Since his surprise departure as CEO of Citigroup in 2012, Vikram Pandit has lent his name, expertise and monetary support to various corners of the financial world. His investments have ranged from Indian real estate lender FICS Consultancy Services to U.K. money transfer start-up TransferWise. One of his favorite targets is peer-to-peer, or marketplace, lending.
Pandit, 59, was an early investor in student loan service CommonBond, trading technology provider Orchard Platform and credit risk assessment outfit PeerIQ. These U.S. firms are all part of a disruptive alternative financial economy that hopes to upend much of the business done by Pandits former employers.
Peer-to-peer platforms let borrowers and lenders find each other online, with borrowers typically vetted and given access to funds much faster than if they went through the traditional application process at a bank. The sector has grown rapidly in recent years, especially as banks have struggled under new regulations in the wake of the 200809 financial crisis and as borrowers embrace technology-based services.
Banks have mostly been playing catch-up, partnering with peer-to-peer players to gain new borrowers and in some cases buying loans on lending platforms. For the most part, they want to make sure they dont get left behind. Pandit is ensuring that he wont.
[Pandit] recognized the shift in the financial industry and started to invest in companies that are the gold standard, or have the potential to be, in their respective space, says fintech entrepreneur and investor Val Katayev, managing partner of Prime Meridian Capital Management, a San Ramon, Californiabased investment firm that specializes in peer-to-peer lending. Names like PeerIQ and Orchard are the tools for the industry and have carved out a solid market share that will be hard to displace.
Pandit helped to develop Morgan Stanleys electronic trading and prime brokerage capabilities during his tenure at the U.S. bank from 1983 until 2006, when he left to launch New Yorkbased hedge fund firm Old Lane Partners with exMorgan Stanley colleague Guru Ramakrishnan and others. Citi bought Old Lane in 2007, and in December of that year Pandit became Citis CEO, tasked with restabilizing a firm that was battling poor performance made worse by the breaking financial crisis. After his October 2012 resignation amid talk that he was being forced out by the board, Pandit shrank from the spotlight, emerging to join consulting firm TGG Group as chair in 2014.
Behind the scenes he made early investments in New Yorkbased Orchard, founded in 2013 by Matt Burton and Jonathan Kelfer, previously of Google, with Angela Ceresnie and David Snitkof, who had both worked at American Express Co. and Citi. CEO Burton says that when the team was setting up Orchard, the missing piece was how best to run a new credit platform. Thats what Pandit brought to the table.
Vikrams been very helpful in helping us understand how the bigger financial services machine works and how we can effectively plug ourselves in, which are the rules that cannot be broken and which are things that are there just because theyre legacy issues, Burton explains.
Those who have worked with and around Pandit say that he and fellow marketplace lending investors such as former Morgan Stanley CEO John Mack and exThomson Reuters chief executive Thomas Glocer add value to up-and-coming firms simply by attaching their names to a venture. An early-stage investment from someone like Pandit or Glocer also often gets the investors additional equity in the form of advisory shares from start-ups.
When Vikram invests, it gets attention from other executives and institutions to take a hard look at this space, Katayev says.
Follow Kaitlin Ugolik on Twitter at @kaitlinugolik.