Despite the continued excitement over alternative lenders and their role in supporting SMEs, it seems that traditional banks are not set to abdicate their dominant position any time soon
A new report from Deloitte estimates that, by 2025, marketplace lenders (MPLs) previously known as peer-to-peer (P2P) lenders, will account for around 6%, or £35.5bn, of the market covering personal lending, SME business lending and the retail buy-to-let market. That is a far cry from some of the more excited forecasts of the role of crowdfunding and other alternative forms of finance in business lending.
The Deloitte Marketplace Lending report estimates that MPLs currently account for less than one per cent of market share in consumer and SME lending. But while that figure will rise over the next decade, the rate of growth should not be overestimated. And a key reason for that is the banks’ ability to replicate the MPL offering but dominate thanks to their scale and reach.
Neil Tomlinson, head of UK banking at Deloitte, said: “Contrary to a number of commentators, we do not see MPLs as a major threat to banks in the mass market. Borrowers like the benefits of speed and convenience of MPLs, but those willing to pay a material premium to access loans quickly are in the minority.
‘Only a matter of time’
“While banks are yet to replicate the benefits of the MPL model, we believe it is only a matter of time before they use their size and scale to overtake and sustainably under-price MPLs.”
“While MPLs look unlikely to grow sufficiently to displace banks, banks can benefit from adopting some of their best practices, particularly around customer experience,” said Ian Foottit, banking partner at Deloitte.
“Unlike banks with legacy systems, MPLs use modern technology, streamlined processes and innovative risk scoring that can make it quicker and easier to get a loan. Collaborating with or acquiring MPLs, banks can benefit from this enhanced customer experience to deliver faster, more convenient access to credit at a very competitive price point.”
‘Flatpack finance’ is a growing problem, according to the National Association of Commercial Finance Brokers (NACFB), which has also reported that it has turned down 40 lenders for membership over the last two years, an eightfold increase on the five or so lenders it rejected in the previous two years.