Interesting opinion on how marketplace lenders may be able to overcome the recent market hurdles - start generating balance sheet loans and basically aim at becoming a bank. The concept makes sense, as balance sheet lending removes potential market risks since there isn't a need for outside capital. The difficulty lies in finding the source for debt capital, and if that's not enough, regulators aren't so excited on granting bank charters. The result has granted banks with more power in the lending space, as they can decide if they may want to takeover an online lender who now has a lower valuation, or possibly build their own loan platform internally.
There are reasons to welcome the slowdown in marketplace lending. Rapid expansion often presages declines in underwriting quality. There has already been a rise in loan losses, especially in some areas favoured by marketplace platforms, such as loan consolidation, where borrowers refinance existing borrowings such as credit card debts. Fewer advances may avoid some painful hits for lenders ahead.
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