MADISON, WIS. - The peer-to-peer lending market is surging within the broad financial services market. In response, a new report from Filene Research Institute and Credit Union Central of Canada, Peer-to-Peer Lending and the Future of Cooperation, encourages credit unions to develop strategies to embrace, adapt to, or defend against peer-to-peer lending.
“Crowdfunding platforms like Lending Club, Prosper and SoFi have lower cost structures than brick-and-mortar loan providers,” noted Filene Research in a statement. “And although their focus is mostly on unsecured lending, some are moving into more complex financial services. Online peer-based lending tools can be used to help modernize a credit union’s traditional role in reputation-based lending. The peer-to-peer lending market is in the midst of rapid growth. The largest player by far is Lending Club, with over $9.25B in loans from its’ founding until March 2015.”
To get a sense of the potential market for consumer and business loans, researchers compared North American markets to those in the UK, which has well-developed markets for both. The authors project a U.S. market size of $5.1-billion in consumer loans and $7-billion in business loans per year.
“Most credit unions have the capacity and risk tolerance to engage in crowdfunding-enabled community operations despite regulatory challenges,” said George Hofheimer, chief knowledge officer for Filene Research Institute. “These projects are relatively low-cost and have high social impact.”
Of particular interest is the possibility of reaching out to young, value-driven consumers and introducing them to the credit union alternative, said Filene, noting that credit unions overall have an aging membership base so the opportunity to attract younger members is compelling, as is the risk of losing potential members.
For info: www.filene.org.