P2P Lending: Responding to Disruption

P2P Lending: Responding to Disruption


P2P platforms have grown exponentially in the last couple of years. Their superior customer experience, speed, and ultimately cost of credit have allowed P2P lending platforms to compete for banks’ customer bases directly. P2P lending platforms are not attempting to serve a previously underserved segment of the market, but lucrative creditworthy borrowers. Alternative credit risk models are a key competitive advantage for P2P lending platforms, enabling cheaper cost of credit through more accurate default risk assessment. The more customers P2P lending platforms acquire, the more refined their credit risk models become and consequently the cheaper the cost of credit.

Key Findings

  • P2P lending platforms have a 400–425 basis point advantage over traditional banks in loan origination.
  • Retention of customers who have used a P2P platform before is high, with 75% saying they would approach one again when seeking a loan.
  • Fractional lending and alternative credit risk assessments allow platforms to reduce exposure to default and asses risk more accurately than banks.
  • The domination of institutional investors does pose a risk to the sustainability of some P2P platforms.

Verdict Financial’s P2P Lending: Responding to Disruption report is a comprehensive analysis of the rise of Peer-to-Peer consumer lending and its impact upon retail banks’ borrowers. The report details the impact of P2P lenders upon banks’ deposit bases. The report shows the growth of P2P lending platforms across the globe and highlights which markets are most at risk from disruption. Readers will gain a thorough understanding of the development and evolution of P2P consumer lending over the last decade. In addition, the report focuses on how P2P lending works and how this contributes to the platform’s competitive advantage. Lastly the report recommends improvements banks should make to their own business, in addition to highlighting their own strengths in relation to customer lending and how these can be leveraged to compete with P2P lending platforms.

Reasons To Buy
  • Identify emerging consumer trends in lending and learn how to re-orientate your business accordingly.
  • Understand the threat posed by P2P consumer lending platforms in your individual market.
  • Learn about the strengths of P2P consumer lending platforms and how they are able to offer customers a superior experience in terms of cost and ease of access.
  • Gain tactical insight into what changes can be made to banks’ operations and business strategies.
  • Learn about the focus of P2P consumer lending business and how these platforms are positioning their business for the future.

  • Executive Summary
    • P2P lending platforms are leaner, more dynamic, and more customerfriendly
    • P2P lending is rapidly growing in the UK due to conducive regulation, as well as the platforms themselves
    • Key findings
    • Critical success factors
  • Introduction to P2P Lending
    • Banks face a formidable threat from a faster, cheaper, leaner rival
      • Chinese banks are most exposed to the greater competition from P2P lending
    • This report focuses on the threat to banks' loan business rather than deposits
      • P2P platforms hold a 400+ basis point cost advantage over traditional banks
      • Returns have attracted large institutional investors to P2P platforms
      • P2P platforms have directly targeted the banks' core prime customers
      • P2P platforms are building strong levels of advocacy
    • Strengths of P2P platforms
      • Fractional lending reduces default risk and lowers interest rates for borrowers
      • Intermediated funding models provide P2P platforms with faster and easier loan origination
      • Deeper, more accurate credit risk models allow P2P platforms to offer more competitive rates
      • P2P lending platforms have high retention levels among borrowers
    • Key takeaways
  • Appendix
    • Abbreviations and acronyms
    • Methodology
      • Verdict Financial's 2015 Retail Banking Insight Survey
      • Markets included in each region
    • Bibliography
    • About Verdict Financial
    • Disclaimer

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