The future of alternative lending is looking bright in the US. Non-traditional alternative lending has grown rapidly in the last few years. Alternative lending caters to those customers who need cash but might not qualify for traditional bank loans because of poor credit profiles. P2P (Peer to Peer Lending) and OPB (Online platform based Business lending) has emerged to make things easier for people as well as businesses who face difficulty in getting loans only because of their low credit profiles.
P2P segment emerged first in 2005 – focusing on lending and borrowing. P2P lending platforms, also known as marketplace lending platforms, offered an alternative to traditional banking and payment systems, since they cater to the underserved with services like consumer lending, student loans, real estate and small-business lending products. P2P lending platform is expected to reach USD $350 billion by 2025 as disruptive players like Lending Club, Prosper and others have made this a viable and growing opportunity. US P2P platforms issued approximately $– billion in loans in 2014. Lending Club originated more than $– billion in personal loans, enabling more than 250,000 consumers to achieve their financial goals in 2014. Since its inception, the organization has originated more than $6 billion in loans. Similarly, Prosper issued new loans worth more than $– millions in 2014.
OPB (Online Platform based Business lending) offers businesses a lump sum amount in exchange for a share of future transactions/Sales. The deal is a “purchase and sale of future income”. They mostly target companies having strong credit card sales like retail, restaurant and service industry. There is a plenty of room for growth in this market as the providers have penetrated only --% of the market which is expected to reach USD $206billion in next 10 years. The lending platform, OnDeck which focuses on small business loans has processed 4.4 million loans since 2007 for a value above $1.7 billion. It originated $458.9 million of loans in 2013, representing year-over-year growth of 165%, and in the first nine months of 2014, the company originated $788.3 million of loans, representing year-over-year growth of 171%.
LTP report on US Alternative Lending Market provide answers to the following questions:
- Why is P2P lending and Business lending through platforms disruptive in nature? How will it impact the traditional banking system
- How big is the addressable market for P2P and Business lending through platforms in the US?
- Who are the players dominating the industry? Is there any room for new players?
- When should we expect the inflection point in P2P and Business lending through platforms?
- How will use of Cloud, Analytics and Mobility in P2P and Business lending change the industry?