There is no doubt marketplace lending, by offering speed and flexibility not historically seen in traditional banking, has done its part to foster the “do it yourself” (DIY) era. At its core, the DIY mindset starts with a question – why pay someone to do a job or share your profits or glory, when you can do it on your own? And ideas come to fruition through the vast amount of information now available to model success. In this DIY age, it seems anyone can start a company, create a fund or even start a blog….
Familiarity might breed contempt, but it seems nothing brings out the detractors like success. After a meteoric rise, marketplace lending has had its share of challenges and scrutiny, but the future should still be bright for such an industry on the forward edge of technology and consumer needs. Yet marketplace lending seems to be ending 2017 under an unwarranted attack from regulators and commentators determined to find similarities in marketplace lending to the subprime mortgage market in the years leading up to the financial crisis.
Everything Subprime? I Don’t Think So
At Credit Chronometer,…
ABS Issuances, by the Numbers
Nine ABS deals totaling $3 billion closed in Q2 2017, a 76% increase from Q2 2016. Q2 ABS issuances included approximately $2 billion in consumer (up 28% versus Q1 2017) and approximately $1 billion in student (down 5% versus Q1 2017). All deals were rated. Total ABS issuance is expected to be over $11 billion in 2017.
Performance and Practices
Performance continued to weaken as delinquencies and charge-offs increased in Q2 for personal, student, and subprime auto loans. Prime credit card portfolios are showing multi-decade delinquency rate lows….
As lenders lean on data, algorithms and automation for more efficient loan underwriting, observers have noted that these largely untested tools have yet to go through an economic cycle. The greatest challenge for automated lending, however, may lie in the very technology that drives it. Artificial intelligence and automation aren’t just for lenders, after all—and as companies across industries adopt them in the coming years, the impact on borrowers’ economic stability could be severe. But online lenders, with their fast-moving, adaptable techniques, may be in the best position to respond to these market changes. Their flexibility and responsiveness may put them far ahead of their more traditional lending rivals….
Act more like a traditional bank, and less like a tech start-up. That’s what some marketplace lenders are trying to do to appease some critical investors. Acting like a traditional bank, however, could be a slippery slope. Operational changes may be enticing to some investors, but they threaten the very foundation of marketplace lending, potentially shutting out the segment of the population marketplace lending was meant to serve. Evolution was expected. Regression was not. The way forward lies somewhere in the balance.
The moves toward more traditional banking are rooted in marketplace lending’s recent wild ride. …
Beneath all the excitement surrounding the fast-growing “fintech” industry has been a more practical question: who, exactly, is going to regulate this new breed of enterprise?
The U.S. Office of the Comptroller of the Currency offered one answer recently, announcing its intention to grant national bank charters to fintech companies. The OCC action would allow companies that gain charters to operate nationwide. Equally significant, it would result in state-level preemption. Chartered fintech companies could be free of capital requirements imposed by states, for instance, as well as state consumer protection laws such as those prohibiting usury,…