Finance · 23 May 2016

Peer-to-peer isnt as disruptive as you think, warns Deloitte

marketplace lending
Only four per cent of small business owners have used alternative finance, though three-quarters were aware of it
Alternative finance could make up less than one per cent of the lending market by 2025 if interest rates rise, according to new research by accountancy giant Deloitte.

The new report into marketplace lending defined as both P2P lending and institutional investment that build on this model was based on the results of a survey of consumers and small business owners.

It identified invoice financing as the most fruitful section of the market for alternative providers, and highlighted the benefits marketplace lenders have when it comes to processing and underwriting loans advantages that come from the greater automation such services use compared to banks.

a fully automated process for processing and underwriting loans allows marketplace lenders to avoid the material costs that banks have to deal with as a result of their legacy systems and multiple channels, wrote the report’s authors.

this also holds true for servicing where a surprising number of banks have, for example, no automated scoring systems for SME overdrafts this results in a significant proportion of relationship managers? time being taken up in renewing overdrafts.

However, a comparison of the total cost of lending to small businesses by marketplace lenders compared to bankshighlighted that central bank interest rates make up a bigger proportion of lending costs for alternative platforms.

marketplace lenders? costs will rise by more than banks? as the credit environment normalises and interest rates increase, argued the report’s authors.

The study also shed light on the attitudes of small business owners to marketplace lending, with only four per cent of those surveyed users of alternative finance, though three-quarters were aware of bank alternatives.

Some 90 per cent of SME lending is currently provided by the bank with which the company’s business current account is held something which the Deloitte report suggests poses a big challenge to customer acquisition by alternative platforms.



Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics as well as running a tutoring company.

On the up