The State of Consumer Finance: Why the Time is Now for Marketplace Lending AL GOLDSTEIN, CEO AVANT

The State of Consumer Finance: Why the Time is Now for Marketplace Lending AL GOLDSTEIN, CEO AVANT

The lending industry is overdue for disruption Potential for Disruption Low High Mortgage SMB Loans International Remittances In-Store Payments Digital Payments Wealth Management Personal Loans Deposits Far-Out Timing of Disruption Near-Term

Companies are being established to address various product segments Consumer Education Small Business Real Estate

Investors believe marketplace lending can create substantial disruption $2,500 Venture Capital Funding for Lending Startups $2,366 $1,875 $1,250 $1,003 85% of institutional investors are interested $625 $179 $320 $301 $315 $0 2010 2011 2012 2013 2014 2015

But, headwinds have emerged

Systemic risk exists for large tech startups as investors question valuations

Accessibility of the capital markets has diminished

Regulatory uncertainty remains a key concern

Oil Yet, the environment for the middle class consumer continues to improve 10.0% 7.5% 5.0% 2.5% Chart Title Unemployment Rate ~$37.00 / Barrel = $700 annual savings 0.0% Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Household Debt Service Payments to Disposable Income 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% Jan-84 Jul-87 Jan-91 Jul-94 Jan-98 Jul-01 Jan-05 Jul-08 Jan-12 Jul-15 Jan-19

And credit performance shows no sign of deterioration 18.0% 13.5% 9.0% 4.5% 0.0% 5 6 7 8 9 10 11 12 13 14 15 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Avant Cumulative Gross Charge-Off Rate by Cohort (%)

Nevertheless, some compare the rise of marketplace lending to the period leading up to 2008

What went wrong in 2008?

Favorable capital markets resulted in high corporate leverage $3.0 $2.3 Dollars in Trillions $1.5 $0.8 $0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Debt Equity

US household debt reached an all-time high of $12.7 trillion in 2008 140% 120% 100% 80% 60% 40% Mar-59 Jul-62 Nov-65 Mar-69 Jul-72 Nov-75 Mar-79 Jul-82 Nov-85 Mar-99 Jul-02 Nov-05 Mar-09 Jul-12 Recessions Household Liabilities as a % of Disposable Income

Financial systems became increasingly complex Structured Credit Collateral RMBS CMBS ABS CMO CLO CDO CDO 2 CDS 600,000 450,000 300,000 150,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Other Structured Credit

2008 was the worst year for the S&P 500 since the Great Depression 2,500 1,875 1,250 625 0 2019201820172016201520142013201320122011 201020092008200720072006200520042003200220012001 20001999199819971996199619951994

During 2008 & 2009, nearly 10% of Americans lost 50+ points of FICO It can take nearly 2 years to recover a loss this severe

Lester Anderson HOMESTEAD, FL 2007 $55,000 salary Married with kids 8 years employed FICO Score: 700 2002 Compact Car $5,000 Credit Card Limit ABC BANK $175,000 Mortgage COMMUNITY BANK $5,000 Car Loan CARS R US *This is a fictitious character, not an actual customer, created and used to illustrate a typical customer of Avant

Lester Anderson HOMESTEAD, FL 2010 $55,000 salary Married with kids 11 years employed FICO Score: 650 2002 Compact Car $5,000 Credit Card Limit ABC BANK No Refinancing Options No Car Loans Available *This is a fictitious character, not an actual customer, created and used to illustrate a typical customer of Avant

47% of Americans < 700 FICO ~150 million people

How Marketplace Lending is Bridging the Gap

Demand Technology Capital

Demand

US consumer credit market presents a $12 trillion opportunity Personal $315B Card $659B Auto $875B Student $ 1, 111 B Mortgage $8,691B

~$22 trillion consumer credit opportunity across US and Europe

Borrowers find that marketplace lenders better meet their needs Net Promoter Score 0 10 20 30 40 50 60 70 80 90 100

The middle income consumer remains largely underserved Technology & Analytics Capabilities Low High Super Prime Consumer Credit Range Near Prime

Non-prime consumer losses are more resilient through downturns Super- Prime > 770 0.2% 0.7% 3.00x Prime 710-770 1% 4% 2.60x Near- Prime 650-710 5% 10% 1.75x Subprime < 650 17% 28% 1.40x

Capital

$1.2 Trillion The amount of additional capital US banks are required to maintain

Portfolio returns of the 80s and 90s may not be repeatable 13.8% Average 5-Year Return (%) 5.2% 1980-1999 2000-2013

Investor interest has fueled growth across the industry Loans Purchased ($Bn) Total Origination Volume $4.0 $3.0 $2.0 1.6244 1.7884 $150 Bn $1.0 $0.0 0.8154 0.3325 0.0897 0.0607 0.1533 2008 2009 2010 2011 2012 2013 2014 Individuals Institutions $15 Bn 2015 2025

Technology

100% Online & Mobile

Real Time Approval & Next Day Funding

Regression is an outdated method of credit modeling

Machine learning models allow quicker, more accurate credit decisions

40.0% Marketplace lenders are more effectively pricing risk Credit Risk is Priced Tight on Cards 20.0% Marketplace Lender Yields Outpace Bonds 30.0% 28.8% 15.0% 17.0% 20.0% 18.0% 10.0% 9.0% 12.6% 10.0% 5.0% 4.0% 1.0% 0.0% Average Credit Card Penalty Rate Average Credit Card Rate Average Digital Lender Rate 0.0% 3-Year Treasury Bloomberg US High Hield

How are Banks Responding?

Partnership versus competition

Not only Avant

Significant partnerships on capital side

The Avant Difference

Products Channels Online / Mobile POINT OF SALE P O W E R E D B Y Retail Auto Healthcare Home Customer Tools

Differentiated funding model with recurring revenue ~ 50% On-Balance Sheet ~50% Off-Balance Sheet Bank Warehouse ABS Securitization New Product Facility Forward Flow Managed Fund Vehicles Skin in the Game & Random Allocation

No up-front fees = Transparent products that are easy to understand

Complementary partnership offering Consumer Credit Spectrum 550 600 650 700 750 800 850 Low Cost Digital Platform Engineering and Technical Depth Machine Learning Underwriting Marketing Analytics & Automation Powerful Brand & Branch Network Low Cost Capital & Industry Expertise Loyal & Diverse Customer Base Customer Data & History Reduced Acquisition Costs No Cannibalization Risk Multi Product (Consumer, Auto) Alignment of Interest

So how does this impact Lester?

Lester Anderson HOMESTEAD, FL 2016 Simple Application Check rates in 6 minutes or less without impacting credit score Fast Service Real-time automated loan approvals and next business day funding Transparent Policies What you see is what you get

Great consumer experience driving long term adoption

lowering the costs and barriers of borrowing