The P2P Threat to Retail Banking - The marketplace lending revolution
Peer-to-peer or marketplace lending has become one of the phenomena of the early 21st century, with service providers like eBay, Uber and Airbnb revolutionising the way business is done in their respective spheres. The disintermediation of industries like travel and retail forced the incumbents to rethink their own strategies to stay alive.
When the financial crisis of 2008 exposed the weaknesses of the traditional banking system and destroyed consumer trust, the way was paved for new thinking and alternative finance providers seized the opportunity to enter the space.
Access to credit had become increasingly expensive for a whole range of consumers
and next to impossible for small businesses. These factors, together with new technological capabilities and a generation of consumers comfortable with conducting financial transactions online created the perfect conditions for disintermediation of the banking model.
A new Lafferty thought leadership report, The P2P Threat to Retail Banking, undertakes a study of the state of marketplace lending globally, with case studies and analysis of conditions in key markets worldwide, including the US, the UK and China, the global leaders in marketplace lending, as well as platforms of note in Australia, Argentina, Canada, New Zealand, South Africa and other key markets in Europe and the Middle East.
The report considers how the p2p lending platforms are beginning to reframe the
debate somewhat, having originally positioned themselves in opposition to the banks.
With the heads of the top platforms saying publicly that they expect and welcome interest in partnerships from the banks, we look at why 2015 might be the year when partnership deals between p2p platforms and banks become commonplace.
To date, banks have generally done little in the face of this potential threat to their business – while awareness levels within the financial sector are now growing, decision- makers have had their attention and efforts focused elsewhere for the last few years, so that marketplace lending has slipped under their radar to a certain extent. Yet, with global growth rates of 100 percent year-on-year, it is only a matter of time before marketplace lending takes a significant portion of consumer and SME lending from the incumbents.
This report looks at the growth rates, regulatory conditions and potential for expansion in marketplace lending as well as explaining the key risks, threats and opportunities for the fledgling industry and why it is so important
for banks to react before it is too late.
Source: Costello, Vicky. "The P2P Threat to Retail Banking - The Marketplace Lending Revolution." The Marketplace Lending Revolution - A Lafferty Group White Paper, May 2015, 8.