The opportunities that exist in marketplace lending can be credited to the digital platforms that these lenders utilize, rather than the product they are delivering, Robert Shaw, director at PwC, said during a recent webinar, hosted by the Center for Auto Finance Excellence.
“If you look at marketplace lenders it is a very simplified model,” he said. “Now, the volume isn’t there yet, but they are able to use their platforms to deliver on customer experience, that is, in a lot of ways, superior to what a lot of larger institutions are able to do.”
During the webinar, entitled “Risks and Opportunities for Marketplace Auto Lending,” Shaw offered his opinion on the integration challenges for traditional lenders looking to move towards a marketplace lending platform, as well as the assessment of current investor demand.
Traditional lenders have built their platforms around products, whereas fintech companies and marketplace lenders have built data-driven platforms focused on the consumer experience, according to Shaw.
“The things that they are able to do with their platforms, the way that they handle data, the way that they can deliver a customer experience that’s differentiated, and the way that they are able to incentivize investors to continue to invest in their product — there’s interest there,” he said “But I think it has more to do with the enterprise platform.”
Marketplace lending is not without its flaws, however, and Scott Pearson, partner at Ballard Spahr LLP, spoke about the current regulatory risk in the industry, as well as the pros and cons of using a bank partner model versus state licensing.
“With respect to the question, how do you structure a bank partnership, that’s very complicated, where we need to work with lenders one on one to figure out what makes the most sense for them,” Pearson said. “Given the current regulatory environment, which has some uncertainty, we do think that it would be prudent for marketplace lenders to find an arrangement where the bank is willing to keep a percentage of the loan on its books.”
This webinar is the second in our four-part, 2016 series of webinars and is presented by the Center for Auto Finance Excellence through the generous support of Fiserv and DataScan. A complete recording of the webinar, with further advice from Pearson and Shaw, can be found here:
