Online Marketplaces For Loans Are Growing Rapidly. Should Banks Be Worried?

Harding Loevner’s Bryan Lloyd and Moon Surana discuss the rise of P2P lending and what it means for the banking industry.

Key Takeaways


  • Peer-to-peer (P2P) lending platforms—online credit marketplaces that connect individual lenders with borrowers for a fee—transfer risk to individual lenders and have no branches, lower staffing needs, and fewer regulatory requirements. These advantages allow the companies to offer better rates to lenders and borrowers alike.
  • P2P platforms found their footing when banks curtailed lending after the global financial crisis and have expanded rapidly during a period marked by steady, if slow, economic growth and rising popularity of online financial services.
  • However, P2P companies have not yet been tested in a downturn. A deterioration in the credit environment could cause individual lenders to abandon the platforms.
  • P2P platforms are most likely to succeed in emerging market economies such as China, India, and Indonesia, where larger portions of the population do not have access to traditional bank accounts.



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