Thousands of men and women in dark suits swarmed the Javits Center early on a windy Monday morning for the largest-ever edition of LendIt, an annual Fintech conference focused on the players and ecosystem related to consumer and small business lending.

At first look, it seemed to be an unlikely crowd for a conference involving technology-focused disruptors, but perhaps the formality of the event was indicative of the startups in attendance – growing companies beginning to rub shoulders with the establishment.

To receive further confirmation of this hypothesis we need look no further than Prosper CEO Ron Suber’s keynote address on “Online Lending: An Industry Built to Last.” Prosper is one of the largest peer-to-peer lenders that allows individuals and small businesses to either invest in loans or borrow money online.

Prosper and its peers Lending Club and OnDeck are part of the “older guard” of fintech companies, and find themselves at the front lines of conversations with regulators, banks, venture capitalists and private equity firms.

It was, therefore, interesting to hear Mr. Suber’s reflections on the past year speaking with key decision makers around the world. Notably, he reported a shift in tone from banks – the skepticism he heard in erstwhile years has been replaced by a desire to partner with platforms like Prosper. This trend convinces him of a future in which fintech startups will be as ubiquitous as ETFs, despite a tough year in 2016.

Suber has spoken at every LendIt conference since its launch and he went on to recount the broad themes from his speeches, starting with the “Uberization” of financial services and the need to educate customers and stakeholders about online lending in 2013. In 2014 he focused on the growth of the sector, and claimed the industry had reached “escape velocity” – the speed of growth to escape the gravity of incumbents and achieve broader relevance – by 2015. This growth began to slow in 2016, with investors struggling with performance and increased skepticism from the media.

Looking to the future, Mr. Suber is convinced that in order to grow sustainably and in order to be “built to last”, the next evolution of online lenders involves partnering with banks to find long-term capital and achieve profitability. He believes there are five ways for banks to engage with online lending:

  • Loan Sales: Banks purchase loans through online lending platforms to diversify asset base and gain access to assets they don’t directly underwrite
  • Lenders as a Service: Banks utilize lending platforms created by startups for origination and servicing that can be leveraged in discussions with regulators
  • Vendor relationships: Banks can leverage, securitize, custody cash, and serve as trustees for online lenders
  • M&A advisory: Banks can help fulfill every entrepreneurs’ dream of an exit
  • Greenfield operations: Some banks build their own online platforms while taking advantage of their low cost of capital

Suber highlighted Prosper’s $5 billion loan-buying deal with institutional investors including George Soros and Jefferies, as an example of this partnership model. Ultimately, he said, returns were the test of the success of the online lending model – and pointed to the high single digit returns that Prosper has enjoyed.  

Suber’s optimistic speech indicated that the industry has gotten over the slump of 2016, a year in which some of the larger online lenders were plagued with troubles. However, he struck a cautionary note as he closed, noting that loan performance, data transparency, customer acquisition and profitability will be the keys to success in 2017.