Payday Loan Interview with Sasha Orloff the CEO of LendUp

Payday Loan Interview with Sasha Orloff the CEO of LendUp.

This is our transcribed interview with Sasha Orloff of LendUp:

LendLayer: What are you most excited about in peer to peer this year?

Sasha Orloff: It’s this weird situation. I’ve have been interested in peer to peer for a long time, I was actually considering joining the growth team atZopa back in the early days, and I’ve known the Lending Club andProsperteams when they were just starting off in the US.

The thing that I’m actually most excited about is that peer to peer is now an accepted, official thing. It is the new way to do business. To finally see that (Wall Street) investor hesitation seemingly ended, and the true value prop emerge is really that software is disrupting the consumer and small business lending space in a major way.

I think the thing I have loved about peer to peer for over 4 years is now that the rest of the world now knows what peer to peer lending is, and other people are talking about how they can leverage P2P to build disruptive financial services models. What was once niche is now mainstream.

I love how software makes financial services more efficient and effective, and there’s a big, public example for lending with peer to peer, or example. And hopefully it will be a publicly traded example shortly.

LendLayer: Peer to peer is an awesome space. And I love just the sheer blue ocean aspect of it. It’s almost untouched, even with Lending Club taking a huge bite out of it, it’s still just a very very small percentage.

Sasha Orloff: It is exciting now seeing all these splinter peer to peer lenders like Funding Circle, Realty Mogul, and fractional small business lending, and even peer to peer lending for medical procedures.

The whole world is coming together, student loan refinancing, the entire market is going to get disrupted by people looking for better, safer returns on both sides.

When you start to see the volume of niche plays that means that the industry is so well defined that new players are trying to gain market entry by focusing on smaller plays to try and chip at Lending Club andProsper, for example.

LendLayer: We’re excited to see what Funding Circle is about to roll out with the £65 million round that’s really exciting for everybody.

Other than LendUp of course, what companies are you most excited about in peer to peer lending?

Sasha Orloff: I am definitely looking forward to Lending Club’s IPO at some point as another validation that this is the year of FinTech.

It’s kind of a boring answer because I have no inside information. I’m really excited to see that because I want it to go live and want it to perform because that’s going to spawn a lot more investment in the space. Success breeds success, and investors want returns. And there have not been a lot of proven successes in lending. Banks tend to only buy collapsing portfolios, not fast growing successful technology lenders.

The ecosystem is really starting to evolve, which is a really exciting growth to the industry. We are seeing cool stuff like Algorithmic Lending, you know them? They came out of Y Combinator and are effectively building a hedge fund for peer to peer lending using machine learning and proprietary software that not just takes loans from within one ecosystem but spreads loans across all these ecosystems. And their performance is really incredible.

I think that is what will make the financial services industry really good for investment, it is ripe for disruption.

Having startups bring better software, machine learning and consumer transparency to enable peer to peer to happen even faster and even better than infrastructure, than bank infrastructure, and provide a clear wake up call. That to me, is pretty cool.

These are all big players, it’s hard to pick something out, but SoFi, it just hits home. I still have student loans, my wife has massive student loans, and I was fortunate enough to start graduate school in 2004 when the federal government was still subsidising student loans, so I have incredibly low interest rates.

My wife started just one year after me and interests went from 2.5% to 6% for her first year and 9% for her second year. And then they got even higher for subsequent years.

So, I’m a huge fan of companies like SoFi because while I was fortunate enough — had I literally started one year later I would be paying $1000’s more in debt and interest. For literally just being alive one more year I save thousands of dollars.

My wife and I went to the same graduate school, at the same time, and we were just one year apart and we’re probably paying thousands of dollars more for the same education at the same time. Literally just because we were one year apart! Same loan, same amount, same school, same program, and everything.

It’s crazy.

And in this crazy is opportunity. And the SoFi team is nailing it.

LendLayer: That kind of goes into what we’re doing at LendLayer. We’re financing students to go through software development bootcamps. We’ve partnered directly with all the top tier bootcamps across the nation.

Sasha Orloff: That is awesome.

I was literally just talking about this in my meeting before, how the need to get more people to understand the power of software, or be software developers themselves. We have a shortage we have of developers in Silicon Valley and across the country, and with immigration laws the way they are, we are leaving so much opportunity for disruption on the table.

As I start talking to banks, the reason they didn’t see peer to peer coming, the reason they don’t see things likeLendUp coming, is because they don’t understand what software can really do.

They don’t understand the power of how disruptive it is to their core business. And having cloud based real time software and analytics and machine learning and modelling capabilities, this is quickly chipping away at the core traditional banking industry.

When you talk to risk management people and you talk to marketing people and they don’t have an understanding of what computer software can do to make their jobs more effective and efficient, it’s almost heartbreaking.

This is really frustrating.

But that’s an opportunity for what you’re doing and what I’m doing. That’s exactly where it lies. People understand the power of what software can do to make any industry, but especially financial service industry more effective, more efficient and better for consumers.

LendLayer: Agreed. Couldm’t have said it better myself. What’s next forLendUp?

Sasha Orloff: We spent 2.5 years building our own software, basically a full stack banking system using the same methodology that Silicon Valley uses to build real time software and analytics.

Our first product is helping create a market alternative to payday lending that really works for consumers. We tested this product for a few years in California, and it is called The LendUp Ladder.

This year we’re really focused on state expansion. We’re launching a new state about every two weeks, today we happen to be launching two states in one day — Texas and Idaho.

Texas is a very big state that is desperately in need of an alternative.

That’s a long winded answer to what we are doing next. I would say the same structural problems that exist in payday lending exist in a lot of other loan products and so, first we plan to expand across the U.S and be in every state that peer to peer lending exists, to create a better market alternative and then once we’re there, hopefully by end of year, we’re going to take the same core platform that we built and enable it to disrupt other consumer lending products one at a time.

Specifically focused on serving people that banks would never approve and focusing all of our design and attention on making products specifically for them.

We’re bringing the best technology to an underserved, and underestimated, customer segment.

Our customers deserve more and better options. That’s why we createdLendUp.