Innovation of the Year: Online Marketplace Lending

May 25, 2015 Blog  INVESTMENTS , Personal Finance
img

In the American Bank Technology News, it is said that 2014 was a “Gold Rush” year for online marketplace lending. As a result of the industry’s rapid growth and evolution, American Banker (a daily New York trade newspaper and website covering the financial services industry) has named marketplace lending its Innovation of the Year.

Until recently, “peer-to-peer lending” was the preferred term for the business activity of companies like Lending Club and Prosper.

Then, after individual investors in the loans began to be elbowed out by hedge funds and other institutional investors, the industry rebranded under the “marketplace lending” name. “Marketplace lending” best describes the many fast-growing firms using technology to build online platforms that stand between borrowers and lenders.

A recent report by a California venture capital firm predicted that marketplace lenders will originate $1 trillion of loans annually by 2025. That’d be more than a 100-fold increase from the estimated $8.8 billion in marketplace loans made last year.

“For the first time in banking, the online marketplace makes it possible for a third party to match idle supply and demand,” argues the report, written by Foundation Capital, which has investments in both Lending Club and OnDeck. “As a result, lenders and borrowers can now find one another and agree to terms — all without the involvement of retail banks or credit card companies.”

One of the industry’s high-profile backers, the former Citi chief Pandit, acknowledges that marketplace lending faces big tests ahead. “These platforms will have a role to play,” says Pandit, before adding: “As to how big or small will depend on the kind of trust they develop over time, through cycles and stresses and strains, and through learning.”

In other words, it’s probably too early to say how many stacks of yellow metal are up for grabs.

Article written by Kevin Wack, Colin Wilhelm and John Adams with contributions by Matt Scully.

Read full article.

Related Articles

  • Blog Why is Marketplace Lending Thriving?

    INVESTMENTS, Personal Finance

    Why is marketplace lending thriving? It’s fairly simple, really. People are realizing that credit cards might be a good way to buy things at point of sale, but they are not a smart way to get credit...

    Read More
  • RainFin In the news RainFin Investors – How It Works

    INVESTMENTS, RainFin Videos

    RainFin is an online lending marketplace where you can safely, quickly and cheaply borrow from or lend to people around you. This video explains the Investor process. After looking at this, the viewer...

    Read More
  • Blog Don’t Settle for Savings – INVEST!

    INVESTMENTS

    The word savings usually makes me think of a treadmill. Why? Well, it comes down to a couple of experiences I’ve had in my life. Specifically when I save for something in the short to medium term, y...

    Read More