Financial services specialist Deloitte has dismissed the disruptive potential of peer-to-peer lending firms on the banking sector in a new report backing the status quo of big institutions dominating the market.
Analysts found that faith in the ability of such initiatives to overturn existing financial models were likely to be misplaced, as the inherent risks involved inevitably benefit the big banks which can protect lenders money.
Peer-to-peer (P2P) lenders have burst onto the scene in recent years offering loans to individuals and businesses, with better rates of interest available to savers and borrowers than those offered by established players – courtesy of the lower operating costs of delivering web-only services and slacker regulation.
Neil Tomlinson, Deloitte’s head of UK banking, commented: “Contrary to a number of commentators, we do not see marketplace lenders (MPLs) as a major threat to banks in the mass market. Borrowers like the benefits of speed and convenience of MPLs, but those willing to pay a material premium to access loans quickly are in the minority.
“Whilst banks are yet to replicate the benefits of the MPL model, we believe it is only a matter of time before they use their size and scale to overtake and sustainably under-price MPLs.”
Extrapolating various scenarios Deloitte estimates that such businesses could account six per cent of the lending market by 2025 assuming the current climate of near zero interest rates and an absence of innovation from current market leaders.
However if, as is likely, interest rates do rebound and established lenders offer more innovative products then P2P lenders are unlikely to grow much beyond around one per cent of the current market, equating to just £500m in loans.