Is Desperate American Express following in Lending Club’s Footsteps?

Like their brethren at PayPal (NASDAQ: PYPL) and Square, American Express’s leaders think they can limit the risks from such lending with their detailed knowledge of spending habits. For example, Amex might extend more credit to a borrower, who only uses his credit card to pay for business supplies. The company deny credit to somebody who uses her card to pay off a bar tab or a casino.

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Is Lending Tree Making Money?

If the U.S. economy does tank because of the situation in China, expect LendingTree to be one of the first stocks to go down and go down hard. This stock is sitting on very shaky ground that will soon collapse.

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Does Lending Club Actually Make Money?

Therefore Lending Club looks like a successful company but not a value investment. Its platform is achieving a lot of growth, but it is not making money the way PayPal is. This indicates that its business model could be flawed or at least seriously limited, so you should stay away from it for now

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Is Lending Club Really Bubble Proof?

To be fair, there are some signs Lending Club is starting to make money. According to its financials, Lending Club had $64.6 million in cash and short-term investments when it went public. Yet on March 31, 2015, Lending Club had $874.13 million in cash and short-term investments. That shows us that it is capable of generating a lot of cash in a very short period of time, but can it keep that up?

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What Will PayPal Do Next?

Something else that is also obvious is that PayPal would be an acquisition target; purchasing it would give a large bank, retailer or credit card company access to a vast financial network and tens of millions of potential customers.

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PayPal and Prosper Changing Banking Beyond Recognition

This could indicate that traditional banking might no longer be a viable business because of the alternatives available. Things could soon get worse because PayPal is about to get spun off from eBay Inc. (NASDAQ: EBAY) and transformed into an independent financial services company that will compete directly with banks.

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Are Digital Wallets a Threat to Banks?

The threat to banks is best shown by PayPal’s growth rate. PayPal’s mobile payment volume increased by 72% between the third quarters of 2013 and 2014, growing to $12 billion. Mobile payments now make up 20% of PayPal’s payments. Venmo, a mobile payment App offered by PayPal subsidiary Braintree, saw its payment volume grow by 50% between the third quarters of 2013 and 2014.

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