Lending Club, Amex, Airbnb And PayPal: Why Payments Never Bores

While most people have used some variation of the phrase “truth is stranger than fiction,” few know that they should be attributing it to Lord Byron, who first inserted the line into a poem in 1823.

And while reality has offered many fine examples to back up the expression in the 193 years since it was first coined, 2016 might just end up being the year that truth, finally and comprehensively, beats fiction’s ability to top it.

The world stock markets have bottomed and bounced back twice, China has become the international economy’s most expensive riddle, England quit the E.U. and, tomorrow (July 18), Donald Trump will officially accept the nomination of the Republican Party at its national convention, where Peter Thiel is the headline speaker.

We challenge a fiction writer to do better than that summary of the last six months of news.

And perhaps even more impressive is that, while the top-of-the-fold news has been a neverending carnival of wonders, flipping through the metro and financial pages almost never disappoints. This week was no different. Lending Club continued to prove there is almost always more to the story, American Express announced a surprise collaboration with Airbnb and PayPal pushed harder into B2B payments.

Need to know more?

Lending Club’s Latest Bad News

If one ever suspects they’ve stumbled into the plot of a horror movie, it becomes imperative to never utter one of two phrases: 1) I’ll be right back (no, you won’t), and 2) It can’t get any worse (it can always get worse).

The last several weeks of news for Lending Club suggest that there’s a little of both to be had here.

This week’s addition to its six-month streak of bad news is that its borrowers aren’t paying back their loans.

Chargeoffs — loans that a lender has written off as noncollectable — are up 38 percent since 2013 for Lending Club — a curious outcome, since consumer credit on the whole during that time period was on the uptick and chargebacks declined for those loans, according to Federal Reserve data.

Which might, in the bigger picture, be the biggest problem Lending Club is looking at this year, since this one actually strikes at the core value proposition that Lending Club (and its fellows in online lending) bring to the market. Those extra-special, super-smart algorithms that crunched data better than anyone ever had done, ever, in order to make lending decisions about consumers that would mitigate investors’ risk and maximize return have turned out to be not too smart.

Those algorithms, theoretically, helped Lending Club underwrite faster and more accurately than traditional lenders, while, at the same time, eliminating “unnecessary” and “overly time-consuming and expensive” elements, like verifying income through pay stubs or tax returns.

While finding people to give money to isn’t the hard part of lending, it’s finding a way to make sure those customers are going to repay that is a problem, and the current spike in chargeoffs tends to lend credence to critics of the marketplace model that questioned how well the loans they were making would perform.

Further investigation turned up the fact that borrowers were not using the loans to consolidate and pay off credit debt — their advertised purpose — but instead to run up new credit card debt on top of their unsecured marketplace loan.

Lending Club has responded to the chargeoff spike. A spokeswoman noted that the firm has taken “a series of steps to strengthen borrower quality, while continuing to make affordable credit available to consumers and small businesses.”

She added that “the strength of our marketplace’s assets continues to attract investors.”

We look forward to cataloging what comes next for Lending Club.

In more upbeat news, the week’s major theme was actually playing nicely with others.

Amex And Airbnb Work Together To Serve Business Travelers

As business travelers’ demands continue to change and expand, it is perhaps unsurprising that Airbnb is slowing taking up more and more space on corporate expense reports.

What has been interesting to watch is the degree to which Airbnb has run with its new and expanding user base in the process of launching the Business Travel program last year to facilitate corporate travel booking and enable managers to have better control and oversight of employee trips via Airbnb.

Last week, the company announced its latest step in the corporate travel space and perhaps its biggest to date: Airbnb struck a partnership with American Express Global Business Travel (GBT) in what the firms said is a first-of-its-kind collaboration.

Going forward, Amex GBT will refer its clients to Airbnb services, as well as facilitate the integration of data between the two to streamline traveler tracking and other information into the GBT reporting platform.

Corporate travel clients will be able to book with Airbnb via Amex referrals, and in the coming weeks, the integration of information will enable travelers to automate the recording of travel plans for travel managers to access.

“Business travelers want the freedom to choose accommodations that align with their personal and professional tastes,” said Amex GBT Vice President of Global Supplier Relations Wes Bergstrom in a statement. “At the same time, traveler safety and security are a top priority for companies. As the first travel management company to partner with Airbnb, our customers can further evolve their travel policies and offer their travelers the ability to book preferred accommodations.”

The partnership will get off the ground in the U.S. over the next few weeks; later this year, the companies plan to expand their collaboration in new markets across the globe.

They also plan to introduce new elements of their partnership and to tighten their integration in the corporate travel booking process, according to various reports.

And Airbnb was not the only player last week looking to tighten its connections to the business community. PayPal also broadened its horizons last week in B2B payments, with a special focus on smaller players.

PayPal’s Latest SMB Play

Since the launch of PayPal Working Capital in 2013, it has been clear that PayPal had its sights set on making sure that it was giving its SMB customers a robust portfolio of services, including access to working capital as needed.

But last week, PayPal pushed that farther with a little help from small business accounting software company Reckon.

Going forward, Reckon will tie PayPal’s payment capabilities into its platform to allow small businesses to issue invoices with a Pay Now button, meaning that it will be possible for small players to pay via PayPal instead of being bound to checks and EFT payments. The Pay Now button will also support payment via American Express and mastercard credit and debit cards, reports added.

The collaboration aims to reduce the friction associated with onboarding a business to a credit card processing network. A senior executive also pointed to recent research that found about 44 percent of business failures in the 2014–2015 fiscal year were due to cash flow problems, another focus of the Reckon/PayPal partnership.

Earlier this year, Reckon revealed a separate partnership with OFX, a move aimed at lowering the cost of cross-border B2B payments.

A senior executive with Reckon notes the program gives SMBs a way for “simplifying the setup process and giving users the ability to take payments instantly.”

“Cash flow is a major concern for small business and steps to alleviate the problem, such as setting up independent credit card processing technologies, can be troublesome,” the executive further noted.

“We see this partnership with PayPal as a very innovative step forward for Reckon One. We are able to enhance our technology to help solve a real business problem, and we are able to do this so efficiently we create substantial time and cost savings in the invoicing and payments process.”

So, what did we learn last week?

Some of what we learn every week. Never stop watching Lending Club. If you blink, you might miss something.

Also, keep an eye on the moves to the enterprise and small businesses, since lots of the cool kids seem headed that way.