The first efforts in this space were called peer-to-peer 
(P2P) lending, and rightly so. It was literally individuals posting 
descriptions of things they needed loans for (a new deck, cosmetic 
surgery) and other individuals offering to loan them the money for those
 things, at various rates. With no banks involved, it was truly 
disintermediated lending. There was no underwriting rigor – because 
there was no underwriting, period. It was the Wild West, and about half 
of those loans failed.
Today, more sophisticated, more professional operations 
have grown up, and these lenders are not truly peer-to-peer, because the
 money used to fund their loans comes from a diversified set of 
investors, not just individuals. They’re not truly disintermediated 
either because the best platforms provide some form of intermediation 
(like scoring borrower quality). That’s why I’ve taken to calling them 
“marketplace lenders.” These new platforms are able to create a 
marketplace where lenders and borrowers can find one another and agree 
to terms, all without the involvement of retail banks or credit card 
companies.
Why does this matter? Because by removing traditional banks
 as the middleman, marketplace lenders can use their spread advantage to
 offer lower rates to borrowers and better returns to lenders. Borrowers
 on marketplace platforms pay closer to 10% interest, a third less than 
the average of what is paid to banks or credit card companies. And 
instead of receiving 1% interest for keeping their money in a CD, active
 lenders on marketplace platforms receive, on average, an 8% return on 
their investments.
I believe marketplace lending will increasingly encroach upon – and take market share from – traditional banking. I
 believe this will happen across lending (consumer, real estate, SMB, 
purchase finance), payments, insurance, equity and beyond.
But the first domino to fall is one that’s already falling, and that’s consumer loans.
Earlier this year my whitepaper on marketplace lending 
forecast that the sector has the potential to originate $1T in loans 
globally by 2025.
What does that mean? At 5% of originations, marketplace 
lending would create $50B in annual revenues and create $75B in consumer
 surplus for marketplace lenders and borrowers (money that would 
otherwise go to Too Big to Fail Banks). That’s about 0.3% of GDP back to
 consumers in the form of better rates and service.
And all this is made possible by the online marketplace – 
the same catalyst that fueled the rise of Internet marketplace pioneers 
like eBay, and more recent marketplace business models like Uber and 
Airbnb. The marketplace lenders who succeed – and who ultimately remake 
the banking industry – will be the ones that create robust, two-sided 
marketplaces.
Creating those marketplaces won’t be easy, but there are 
several companies that are already well on their way. Finding them, too,
 hardly takes a scavenger hunt – unlike your bank’s loan officer, 
they’re just a click away.

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