The Future Of Peer-To-Peer Lending
- May 3, 2016
- 1 min read
Although peer-to-peer lending platforms have only begun to scratch the surface of the more than $3 trillion consumer debt market, they have been hailed as cutting banks out of the process thereby providing individual borrowers with lower interest rates and individual lenders higher returns.
But this picture has changed drastically over the last few years. With P2P lending becoming ever more prevalent, institutional lenders have started to eradicate the peer-to-peer nature of the business. And they have quickly begun to dominate the industry accounting for up to 60% of the capital deployed through p2p lending platforms. With greater resources and capital, small p2p lending platforms stand little chance in winning this battle.
Alas, the very institutions that these P2P platforms were meant to disrupt are now starting to dominate the industry. Institutional lenders have managed to infiltrate P2P lending from every angle. Board members at the largest P2P platforms include executives at some of the largest banks in the world. P2P lending platforms, are now being flooded with institutional and wall street money.
Proponents of this trend argue that it is good for the P2P industry because it means more capital for borrowers and greater scale than would be achievable solely through individual lenders. Opponents argue that by eliminating true P2P lenders, the disruptive force of these platforms is being only partially realized.
So the next time you hear the phrase Peer-To-Peer Lending, you might find that the P2P lender has been displaced by a financial giant.
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