4/21/15

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It only takes a spark to get a fire going…..

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Who the heck is QED?

§  Venture Capital firm focused on AdTech and FinTech

§  Founded in late 2007 by 3 Capital One Veterans

§  Added 2 new Partners – both Capital One Veterans

§  Collectively 100+ years of experience in building Financial Services businesses

§  Breakthrough disrupters attacking the incumbents and leveraging next generation approaches

§  Play active, hands-on consigliore roles with leaders leveraging our operating experiences

Frank  Rotman   Nigel  Morris   Caribou  Honig  

Miles  Reidy   Bill  Cilluffo  

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Our FinTech portfolio is keeping us busy!

Pre-­‐2011   2011   2012   2013  

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2014  

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About the Whitepaper

•  Tells  the  story  of  the  personal  loans  ecosystem  over  the  past  decade  through  the  lens  of  Big  Bank  incumbents  as  well  as  from  the  vantage  point  of  the  emerging  next  generaFon  players  

•  AHempts  to  answer  important  quesFons  such  as:      

•  Why  did  the  Banks  shut  down  their  personal  loans  business  units?  •  What  caused  Prosper  and  Lending  Club’s  recent  acceleraFon?  •  Why  haven’t  the  Banks  re-­‐entered  the  personal  loans  space?  •  Will  the  next  generaFon  plaQorms  be  here  for  good?  

   •  The  paper  wraps  up  with  a  look  into  the  future  and  discusses  five  disFnct  scenarios  and  their  likelihood  of  occurring  

 

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The Story in Brief

Economy Banks P & LC

•  Great  Economy  

•  Consumer  Levering  Up  

•  Home  as  an  ATM  Machine  

•  Growth  Mandate  

•  Tough  CompeFFve  Landscape  

•  Book  Now,  Fix  Later  

•  Launch  of  an  idea  

• Wild  West  

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The Story in Brief

Economy Banks P & LC

•  Great  Recession  

•  Government  IntervenFon  

•  Dodd-­‐Frank  Act  

•  CARD  Act  

•  HELOC  Collapses  

•  Ugly  Forecast  

•  ExFncFon  Event  

•  Book  Now,  Fix  Later  

•  Capital  Raises  

•  Governed  by  the  SEC  

•  Managing  the  Imbalance  

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The Story in Brief

Economy Banks P & LC

•  House  Prices  Bounce  Back  

•  Household  De-­‐Levering  

•  HELOC  business  sFll  challenged  

•  Credit  Card  business  structurally  disadvantaged  

•  Analysis  Reveals  Insights  

• Why  Take  the  Risk?  

•  Imbalance  Solved  

•  Big  Opportunity  

•  Just  Add  Water  Capital  

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The Story in Brief

SCENARIO #1 The Emergence Of The SBU

ODDS  OF  THIS  SCENARIO  

OCCURRING:  

LOW  

•  A  large  Bank  could  re-­‐launch  its  personal  loans  business  as  an  SBU  

•  Separate  the  SBU  from  the  core  business  

•  Staff  with  dedicated  talent  and  use  dedicated  systems  

•  Stop  the  transfer  pricing  madness  and  run  as  a  true  P&L  

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The Story in Brief

SCENARIO #2 One Bank Wakes Up

ODDS  OF  THIS  SCENARIO  

OCCURRING:  

LOW  TO  MODERATE  

•  A  large  Bank  could  acquire  a  major  personal  loans  originaFons  plaQorm  

•  Leave  it  alone  with  a  few  excepFons:  capital  markets/treasury,  compliance  and  finance  

•  Shut  down  most/all  lenders  on  the  plaQorm  and  fund  originaFons  volume  using  the  exisFng  deposit  base  

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The Story in Brief

SCENARIO #3 Status Quo

ODDS  OF  THIS  SCENARIO  

OCCURRING:  

MODERATE  

•  The  Banks  conFnue  to  ignore  the  next-­‐generaFon  originaFons  plaQorms  

•  DiversificaFon  of  lender  capital  is  criFcal  for  weathering  a  credit  cycle  

•  DiversificaFon  of  asset  classes  is  criFcal  for  sustained  growth  

•  PlaQorms  need  to  be  keenly  aware  of  the  Regulatory  environment  and  any  re-­‐levering  of  consumers’  personal  balance  sheets  

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The Story in Brief

SCENARIO #4 Knife Fight ODDS  OF  THIS  

SCENARIO  OCCURRING:  

MODERATE  TO  HIGH  

•  Hyper-­‐compeFFve  environment  for  finding  high  quality  borrowers  

•  Channel  partners  win  

•  Low  cost/high  efficiency  plaQorms  win  

•  PlaQorms  that  have  access  to  unique  sources  of  applicant  volume  win  

•  “Me  too”  players  lose  

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The Story in Brief

SCENARIO #5 Lending as a Service

ODDS  OF  THIS  SCENARIO  

OCCURRING:  

CERTAIN  

•  Large  plaQorms  have  become  foundaFonal  businesses  in  the  Banking  ecosystem  

•  13,000  Banks  are  deposit  rich,  lending  asset  poor  and  are  beHer  off  using  these  plaQorms  than  managing  programs  themselves  

•  Non-­‐Banks  can  start  to  lend  to  their  customers  with  ease  

•  Enables  the  ability  to  assemble  a  porQolio  that  meets  their  internal  needs  while  serving  their  enFre  customer  base  

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For the whole story you can find the paper at www.fintechjunkie.com