External Analysis Of Lendingclub ( Lc ) Essay - 2077 Words

External Analysis: LendingClub (LC) is the dominant player in the new peer-to-peer (P2P) lending industry. A Five Forces external analysis of LC’s place in the industry reveals the following: Intensity of Rivalry among Existing Competitors: Although the largest company of a new field in the United States, LC faces a constellation of upstarts. Some of these are direct competitors, like Prosper, which deal with consumer debt like LC. Others are more specialized, like GROUNDFLOOR, which facilitates P2P real-estate loans, or SoFi, which creates P2P loans focusing on refinancing student debt. And of course, traditional banks could more aggressively compete in the consumer debt field, as Goldman Sachs is doing with its online lender Mosaic, or Wells Fargo with its FastFlexSM small business loans. Because LC grew in part by capitalizing on traditional banking’s withdrawal from small business and consumer debt servicing, a sustained reentry could pressure LC’s margins greatly. Bargaining Power of Buyers: The buyers of LC are the borrowers who receive LC constructed loans. They pay an origination fee as well as servicing fee, while the 3rd party creditors receive the actual interest payments. While LC uses an advanced algorithm to determine creditworthiness, traditional credit scoring is still the main determinant of what interest rate a borrower receives, or whether they receive a loan at all. Many of LC’s borrowers are high risk, with several missed payments, high monthly rotating