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The fintech revolution of P2P lending: product innovation, secondary loan market, re-bundled banking by the end of 2018. Forecasts from LendIT 2017

NewsFromThePlatform | October 17th, 2017

The next 15 months will see a strong acceleration and profound changes in the world of P2P lending

LendIt Europe ends in London with this this great promise. Two days were entirely devoted to the world of marketplace lending, an industry that has entered into its mature phase thanks to a reliable history, competitive returns and the acknowledgment by the financial world as an asset class to all effects. 150 Fintech companies and over 1,100 participants were present, coming from 50 countries.

Numbers prove that the market is evolving rapidly: around 20% of table attendants was represented this year by banks and asset managers. This means that the traditional financial world is beginning to fully acknowledge P2P lending as a competitive, and complementary, market. And perhaps, it rightly starts to fear its disruptive power,” says Giuseppe Donvito, Partner of P101 Ventures. Giuseppe explains that unlike  Europe and the rest of the world, in Italy traditional operators are still somehow shy about what is now clearly seen as an inevitable revolution. However, Italy was represented too at LendIt, by BorsadelCredito.it: an Italian P2P leader that has lent €16.5 million in two years to local SMEs. BorsadelCredito.it is focuses on small businesses, which are the ones in the spotlight of international investors.

Generally speaking, Europe’s P2P lending has a growing interest in Italian SMEs (especially micro-enterprises) – says Donvito. “Our “pocket-size corporations”, that are often of world-class excellence and preside over entire niche markets, are targeted by foreign investors. In addition, all portfolio managers tend to look for diversification and decorrelation, and in this sense direct lending is an emerging asset class that is gaining momentum in the English-speaking world.” All this goes in favour of marketplace lending, but lending to business will increasingly move towards alternative means because of regulatory reasons and the natural evolution of the system. As Donvito explains, “the spreading of big data and open banking, urged by the European Directive PSD2, will lead to a radical revolution in banking and finance.” Indeed, with PSD2 Europe establishes that banks make their customers’ current accounts accessible to third parties, who may even, after authorization by the account holder, carry out payment transactions on their behalf.

Moreover, “the ongoing unbundling of banks will give rise to two phenomena. On the one hand, the credit system in general will undergo disintermediation, on the other, banking services will re-aggregate or rebundle through Fintech. Banks will have to become platforms themselves, aggregating various Fintech companies. And a trend is already growing among Fintech companies to cooperate in order to offer customers the best services, integrating various products in a single user experience. In this context, the banking process will become a seamless experience for users.” This means that it will be characterized by an integrated approach, a digital interface, and will no longer need users to interact with a human intermediary. But that’s not all: “Rebundling will give rise to at least one major customer-based product innovation over the course of 15 months, as explained at LendIT by P2P lending global guru Renaud Laplanche, former CEO  at Lending Club,” says Donvito. He also agrees with another forecast by Laplanche: “the time is ripe for a significantly strong secondary market to develop for online lending. We’ve talked a lot about it, now the time has finally come: cloud computing, big data and blockchain will help make it more efficient.” And we hope that Italy will not stay too far back, as in this race those who slow down are those who may easily stop running.