What Could 2016 Hold for P2P Lending?

2015 was a good year for peer to peer (P2P) lenders and the FinTech sector as a whole. Following major IPOs from Lending Club and OnDeck at the very end of 2014, last year saw several players both raising and lending money at impressive levels. So can the momentum continue this year or is there a bubble set to burst? TechCrunch contributor Sonny Singh recently took a look at the current state of P2P lending to answer that exact question.

Although their general feeling seems to be that the strength of P2P lending last year will lead to strong 2016, they do note some possible concerns for the year ahead. At the top of the list is a possible rise in interest rates. While the Fed recently raised rates .25% (which caused Lending Club and others to raise their rates accordingly) there are mixed signals on whether they’ll raise them further later in the year. The problem would be if the Fed hiked rates up before the economy was strong enough, which could lead to more loan defaults and in turn could hurt lenders. However, even if this were to happen it likely wouldn’t hit P2P lenders as hard since they aren’t actually the ones lending the money. Still a lower default rate is better for everyone involved as peer to peer lenders do ultimately have to keep their investors happy as well (and have borrowers who can afford to take on a loan).

Another concern is over new regulations. To a certain degree having regulators asking you a lot of questions really comes with the territory of being a disruptor but a new scandal could be brewing that’s a little different from the typical SEC investigation. Following the tragic attacks in San Bernadino that left 14 people dead it was discovered that the shooter had secured a loan from Prosper just weeks before the killings. This connection could lead to more government intervention (especially in an election year) to ensure that terrorists can’t easily obtain loans via peer to peer lenders. It’s unclear how that would accomplished but it may be something that FinTech lenders might want to start thinking about.

Lastly banks and FinTech firms seem to be learning to work together including Lending Club’s partnership with BancAllience and OnDeck’s deal with Chase. At the same time Goldman Sachs and others are developing their own p2p lending sites. It will be interesting to see long term if these spin-offs from traditional banks can actually compete with pioneer P2P lenders can or if they’ll eventually admit defeat and form a partnership instead.

Despite some possible speed bumps in the road ahead peer to peer lending is looking to have a big year in 2016. With more partnerships to form, more possible IPOs in the works, and of course more loans to facilitate expect FinTech to continue on its current positive trajectory in 2016. As for 2017 we’ll just have to wait and see.

Hello there! Would you mind if I share your blog with my facebook group?
There’s a lot of folks that I think would really
appreciate your content. Please let me know.

Many thanks

Comments are closed.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Carbon Credit API Cloverly Joins Visa's FinTech Partner Connect 

Last year, Visa introduced the FinTech Partner Connect program to the United States, with the goal of introducing institutions to vetted startups that could help them expand their product offerings. Now, the latest company to join the program is Cloverly. Founded in 2019, Cloverly is an API for carbon credits, allowing businesses and consumers to help fight climate change. As the company points out, with the Visa partnership, Visa clients...

Prosper Announces $75 Million Growth Capital Financing

A long-admired FinTech has added some new capital to its coffers and it continues to grow after more than 15 years in business. Recently, Prosper Marketplace announced that it had closed a $75 million debt financing round. This capital came from a fund managed by Neuberger Bergman and will be used to help Prosper meet the demand for its loans, credit card, investment products, and more. According to the company,...

Small Business Saturday 2022 Drives Projected $17.9 Billion in Sales

This past weekend saw the kick-off to the holiday shopping season with Black Friday followed by Small Business Saturday. Now in its 13th year, the latter is a promotion meant to raise awareness for small local businesses and encourage consumers to support them. Now, the initial figures from this year's event have arrived. According to American Express (which actually invented the retail holiday in 2010), an estimated $17.9 billion were...