The growth of marketplace lending platforms like Lending Club and Prosper have inspired numerous industry observers to wonder whether those platforms pose any long-term competitive threat to traditional banks and credit card issuers. A recent Forbes article took a stab at answering that question as it relates to the small business card segment.
“A lot of Peer2Peer and alternative lenders have capitalized on this reputation, providing short-term loans intended to replace credit card debt. Lending Club, the largest global peer2peer lender, counts over 80 % of its loans as credit card payoffs.
Do such inroads spell trouble for the credit card companies and banks? As an investor, should you be concerned about these news types of lenders replacing credit cards as a form of business financing? Unless alternative and P2P lenders significantly lower their rates and provide benefits similar to what credit cards offer, I think plastic is here to stay.”
I agree with the article’s author that credit cards (though not necessarily their plastic incarnations) are safe for the time being. In my recent research report, The Disruptive Potential of Marketplace Lending in the U.S. Consumer Credit Card Market, I argue that the true disruptive potential of these alternative lenders lies in their technology rather than in their expanding marketshare.
Overview by Alex Johnson, Sr. Analyst, Credit Advisory Service at Mercator Advisory Group
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