Blog: Deloitte report: Marketplace lending a temporary phenomenon?

jordan stodard
Jordan Stodart

By Jordan Stodart, chief marketing officer, with Orca Money.

Consultancy giant, Deloitte, recently released its report ‘Marketplace lending: A temporary phenomenon? citing the desire for marketplace lending/P2P funds and not online P2P platforms as the only real, material threat to the banking industry.

Neil Tomlinson, Head of UK Banking, concludes that from the report findings, there’s a suggestion that marketplace lending platforms ‘are unlikely to pose a threat to banks in the mass market’ but they are ‘likely to find a series of profitable niches to exploit’.

The Deloitte report is underpinned by one significant question, one that is pertinent to global marketplace lending given recent revelations around U.S giant, Lending Club, and its lending misconduct. The question is: ‘is marketplace lending a disruptive threat or a sustaining innovation?’. The report prescribes four main sources for peer-to-peer lending’s competitive advantage:

  1. A fundamentally lower-cost operating model
  2. An ability to use public data to (safely) overcome incumbents’ data advantage in scoring risk, potentially going on to achieve better risk-pricing by taking a more agile ‘Big Data’-based approach.
  3. A superior customer (borrower) experience, driven by speed and convenience.
  4. An ability to better absorb and diversify risk by matching the appetite of borrowers and investors for both risk and duration.
  5. The report proceeds to delineate just why and how banks have managed to stave off the competition, so far.

    • Banks can borrow cheaply through inexpensive deposits, a benefit enabled through government underwriting of deposits, leading to banks justifiably having a structural cost advantage over marketplace lending platforms…but only if and when the credit environment normalizes again.
    • Customer awareness of marketplace lending is fractional compared to that of banks. One in 20 retail consumers who are aware of P2P lending has lent through a P2P platform.
    • Banks have a large customer-pool with tested and established acquisition channels. Marketplace lending platforms are digitally innovative, but still rely on expensive channels such as traditional – TV, radio, print – comprising 60% of UK platforms marketing spend.
    • At Orca Money, we would argue that the emergence of independent, impartial and informed resource centres where the market can be researched and compared, at a cheaper cost for the platform, will support growth and reduce costs.

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