The takeover of marketplace lending by the big boys continues, with half of US institutional investors now putting money into what were once known as 'person-to-person' platforms.
Of more than 300 institutional investors surveyed by Richards Kibbe & Orbe and Wharton FinTech, half have made some form of investment in marketplace lending, up from less than 30% just one year ago.
And, while some observers have been predicting an industry contraction, more than 80% of those quizzed express high or moderate levels of optimism for marketplace lending’s future.
"Last year, it was clear that institutional investors saw the promise of marketplace lending. This year, they stepped off the sidelines and into the action," says Richards Kibbe & Orbe partner Jahan Sharifi.
Among respondents who invest in whole loans or borrower payment dependent notes through marketplace lending platforms, consumer, small business and real estate loans are the most popular investments.
Meanwhile, borrower quality is becoming less of a concern, dropping from being perceived as the greatest risk last year to third, behind two external forces: market-wide credit risks and regulatory risk.
Despite the increased concern over potential regulatory developments, more than 40% of legal and compliance professionals say they were not at all or just a little familiar with the industry’s regulatory framework.
Scott Budlong, partner, Richards Kibbe & Orbe, says: "Institutional investors are right to identify potential regulatory developments as a key factor in the industry’s continued growth, which means they will want to arm themselves with better knowledge about the evolving regulatory framework."