Non-bank alternative finance providers are unlikely to make any significant dent in the share of marketplace lending by the traditional banking establishment, according to an analysis by Deloitte.
Given a fair headwind and a ten-year timeframe, Deloitte estimates that marketplace lenders could gain control of approximately six percent of the loans market across key segments, including personal lending, SME business lending and the retail buy-to-let market in the UK, which, together, may represent approximately £600bn of lending.
However, this assumes that banks make no effort to compete and historically low level interest rates prevail. MPLs face an even lower share of the market of just one percent or £0.5bn by 2025, if interest rates normalise and banks innovate.
Deloitte estimates MPLs currently have less than one percent market share in both consumer and SME lending.
Neil Tomlinson, head of UK banking at Deloitte, says: “Contrary to a number of commentators, we do not see MPLs as a major threat to banks in the mass market. Borrowers like the benefits of speed and convenience of MPLs, but those willing to pay a material premium to access loans quickly are in the minority. Whilst banks are yet to replicate the benefits of the MPL model, we believe it is only a matter of time before they use their size and scale to overtake and sustainably under-price MPLs.”
A consensus appears to be building across the financial services industry that whole swathes of the current crop of fintech startups are themselves set to be disintermediated by the establishment banks as they invest in new technology and hoover up the most promising ideas and firms. A report from Greenwich Associates last week forecast that many major fintech and nonbank providers will be acquired by banks in the coming years, leading to the creation of digital financial superstores owned and controlled by the world's leading banks.