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Illustration: Sarah Grillo/Axios

Lending Club was founded on the idea of bringing individual borrowers and lenders together. Those days are now officially over.

Why it matters: The peer-to-peer dream was that Americans could deal directly with each other, rather than having to go through hated banks.

  • Lending Club was the foremost avatar of that dream. But the company soon realized that it was a lot easier to borrow money from hedge funds, or the market, than it was to provide the ability for people to make tiny loans to hundreds of different borrowers.
  • Individual lenders wanted higher returns, too. If Lending Club wanted the lowest borrowing costs for its borrowers, it had to move to wholesale funding.

Eventually, Lending Club decided it should just become a bank — so it announced the acquisition of Radius Bank in February.

  • Banks intermediate between borrowers and lenders. If you lend to an FDIC-insured bank like Radius, you take no credit risk, and let the bank worry about what happens if borrowers default. (Lending to a bank and keeping money on deposit at a bank are ultimately the same thing.)
  • It's the exact opposite of the peer-to-peer model, which was built on the idea that individuals are more likely to repay other individuals than they are to repay a faceless financial institution. If that was ever true, it isn't any longer.

The bottom line: Peer-to-peer lending failed. When Lending Club went public in 2014, it was worth more than $9 billion. Today, it's worth just $350 million.

Go deeper

Ro Khanna: Government must focus lending on rural and minority communities

Photo: Axios screenshot

Rep. Ro Khanna (D-Calif.) said during an Axios virtual event that the Federal Reserve Board needs to be able to give loans in rural and minority communities, which have been some of the most affected during the coronavirus pandemic.

Why it matters: People in rural and minority communities have been disproportionally impacted by the coronavirus.

Updated 3 hours ago - World

Reports: Up to 17 U.S. missionaries kidnapped in Haiti

Haitian soldiers guard the public prosecutor's office in Port-au-Prince earlier this month. Photo: Richard Pierrin/AFP via Getty Images

Children were among up to 17 American Christian missionaries and their relatives kidnapped by a gang in Haiti on Saturday, the New York Times first reported.

Details: The missionaries had just left an orphanage and were traveling by bus to the airport to "drop off some members" and were due to travel to another destination when the gang struck in Port-au-Prince, Haitian security officials said, per the NYT.

5 hours ago - World

Melbourne, "world's most locked-down city," to lift stay-at-home orders

Victorian Premier Daniel Andrews during a news conference in Melbourne, Australia, on Sunday. Photo: Quinn Rooney/Getty Images

Melbourne's stay-at-home orders will end five days earlier than planned, officials in Australia's second-biggest city announced Sunday.

Why it matters: The capital of the state of Victoria has had six lockdowns totaling 262 days since March last year. That means Melbourne spent longer under lockdown than "any other city in the world" during the pandemic, Reuters notes.

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