With a new form of lending that is becoming more popular, peer-to-peer (commonly abbreviated p2p) marketplace lending has the potential to change how we understand borrowing and debt. It’s not just about personal loans anymore–it could mean an entirely different way for businesses to borrow money when they find banks too slow or complicated.
But recent events have cast some doubt on this industry as well, so leaders must stay mindful to ensure it succeeds while maintaining transparency with lenders and borrowers alike!
1. Don’t get greedy
Suppose the recent woes with LendingClub have any lessons for p2p and marketplace lending companies. In that case, companies must be careful and operate within legal, ethical, and common-sense parameters. A well-run marketplace lender WILL grow in this environment. There is no real need to push to avenues that will hurt the business for short-term gain.
2. Be proactive in fighting fraud
Probably one of the more significant mistakes in the debt-buying world, p2p, and marketplace
Lenders need not just to set good industry standards (which LendingClub did not follow) but also be open, transparent, and proactive in fighting against companies actively committing fraudulent activity – even if they are not members of the newly created Marketplace Lending Association.
The MLA should continue to set the standards for the industry, and any lender who is not a member should be called into question. Also, membership within the MLA should be based on corporate standards rather than revenue – small companies should be incentivized to join rather than a club for the large companies to squeeze out competition.
3. Work with the government, but stand your ground
Standing ground against a regulation-happy federal government and banking system is probably the most brutal fight. Institutional and large debt buyers have given in to government oversight and overreach in the old debt-buying market, leading to good companies leaving the debt space or going out of business altogether. P2p and Marketplace lenders need to help ensure that their house is in order and that they are taking care of their own business, and the federal and state governments do not need to set regulations.
Person-to-person and Marketplace lending, even when banks participate more and more, will be a massive industry in a short time. Bad players will be shaken out, and others will come in. Suppose the industry wants to survive and establish maximum profitability. In that case, it must take steps and learn lessons from other financial sectors under greater oversight due to poor business practices.
In conclusion: When considering p2p marketplace lending, industry leaders must remember that the industry is still relatively new and has not yet proven its worth. The peer-to-peer (commonly abbreviated p2p) lending space has been booming in recent years as a way for businesses to borrow money, where banks have become too slow, overregulated, and cumbersome.
With so much happening so fast in this burgeoning market, it’s essential to take lessons from recent events into account because they’ve shed light on some of the pitfalls inherent in any emerging technology or business model – especially one like p2p lending that relies heavily on human interaction between borrowers and lenders.