Google Invests $125 Million in Lending Club

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Google-logo1Last month, Internet giant Google surprised both tech and financial watchers alike with its investment of $125 million in Lending Club, the most popular peer-to-peer lending site in the United States. Analysts from both industries agree that Google’s move is another sign of a changing landscape for the financial services industry in the United States.

Founded in 2007 by French entrepreneur Renaud Laplanche, Lending Club was designed to be a meeting ground for investors who wanted reliable returns and borrowers who were tired of shelling out thousands in interest on outstanding debts. Since the financial crisis, many customers who have sought an alternative to traditional banks for their credit needs have turned to Lending Club, and the company’s profits have soared. According to Forbes, Lending Club – which is planning an initial public offering sometime in the next 12 months – is currently valued at $1.5-$1.6 billion, a figure that grabbed Google’s attention.

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Google’s investment interest in peer-to-peer lending seems to reflect a shift in American attitudes towards the financial services industry; many have become disillusioned with the mega banks that dominated the news during the financial downturn and are looking for options that provide better services at lower costs. Google’s stake in Lending Club may be the endorsement needed to tilt the balance in favor of non-traditional financial service providers.

However, some critics of the relationship between Google and Lending Club worry that by bringing in large, institutional investors, Lending Club is straying too far from its roots as a peer-to-peer lender. According to CNET, currently only one-third of Lending Club’s investors are individuals with average an average net worth – the other two-thirds are institutional investors and very wealthy individuals. This, in addition to Lending Club’s future as a publicly traded company, has led some to worry that the financier may become exactly what it stood up against at its beginning: corporate.

What do you think about the team-up between Google and Lending Club?