This is an excerpt from a story delivered exclusively to Business Insider Intelligence Fintech Briefing subscribers. To receive the full story plus other insights each morning, click here.
Lendable has struck a £200 million ($249 million) deal with Goldman Sachs, per the Financial Times. Under the partnership, the Wall Street giant’s investment division — dubbed Goldman Sachs Private Capital, which invests in medium-sized companies — committed to buying loans originated by Lendable.
Lendable launched five years ago and uses machine learning to automate credit underwriting. It offers personal loans between £1,000 ($1,245) and £20,000 ($24,905), with terms ranging from one to five years, and has so far originated £650 million ($809 million) in loans to UK consumers. Lendable originates the loans on behalf of institutional investors and doesn’t hold them on its own balance sheet.
Here’s what it means: This is yet another move from Goldman in the UK, and we will likely continue to see the alt lending industry flourish.
- Goldman Sachs isn’t shying away from the UK, despite Brexit. With this latest deal, Goldman is doubling down on its presence in the UK: The bank entered the savings space by rolling out its digital offshoot, Marcus, to the country last year. Other companies have been warier about the UK and have started turning their backs on the country: Germany-based neobank Fidor will cease its UK operations later this year due to uncertainties surrounding the UK market, and insurtech Lemonade chose Germany as its first European market, citing Brexit worries.
- Lendable has been benefiting from a stable flow of institutional investments. Just last month, Lendable secured a £500 million ($622 million) investment from Waterfall Asset Management, NatWest Markets, and Varadero European Special Opportunities. Over the past 12 months, institutional investors have committed almost £1 billion ($1.2 billion) to Lendable in eight separate transactions, per the FT. This investment flow will likely help Lendable continue to grow its business and remain successful.
- While UK marketplace lenders have taken a hit from regulators recently, other parts of the alt lending industry continue to thrive. The Financial Conduct Authority (FCA) recently introduced new regulations that limit retail investors to only spending 10% of their investable assets on marketplace lenders. Additionally, the industry saw Lendy enter administration, which raised further questions about the sustainability of the sector. Despite the marketplace space getting tighter regulations, the negative sentiment doesn’t spill over to the rest of the alt lending sector, including companies like Lendable.
The bigger picture: With Lendable continuing to prove the success of lending out institutional money, more marketplace lenders may go down this route.
Introducing more stringent regulations for parts of the alt lending industry will help enhance the sector’s prestige, while also forcing some companies to explore new business models. We’ve already seen some big marketplace lenders, including Funding Circle, seek out more institutional investors to fuel their lending platforms and ensure they have the necessary capital to keep operating in light of the new regulations.
Over time, we may see more marketplace lenders make a similar decision, which, given how much interest there is from institutional investors in the space, will likely be a wise and successful move. Additionally, having the FCA as an innovative and forward-looking regulator will likely ensure that the country continues to introduce new rules in the industry as needed to safeguard consumers’ capital — which, in turn, will likely help to increase users’ trust in alt lenders and further fuel the establishment of fintechs in the country.
Interested in getting the full story? Here are three ways to get access:
- Sign up for the Fintech Briefing to get it delivered to your inbox 6x a week. >> Get Started
- Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Fintech Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
- Current subscribers can read the full briefing here.
- Samsung is upping its wallet’s value to secure its position as a top mobile provider in India
- Goldman Sachs sets its sights on supporting fintech challengers in Latin America
- The FDIC’s recent upward tick in application approvals marks a turning point for new banks