BII
This story was delivered to BI Intelligence " Fintech Briefing " subscribers. To learn more and subscribe, please click here .
U.K. marketplace lenders might only originate $0.7 billion in 2025, according to a new Deloitte forecast.
That would be a marked decrease from $4 billion in 2015 and would represent less than 1% of marketplace lenders’ addressable market of personal loans, business loans, and buy-to-let property loans, according to Deloitte’s math.
This is a worst-case scenario, but it demonstrates two features of marketplace lending that are mostly outside the control of these startups.
For starters, marketplace lenders must provide investors with a greater return than other investments in order to give them a reason to buy loans. If interest rates in the U.K. rise, then the rate lenders must pay investors would also likely rise along with them. This would place more pressure on margins and make it harder to acquire capital.
Marketplace lenders use technology to expedite borrowers’ decisions on loan applications and provide faster access to funds than legacy lenders. This tech also helps them service markets that are not profitable for banks, which increases the appeal to borrowers.
But banks could simply acquire or partner with startups to get this technology, or even build it themselves. For example, JPMorgan Chase has teamed with OnDeck and now lends to borrowers through a platform with the Chase brand that OnDeck built and runs.Economic conditions have been rocky, so it’s unlikely that interest rates will rise significantly in the U.K. anytime soon. This gives marketplace lenders some cushion.They will, however, struggle to make sure that their platforms are still the most attractive options on the market. There is little preventing banks from replicating lenders’ technology, and big banks could even introduce inferior platforms to place more pressure on lenders.Regardless of the struggle […]
