In a number of ways, the evolution of LendingClub growing from a peer-to-peer online lender to also offer banking and investing resources speaks to where the digital financial world is heading.

That was part of the discussion Scott Sanborn, CEO of LendingClub, had with Karen Webster, CEO of PYMNTS.com, in a fireside chat at last week’s LendIt Fintech USA conference in New York.

Webster put the conversation in context with the current economy and what may be ahead, at least in the near-term, with interest rates rising, businesses looking to keep costs in check, and consumers spending more.

Sanborn said many consumers were well-suited financially going into the pandemic in terms of debt levels and income and now are in the process of coming out of the pandemic with debt paid down and savings built up though that does not necessarily mean everyone is flush with cash. “What we’re seeing now as government support has subsided … you are certainly seeing, especially the more vulnerable part of the population, back to where they were pre-pandemic,” he said.

Webster pointed out that many consumers live paycheck-to-paycheck, including about 50% of those earning in excess of $100,000 annually. They might not all be struggling, she said, but they do need each paycheck to pay their bills.

The average customer of LendingClub, Sanborn said, does earn more than $100,000 and has an average FICO score north of 700, which might not seem like the type of person who needs lending services. “People say, ‘Wow, why would a consumer like that have credit card debt?’ ‘Why would they be living paycheck-to-paycheck?’” He said trends over time, such as expenses going up, can play a role in consumers seeking lending options. “The more money you’re making, up until you reach a certain point of wealth, the more debt you actually have,” Sanborn said.

Higher Incomes, Higher Debt

Higher incomes can mean higher credit card balances, higher loan balances, and bigger student debt, he said, as consumers put their income to work providing for themselves and their families. “In this environment, there’s going to be a need to really look at what they’re prioritizing for spending.”

The growth in credit card balances is a tailwind for LendingClub’s business, Sanborn said, because it means there are more consumers who might need such services while rates are also on the rise. Webster said as consumers look to digital financial resources, they seem to want more than just a place to park their money.

Sanborn said LendingClub’s history is in lending but now the company also offers other services to help with spending and savings. Further, customers have wanted assistance to make it easier for them to make smart financial decisions, he said, such as refinancing loans to save money or advice adjusting recurring bill payments to better coincide with payroll dates.

The digitally native nature of LendingClub, Sanborn said, allows the company to review data from customers such as their spending and income profiles to navigate ways to advise them. He also said his company’s typical customer might already be served by banks but not always efficiently.

While many incumbent banks have been offering their own digital services such as overdraft protection and online account access, other factors continue to make fintech increasingly attractive to consumers. “There’s been a ton of innovation that’s been great for consumers,” Sanborn said. “It’s really altering the bank landscape, and not just digital banks.” Mainstream use of smartphones for banking shook up old paradigms, but the pandemic accelerated the move to digital, he said, with consumers changing the basis for some of their banking decisions. “They used to choose the bank based on the branch location.”

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