Marketplace lending: evolution and expandability

By Herbert Leonelli | 25 July 2018

As with every trend, marketplace lending has evolved into different shapes and sizes, ranging from P2P lending platforms gaining banking licences to actually collaborating with established banks to enhance the offering of both. The regulatory environment around this is also evolving to better protect customers, providing guarantees where needed to ensure longevity and good business procedure.

Examining how this has grown over time helps identify similar patterns in other industries. Trends in marketplace lending according to CapGemini show that:

  1. Lending firms are consolidating platforms to offer better customer analytics for improved service. Technology will be easier to utilise, enabling focus on the development of new services
  2. Firms deploy technology to optimise credit risk analytics for advanced customer segmentation, personalised profiles and real time updates
  3. Operational enhancements with the use of technology (risk analytics, RPA, AI, APIs, etc.) enable automation across entire processes, while providing intelligent reporting
  4. Lending as a service model emerges to enrich direct lending business
  5. Banks are partnering with fintech firms to deliver innovation and meet evolving customer expectations at better cost rates
  6. Increased regulatory inspections are leading fintech firms to deploy more robust banking-like systems to ensure compliance that considers customers’ best interests
  7. Unquestionably, millennials drive the transformation for a more digital, tech-oriented service approach. Firms responding to this try to deliver data-driven lending to enhance their business as well as the customer experience with advanced front-end solutions
  8. The hype of digitisation is also increasing the need for cyber security platforms to protect businesses with authentication methods to combat fraud
  9. Leveraging new technologies streamlines and automates operations (IoT, blockchain, AI, etc.), while addressing new markets
  10. Open marketplaces gain traction as they offer transparency, faster service and competitive rates using technology-driven market dynamics

In this context, it is becoming apparent that technology plays a key role in helping lending and leasing firms grow their operations. Combined with the fintech approach of marketplace lending platforms, it is certain that technology will add to firms’ bottom line for expansion, profitability and customer loyalty.

According to Altfi Data, in 2017 the EU volume of marketplace lending projects exceeded €1.5bn; and the projection for 2018 looks like it will be in excess of €2.8bn, with the strongest growth in property and consumer lending averaging 90% of the total deals.

Diversification of the banking industry, such as support for fintech operations, coupled with evolving customer expectations for faster response and digital experience is creating opportunities to develop innovative solutions for credit services. As a result, financial firms are shifting from “fintech disruption” to “fintech transformation”, thus delivering a competitive offering by redesigning their processes through the whole chain, from loan origination to risk analysis, using technologies to automate their operations.

Profile Software, as a pioneer fintech solutions provider, offers a truly flexible marketplace lending solution that combines banking and investment management functionality along with advanced risk management capabilities, resulting in enhanced user experience and business agility for both professionals and their clients. The company has a long standing presence in this market having deployed the solution in demanding lending platform to contribute to faster and reliable process of information and automation.

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