Evan Bakker, April 17th
There is a huge opportunity in alternative lending and banks are taking note. Prosper Marketplace, one of the largest peer-to-peer lending platforms, has raised $165 million in Series D financing from Credit Suisse NEXT Investors, JPMorgan Asset Management, SunTrust, BBVA Ventures, and other financial incumbents. The company plans to use the funds to expand their platform-based lending products and services. Prosper had a highly-successful first quarter, originating $600 million in loans, a 200% increase from the same quarter in 2014. And the company expects to hit $3 billion in loan originations in 2015 (see chart). This funding is one of many indications that the alternative lending industry is taking off, and that the traditional banking model for loan origination is ripe for disruption.
Speaking at the Lendit 2015 conference, Ron Suber, President of Prosper Marketplace, compared alternative lending's underlying business model to those of companies like Uber and Airbnb. These companies use the internet and technology to make the exchange of existing services and goods more efficient. Uber, for example, has one of the world's largest networks of drivers but doesn't own any of the vehicles. Airbnb provides lodging for millions of travelers but doesn't own any hotel rooms. Likewise, many alternative lenders manage the interactions between lenders and borrowers but don't hold any of the loans themselves. Instead, they own the technology which increases the efficiency of the lending process and better matches borrowers to lenders.
The bank-backed funding of Prosper shows that banks have something to gain from the emergence of alternative lending. Thriving marketplace lending companies do not spell doom-and-gloom for banks, but instead, offer banks an opportunity to reach a new segment of borrowers. Alternative lenders service smaller borrowers that would be too costly for banks to underwrite individually using the legacy model. Nevertheless, it's clear that the predominant lending model has been challenged, forcing banks to make a choice – ignore these startups, or provide them with capital to earn returns on the loans that are rapidly growing in volume in these marketplaces.
JPMorgan Chase CEO, Jamie Dimon, recently praised the success of lending startups that are "reducing the pain points" of finance, and said that JPMorgan is open to partnering with marketplace lenders when necessary.
Read more: http://www.businessinsider.com/marketplace-lending-is-heating-up-2015-4#ixzz3Xao72lII