralph
Daloisio 82
Multiple
Participants,
Where
is
Alternative
Financing
Heading? (4/4)

83. Ralph
Daloisio 83
THE END