What Could 2016 Hold for P2P Lending?

2015 was a good year for peer to peer (P2P) lenders and the FinTech sector as a whole. Following major IPOs from Lending Club and OnDeck at the very end of 2014, last year saw several players both raising and lending money at impressive levels. So can the momentum continue this year or is there a bubble set to burst? TechCrunch staffer Sonny Singh recently took a look at the current state of P2P lending to answer that exact question.

Although their general feeling seems to be that the strength of P2P lending last year will lead to strong 2016, they do note some possible concerns for the year ahead. At the top of the list is a possible rise in interest rates. While the Fed recently raised rates .25% (which caused Lending Club and others to raise their rates accordingly) there are mixed signals on whether they’ll raise them further later in the year. The problem would be if the Fed hiked rates up before the economy was strong enough, which could lead to more loan defaults and in turn could hurt lenders. However, even if this were to happen it likely wouldn’t hit P2P lenders as hard since they aren’t actually the ones lending the money. Still a lower default rate is better for everyone involved as peer to peer lenders do ultimately have to keep their investors happy as well (and have borrowers who can afford to take on a loan).

Another concern is over new regulations. To a certain degree having regulators asking you a lot of questions really comes with the territory of being a disruptor but a new scandal could be brewing that’s a little different from the typical SEC investigation. Following the tragic attacks in San Bernadino that left 14 people dead it was discovered that the shooter had secured a loan from Prosper just weeks before the killings. This connection could lead to more government intervention (especially in an election year) to ensure that terrorists can’t easily obtain loans via peer to peer lenders. It’s unclear how that would accomplished but it may be something that FinTech lenders might want to start thinking about.

Lastly banks and FinTech firms seem to be learning to work together including Lending Club’s partnership with BancAllience and OnDeck’s deal with Chase. At the same time Goldman Sachs and others are developing their own p2p lending sites. It will be interesting to see long term if these spin-offs from traditional banks can actually compete with pioneer P2P lenders can or if they’ll eventually admit defeat and form a partnership instead.

Despite some possible speed bumps in the road ahead peer to peer lending is looking to have a big year in 2016. With more partnerships to form, more possible IPOs in the works, and of course more loans to facilitate expect FinTech to continue on its current positive trajectory in 2016. As for 2017 we’ll just have to wait and see.

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