"We effectively compete with Prosper and LendingClub on yield," Crosby said. "But if something goes wrong, you can foreclose on the real estate."
In May, LendingClub shares plummeted after an internal review discovered staff knowingly sold $22 million in loans in March and April that did not meet the buyer's requirements. Since then, the CEO has resigned, and the company has been subject to regulatory scrutiny.
Negative sentiment seemed to bleed quickly into other U.S. firms in the industry. Vouch reportedly folded amid the hostile funding environment, while companies such as Avant, On Deck Capital and Prosper Marketplace reportedly battled business woes.
But Jeremy Allaire, founder and CEO of Circle, denies getting any pushback when raising funding. The company, which specializes in cross-border peer-to-peer payments, announced Thursday a $60 million strategic financing round.
Allaire was quick to dismiss the "LendingClub effect," saying, "there are mediocre start-ups in every space."
Circle, which looks similar to PayPal's Venmo but works with blockchain technology, will focus its expansion on China and Europe. LendingClub, too, has gotten the benefit of the doubt thanks to the more enthusiastic Chinese market: Chinese billionaire Chen Tianqiao recently upped his stake, seeing LendingClub's downfall as a buying opportunity.
LendingClub did not respond to CNBC's request for comment on this story.
China has been at the forefront of mobile payments, Allaire said, as the site of the early proliferation of services like Alibaba's Alipay. Indeed, Circle's latest round of financing comes from Chinese power players such as Baidu and IDG Capital Partners.
While Allaire said he's gotten full support from his American investors, he sees the Chinese market as an inspiration.
"[Venture capital investors] in the West are reluctant to invest in regulated industries," Allaire said. "It is a much broader burden. There's personal financial scrutiny, FBI background checks. You have to share proprietary information with the government. But if you want to compete in this market, you have to do that."