How Marketplace Lending Will Remake Banking As We Know It

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"For the first time in banking, the online marketplace makes it possible for a third party to match idle supply and demand. As a result, lenders and borrowers can now find one another and agree to terms – all without the involvement of retail banks or credit card companies.

By 2025, we predict that $1T in loans will be originated in this manner globally.

We believe that when that lending activity is taken off of the books of big banks, there will be much less need for government to backstop those banks – thereby rendering irrelevant the concept of “too big to fail.”

This new system of lending and credit began as “peer-to-peer” (P2P), but the system is creating so much value that has grown to involve a diversified set of investors. While this system is “disintermediated,” because it removes traditional retail banks and credit card companies from the transaction, it goes beyond that. In fact, the best platforms provide some form of intermediation – such as by scoring borrower quality to enable lenders to make good decisions.

“Marketplace lending” is a better name to describe this new system, which is fundamentally about creating platforms to connect borrowers with lenders."