Equifax predicts transformation of online marketplace lending by year 2020
Las Vegas, NV-- By 2020, the marketplace lending industry will have mushroomed into a global phenomenon that includes more financial institutions, larger loan sizes and longer terms – including mortgage loans that peer-to-peer lenders have thus far primarily resisted. Those are among the conclusions of an analysis prepared by global information solutions provider Equifax Inc. for the Money20/20 conference that begins today in Las Vegas.
Equifax’s 2020 outlook for marketplace lending comes as more than 10,000 people and hundreds of financial services firms, investors, payments firms, assorted vendors and analysts converge for a four-day conference that organizers have dubbed “Primetime.” Equifax’s Jeff Knott, an assistant vice president and also 2015 Chairman of the Electronic Signature and Records Association (ESRA), points to the skyrocketing popularity of Money20/20 – attended by 2,300 people at the inaugural conference in 2012 – as evidence of the industry’s unprecedented growth and changing complexion.
“Enormous change is ahead as marketplace lending matures,” Knott said. “We will witness a shift in alternative lending in which the industry evolves from its peer-to-peer origins as competitors establish a dominant online lending model.”
Among the changes Knott and Equifax expect by 2020:
- A growing number of financial institutions will enter the market as direct providers or indirect investors, including credit unions and community banks, thanks to technology advancements in mobile and in the back office. Traditional lenders who once viewed P2P as a passing fad will join the fray because marketplace lending “offers them the ability to gain greater exposure in certain geological and socioeconomic populations,” Knott said.
- More big players will jump in, though the overall number of competitors by 2020 may not change dramatically due to consolidation and contraction.
- Loan terms will grow longer and loan sizes larger as the industry moves from short-term instalment loans to, by 2020, mortgage loans. Already the industry has grown beyond payday advances to small business loans to auto loans, Knott noted.
- Geographic growth with rapid adoption of marketplace lending worldwide. “This global phenomenon will give new opportunities to individuals who now live in places with no lending infrastructure,” Knott said.
- Continued growth of conferences such as Money20/20 and LendIt, but also the emergence of a central, large industry organization to serve as an umbrella for all stakeholders in online marketplace lending. Active talks are underway to discuss the emerging need and appropriate timing to create such an organization, according to Knott.
- Greater pressure on lenders to use trusted, verified data from neutral sources – and to require data and document integrity – so as to minimize risk, comply with anticipated regulation, and avoid a repeat of the recent mortgage industry collapse. “Hopefully the industry can learn from those lessons and proactively put the right protections and controls in place,” Knott said.
“The advantage of online marketplace lending is that it has imbedded features that regulators like,” Knott said. “Lenders have the ability to provide financial education to borrowers, to demonstrate process transparency, and to benefit consumers by using the delivery model they prefer most, which is online and by smartphone or tablet.”