Global consulting firm PwC has published a report on the marketplace lending industry. The timing is good as the industry is being buffeted by the broader challenge of a stumbling economy. The document aptly starts by noting the marketplace lending sector is oh, so much more different than the peer to peer lending days. What started as a fascinating concept of disintermediation of traditional finance is quickly emerging a technologically superior method of lending that, in many ways, mirrors what it is intended to supplant.
Peer to peer lending started as a true peer matching process: lender to borrower. And in some countries, like China, this remains the case. But in the US, perhaps the most evolved online lending sector, marketplace lending is dominated by institutional money seeking the superior risk-adjusted returns the industry has come to expect. PwC has produced a “road map” to potentially guide existing market participants and those who are preparing to launch an online lending platform.
PwC defines marketplace lenders as any non-bank operation that is primarily a digital operation. But a common characteristic of all marketplace lenders is the fact they are unencumbered by a bricks and mortar past and tend to be more agile than their legacy peers. Based on their experience and knowledge, PwC envisions a four-stage road map:
Build the foundation
Refine the core lending business
Expand and innovate
Look beyond core lending
There are some solid recommendations in the PwC report. While some suggestions may come across as common sense strategy it is still good to hear. Never get complacent. Embrace the need for speed.