P2P Lending to Reach $350 B, OPB Lending $206 B in Next 10 Years

Peer-to-Peer (P2P) and Online Platform based Business (OPB) Lending Report

The future of alternative lending is looking bright in the US. Non-traditional alternative lending has grown rapidly in the last few years. Alternative lending caters to those customers who need cash but might not qualify for traditional bank loans because of poor credit profiles.

In the financial services industry, the P2P segment emerged first in 2005 – focusing on lending and borrowing. P2P lending platforms, also known as marketplace lending platforms, offered an alternative to traditional banking and payment systems, since they cater to the underserved with services like consumer lending, student loans, real estate and small-business lending products. While these online providers create a marketplace for lenders and borrowers, lenders can expect a higher rate of return on their investments compared with traditional bank deposits. Borrowers who are unable to qualify for loans from banks turn to these alternatives to obtain credit — possibly at a lower interest rate than they would have received from their bank, based on their respective credit profiles.

Similarly, merchants with poor credit or a lack of credit history typically have a hard time getting financing through traditional means, such as a loan, line of credit, or credit card. It’s tough for small businesses to get bank loans, pushing them towards high cost alternatives. Therefore, merchants looking for fast cash are shifting from traditional bank-led models to marketplace lending platforms. Unlike banks, the processes involved in these platforms are simple and streamlined. There’s no waiting involved as with traditional methods that take forever to underwrite a loan.

What are the benefits of platform based lending for Borrowers and Lenders?

Disruptive players like Lending Club, Prosper, Ondeck and others have made this a viable and growing opportunity. US P2P platforms issued approximately $-- billion in loans in 2014. Lending Club originated more than $-- billion in personal loans, enabling more than 250,000 consumers to achieve their financial goals in 2014. Since its inception, the organization has originated more than $6 billion in loans. Similarly, Prosper issued new loans worth more than $-- millions. The lending platform, OnDeck which focuses on small business loans has processed 4.4 million loans since 2007 for a value above $1.7 billion.

This success of the lending market is now prompting banks to enter into partnerships with leading lending players. Marketplace lending has created a paradigm shift in the financial service industry.

Marketplace lending could generate >400 BP cost advantage VS Banks

Source: Lending Club based on data from St.Louis fed, Federal Reserve and Foundation Capital

LTP, along with GrowthPraxis, is publishing a new report which will provide answers to the following questions:

  • Why is P2P lending and Business lending through platforms disruptive in nature? How will it impact the traditional banking system?
  • How big is the addressable market for P2P and Business lending through platforms in the US?
  • Who are the players dominating the industry? Is there any room for new players?
  • When should we expect the inflection point in P2P and Business lending through platforms?
  • How will use of Cloud, Analytics and Mobility in P2P and Business lending change the industry?

Detailed Contents of the Report:

Peer-to-Peer Lending

  • Overview of Peer-to-Peer (P2P) Lending
  • P2P Lending – Disruptive Force in the Financial Services Industry
  • Market Size of P2P Lending in US
  • Market Share of P2P lending in US – Players
  • P2P Lending Forecasts in US (2014–2025)
  • Analysis of Loan Applications from the Loan Data of Lending Club

Platform based Business Lending

  • Overview of Business Lending through Platforms (OPB)
  • Market Size of Business Lending through Platforms in US
  • Market Share of Business Lending through Platforms in US - Players
  • Business Lending through Platforms - Forecasts in US (2014-2025)

Use of Cloud, Analytics and Mobility in P2P and Business lending

Upcoming trends in P2P and Platform based Business Lending