Deloitte dismisses impact of peer-to-peer lenders

But while the global accountancy firm believes online platforms connecting investors directly with consumer and commercial borrowers will form a fraction of the £600 billion being loaned in a decade’s time, it warned that this could swell to as much as 6 per cent of the market if banks do not innovate and the Bank of England keeps its key interest rate near a record low.

The so-called marketplace lenders are typically websites where savers can lend their money to small businesses or individuals who need a loan.

Currently, a freedom from the regulation weighing down banks means the P2P lenders aim to offer better rates of interest to both savers and borrowers.

Britain’s largest banks at the moment are further disadvantaged by their crumbling computer systems in the face of the slick new technology employed by the ‘P2P’ players such as marketplace lenders Zopa and Funding Circle.

Even so, banks hold an upper hand in a low-cost funding model from customer deposits that will prove “even more powerful” when interest rates rise, according to Deloitte.

Neil Tomlinson, head of U.K. banking at Deloitte, said: “Contrary to a number of commentators, we do not see marketplace lenders (MPLs) as a major threat to banks in the mass market. Borrowers like the benefits of speed and convenience of MPLs, but those willing to pay a material premium to access loans quickly are in the minority.”

He added: “Whilst banks are yet to replicate the benefits of the marketplace model, we believe it is only a matter of time before they use their size and scale to overtake and sustainably under-price MPLs.”

Marketplace lenders probably accounted for about £2.7 billion of lending in the U.K. and 669 million euros in Europe last year, dwarfed by $23 billion in loans in the U.S., according to Liberum, AltFi Data and Deloitte analysis.

The 6 percent share of the British market would bring lending to consumers and small-and medium-sized businesses to as much as 35.5 billion pounds by 2025, Deloitte said.

While the peer-to-peer platforms, which do not take deposits, nor face as many regulations as the U.K.’s largest banks, this may change as they become more important to the financial system, Deloitte said.

Banks are likely to work with or acquire some marketplace lenders and adopt their best practices to maintain the status quo.

There are also serious risks involved in the marketplace practice as savers do not get the protection of putting their money into a bank account and run the risk of losing their money.