Given the rapidly shifting market lately,
I couldn’t help thinking about the words I heard back in 2008,
From the CRO of a large US lender, on recession/product sustainability.
A truly viable lending product, he said,
Should be able to survive 3 recessions.
Because every recession is different.
Even the product has survived 2 recessions,
It does not mean it necessarily will survive the 3rd one.
Consumer lending is a long-cycle business.
A cycle could be as long as 10-plus years.
It’s great a product has enjoyed 2 phenomenal years,
But it doesn’t mean you will win in the long game.
Just like in a multi-day poker tournament,
Day 1 chip leader rarely makes the final table.
The pandemic is not a true test for lending products.
Relief measures from the government and lenders suppressed the losses.
For the new products and businesses that arise in the last few years,
The real test just started, as the liquidity begins to recede.
Once you come out intact on the other side of the cycle,
You would have passed the test - on the 1st of the 3.