Market Overview

SPDR S&P 500 ETF (ETF:SPY), LendingClub (NYSE:LC) - Myth Busting: Are Online Lenders Shadow Banks?

Myth Busting: Are Online Lenders Shadow Banks?

Myth Busting: Are Online Lenders Shadow Banks?
Related SPY
The Foundation Hotel, A $28 Million Boutique Property, Opens In Detroit's Historic Former Fire Department HQ
Raymond James' Saut Thinks Investors Are 'Profoundly Underinvested' In Stocks
Gold Shines On Quiet Day In Market; Which 3 Still In Buy Zone? (Investor's Business Daily)
Related LC
LendingClub's Q1 Signals Another Step Toward Re-Establishing Its Growth Story
Watch These 8 Huge Call Purchases In Friday Trade
The Vetr community has upgraded $LC to 3.5-Stars. (Vetr)

As non-bank lending institutions, alternative lenders have occasionally come under fire for acting as "shadow banks," a term coined to describe the subprime lenders that led to the 2008 financial crisis. However, the term is a misnomer when applied to innovative lenders, according to an industry expert.

Glenn Goldman, CEO of leading small business lender Credibly, explained in a recent interview that online lenders are the "furthest thing" from shadow banking. In fact, Goldman sees "rays of sunshine" around online lenders.

"As each day, week and month goes by, we are looking at new ways of making data, information, trends, ideas, concepts more available, more transparent, and [bringing] the industry to welcome a very open and robust dialogue," Goldman said.

However, there's a lot of work to be done to get to that point, Goldman said, as different loan originators will have different data points and metrics.

Related Link: Here's Why Alternative Lenders Are Here To Stay

"If we were to line up 10 originators within the same asset class and we're all asked to present all of our data, effectively being fully transparent, the fact is no two of us will have all the same data as anyone else," Goldman said.

Goldman sees standardization of what data originators should provide as a top priority to enforcing true transparency in the industry. He sees Orchard Platform's work in creating a lending exchange as "[getting] to the heart of that" priority.

"In order for [Orchard] to be successful, there needs to be a consensus among the participants whether you are a platform, investor, lender, whether you're a rating agency or somebody who is looking to secure top loans," Goldman said.

Standardizing data and documentation among the various lenders would be a "significant leap forward to achieving ultimate transparency," Goldman concluded.

Did you like this article? Could it have been improved? Please email with the story link to let us know!

Posted-In: alternative lenders alternative lending Credibly Glenn GoldmanFintech Personal Finance Interview General Best of Benzinga


Related Articles (SPY + LC)

View Comments and Join the Discussion!