Based on latest quarterly earnings[1], revenue to origination ratio is 5.21%. Lending Club is making 5.21% (top line) on every dollar of origination while lenders on LC platform on average are making 7.84% (bottom line) [2].
It is already a bad business deal for Lending Club to make less in top line than the lenders on the platform (higher portion of economic profit going to lenders). Basically, Lending Club is borrowing funds from lenders at 7.84% to lend when it could easily borrow the same amount as debt at much lower interest rate. Recently, I was looking at a junk level corporate debt of a company, it's borrowing cost 3.8%. It makes no sense for Lending Club to be borrowing funds at 7.84% from lenders, when it could get same funds from a corporate debt at much lower rate. Or Lending Club could become a bank like Ally Bank which pays depositors 1% and lends majority of these funds at much higher rates to auto loans and keep all the profits for itself.
So, count your blessings that you are already getting extra returns. Sooner than later, this gravy train will need to stop for Lending Club to be a viable, standalone and scalable business and shareholders are going to demand that. Either Lending Club will have to become pure balance sheet lender or offer lenders a fixed return (or variable return within a fixed range) like some UK p2p platforms. In my estimates, if Lending Club becomes pure balance sheet lender, it can raise its top line from 5.21% to almost 10% with a combination of origination fees and interest received from loans.
[1] Lending Club Reports Fourth Quarter and Full Year 2015 Results and Announces $150 Million Share Buyback
https://finance.yahoo.com/news/lending-club-reports-fourth-quarter-123000094.html[2] Edited Transcript of LC earnings conference call or presentation 11-Feb-16 1:30pm GMT
https://finance.yahoo.com/news/edited-transcript-lc-earnings-conference-210404329.html
LC makes 4 times a much on the Origination Fee. Immediately. And they don't give it back even if the loan defaults.
Are you not aware of this?