Loans in the market will survive and thrive, says Deloitte

Alternative loans

A new report from Deloitte sees market lenders maturing, and says they could serve as an indicator of the credit cycle.

The latest report from Deloitte On the lending sector the US market sees a bright future for the industry, suggesting that it will become increasingly nested in the larger lending landscape.

The report took into account the fact that the sector was untested for a long period of downturn. The authors asserted that while a decline in the credit cycle seems unlikely in 2017, there are signs that “may point to the start of a downward trajectory on the not-so-distant horizon.”

The report cites several factors, such as the continued easing of banking standards, to highlight this downward trajectory. Meanwhile, there are clear signs of easing lending standards in the US market lending industry, with automatic lending seeing a particularly noticeable increase in the number of subprime borrowers.

Nevertheless, Deloitte remains “confident that market lending itself will survive and thrive as a model as the success stories continue to run rigorously and become increasingly interwoven with the lending market as a whole.”

The report also pointed out that lending in the market remains very limited against the backdrop of the US $ 3.7 trillion outstanding unsecured consumer credit.

Play in Deloitte sense of confidence is the continued maturation of the market lending sector. Key aspects of this process are the recent changes made by some of the major players in the industry. Interest rate adjustments by Prosper and Loan Club, in response to the Fed’s rate moves, and increasingly hybrid funding models were each cited by the report as evidence of maturation.

The continued activity within the securitization space was also reported. “The analysts who pontificated that the end of the Prosper-Citi’s securitization relationship was a sign that the loan-backed securitization market was faltering as the market was denied, ”the report’s authors wrote. “The pace and depth of securitizations in the online lending space has not abated.”

Commenting on the formation of organizations such as the Lending Association Marketplace and Association of Innovative Lending Platforms, the report also said the industry had “astutely understood that establishing a position in an industry that has historically been plagued by economy-shattering transgressions requires proactive action.”

And while regulatory issues such as Madden v Midland case continue to afflict the industry, Deloitte believes that the proposed OCC federal fintech charter could be a game-changer.

Equally revolutionary, according to Deloitte, would be the widespread adoption of blockchain technology, which the consulting firm seems to be a natural fit for lenders in the market.

The report states the following: “Loans in the market are quite natural to join the pioneering use cases of blockchain in that it: 1) is a sufficiently small and focused market with a volume of transactions. for a shared network; 2) includes tech-savvy companies open to the integration of new technologies; and 3) includes agile players without the size and baggage of complex legacy systems that prevent the integration of blockchain into their core operations.

The continued growth of the industry, both in terms of volumes and sophistication, has Deloitte the anticipation of increased convergence between market lenders, banks and other parties – in tandem with the broader lending industry becoming increasingly technology dependent.

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