In recent presentations and conversations with bankers, we've been talking quite a bit about the impact that person-to-person lending sites like Prosper.com are having on the industry. And, it's concerning that many in these audiences - usually bank executives, senior managers and marketing officers havn't heard of P2P lenders, or they have heard about them but don't consider them to part of the competitive landscape.
Yesterday's issue of the Wall Street Journal featured an article about the impact these P2P sites are having on small business lending; the article also provides a good introduction to how the person-to-person sites work. For more, check out Jim Bruene's perspective - I completely agree with him - now is the time to address the threat that P2P lending may pose to your institution.
Mar 13, 2008
Person-to-Person Lending Sites Gain Traction with Small Businesses
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2 comments:
I am still amazed after all this time that there are people in banking who never heard of P2P lending. As far as it being a threat to Small Business Lending, I can understand people not seeing it as an active threat even one year ago. It was going on, but not at a level considered to be threatening. I just wonder how anyone could not see it as potential threat.
Personally, a year ago, I only saw it as a marginal threat at best since most of what we do at my community bank is relationship based. However, with the worsening economy and the rapid tightening of credit at banks, I agree P2P lending should now be considered a threat. If you take the Wall Street Journal article at face value, banks are losing desired customers to P2P lending, but more importantly, they are losing companies to another online channel. If a loan goes to a P2P lender and you get the businesses' operating accounts, that is ok in this market since you got the transaction accounts. But, if they find the online channel so easy for a loan they may just goto an online bank for their transaction accounts and you are cut out of the picture.
P2P lending is just as much as a threat as online banks. If your bank does not have online account opening, get it! Even if you start with loan or deposit accounts first, just get it. We need to be in all channels and we need to be researching and stay current with all channels. We can not be the old fashioned brick and morter banks we were just a few years ago. We need to be everywhere and that means both online and offline.
David, thanks for your comments - they are spot-on. I can see how some bankers may have a hard time seeing how P2P lending sites may be competing directly with their institutions - but, I think this is largely due to the fact that they simply have not heard of P2P sites; they don't understand how it works; or are viewing them as the latest fad.
In response to online account opening, I couldn't agree more. The online channel needs to be viewed as part of the delivery network - and that means offering the ability to apply for, and open accounts online to those customers who prefer that channel.
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