The Sophisticated Algorithms Behind Peer-to-Peer Money Lending

From collapse comes opportunity. In the aftermath of the financial crisis that hit the world ten years ago, one of the results was that banks started to put tough limits on consumer loans and it just became so easy to get funds than finding a taxi at rush hour during a downpour. Enter the loan between individuals.

As the financial world began its slow recovery, P2P lending is rising from its ashes and has become a major player in global capital markets with extended funding forecasts of $ 460 billion by 2022.

LendingClub Inc is one of the companies that has taken advantage of the growing consumer interest in P2P. The company has issued $ 38 billion in loans since its inception in 2007, and the company has built a sophisticated technology platform on which to assess risk and place investors and borrowers. together.

“We’re actually the nation’s largest personal loan lender in this market space,” said Steven McCaa (pictured), director of infrastructure and end-user services at LendingClub, who described the model as connecting people in need of loans with others willing to invest in financing. risk. “We are offering a market for these two halves to meet. “

McCaa spoke with Jeff Frick (@JeffFrick), host of theCUBE, SiliconANGLE Media’s mobile live streaming studio, at theCUBE studio in Palo Alto, Calif., to discuss the crucial role technology plays in running the business, how Cohesity Inc. has provided data backup and recovery solutions to meet the needs of LendingClub, the changing nature of information technology and McCaa’s decision to perform transactions using only her phone. (* Disclosure below.)

This week theCUBE features McCaa as guest of the week.

Algorithms determine loan decisions

Technology has played a vital role in LendingClub’s rise to a prominent position in the P2P arena. The company uses its own proprietary platform – LendingMatch – to match supply with demand and assess common personal attributes between borrower and investor.

LendingMatch is essentially the company’s secret sauce. The system relies on algorithms that can weigh a number of key factors, including an investor’s risk tolerance and the borrower’s credit rating, to determine an appropriate match. Other factors include geography, education, and connectivity within social networks.

“We use a wide variety of traditional things that people are familiar with, but we also look at things that are a little bit off the beaten track,” McCaa explained. “It has a lot more to do with who you are as a person and what kind of credit you’ve had in the past. “

Need a modern data backup

This kind of sophisticated analysis takes data, a lot of data, and constant modeling to account for the myriad possibilities involved in serving over 2 million borrowers and 180,000 investors, as the company reported in 2017.

The challenge for LendingClub as it grew was to save an increasing number of data-rich models used to calculate the advanced formulas required for ideal and accurate lending decisions. The company relied on a legacy state-of-the-art backup solution ten years ago.

“It was time to think outside the box and shake things up a bit,” McCaa said. “Cohesity is basically our new backup platform. “

An increasingly complicated processing environment has motivated LendingClub to seek a solution that can meet the demands of data recovery and retention, while improving operational efficiency with a modern architecture. By working with Cohesity, LendingClub has migrated away from its legacy backup system.

Cohesity’s ability to provide scalable file and object storage was a key part of LendingClub’s migration strategy. “The competitive differentiator was this file system,” McCaa said. “It has great capabilities for moving data to the cloud, to the Amazon Web Services space. “

The era of storage evolves: PC-to-phone convergence

McCaa has led LendingClub’s enterprise technology initiatives for almost three years, but her career includes previous work in enterprise IT with Salesforce.com Inc. and Medtronic PLC. He recalls a different era of storage dating back to a time in the early 2000s when gigabytes represented the Promised Land.

“Back when I started in IT, I was backing up four gigabyte hard drives,” McCaa recalls. “Four concerts were awesome. Now my phone is much bigger than four gigs.

The increase in the computing capacity of today’s smartphones led McCaa to make the decision to give up his laptop entirely. Now he runs LendingClub’s IT operations primarily through his phone.

The idea is not that far-fetched. PC-to-phone convergence has evolved in recent years as the same processors, such as the Qualcomm Snapdragon 835, that run smartphones, are now built into newer Windows 10 laptops.

“A month ago, I turned my laptop into my desktop support team, and now I manage everything on my phone,” McCaa said. “The idea of ​​mobile first is a bit like mobile only. “

The LendingClub saga and McCaa’s role in helping drive technology to enable P2P lending provides yet another example of how information technology is at the heart of nearly every business today. Without the ability to store and process the data essential to making the right decision in the high-stakes world of consumer credit, McCaa’s business would not last a week.

“I make sure employees have the tools they need to do their jobs on a daily basis,” said McCaa. “I take care of making our internal employees happy. “

Watch the full video interview with McCaa below, and be sure to check out more CUBE conversations from SiliconANGLE and theCUBE. (* Disclosure: Cohesity Inc. sponsored this segment of CUBE. Neither Cohesity nor the other sponsors have editorial control over the content of CUBE or SiliconANGLE.)

Photo: SiliconANGLE

Show your support for our mission by joining our community of Cube Club and Cube Event experts. Join the community which includes Amazon Web Services and Amazon.com CEO Andy Jassy, ​​Dell Technologies Founder and CEO Michael Dell, Intel CEO Pat Gelsinger and many other luminaries and experts.

About the author