NEW YORK--(BUSINESS WIRE)--The industry known as marketplace lending—until recently called “peer-to-peer” lending and dominated by individual investors and borrowers—could soon see a transformative influx of capital by deep-pocketed institutional investors, according to a new survey and analysis published by Richards Kibbe & Orbe LLP and Wharton FinTech. In the report, titled 2015 Survey of U.S. Marketplace Lending, institutional investors are watching the emerging market eagerly. The survey is available here.
The survey demonstrates a very high level of interest among institutional investors in marketplace lending, with 85 percent expressing interest in entering the industry in some fashion. The survey also reveals that investment professionals have not fully acted on that interest; less than 30 percent of respondents have allocated capital to marketplace lending. The findings result from polling more than 300 institutional investors on marketplace lending, the practice of connecting borrowers directly to investors as an alternative to traditional bank lending.
The survey’s other key findings include:
- Over 60 percent of respondents expect returns from investments in marketplace lending to outperform those in corporate bonds.
- The presence of a mature secondary trading market for marketplace-lending-issued loans would have the greatest impact in assuaging institutional investors’ concerns about investing in the industry.
- Respondents were most interested in investing in loans to small businesses, followed by consumers and those for real estate loans.
- The risk factor of greatest concern to respondents was the potential for low credit quality among borrowers, while the possibility of competition from banks ranked last on a list of six risk factors.
“Because investment funds and other institutional investors have the potential to dramatically grow and reshape this nascent industry, it’s important to understand their attitudes towards it,” said Jahan Sharifi, partner at Richards Kibbe & Orbe. “This initial survey gives us a valuable snapshot of institutions’ interest level and concerns, which we expect to change rapidly over time,” added Scott Budlong, also a partner at the firm.
“We’re very much in the early days of this disruptive industry,” said Steve Weiner, co-founder and co-president of Wharton FinTech. “The intense interest among institutional investors, who haven’t yet entered the industry in force, signals that it is on the verge of evolution.”
Among its conclusions, the report indicates that near-term regulatory action could have a significant impact on institutional investors’ comfort with marketplace lending. Emphasizing that marketplace lending is still an emerging phenomenon, the survey states that it expects to document “a completely new landscape” next year.
About Richards Kibbe & Orbe LLP
Richards Kibbe & Orbe LLP has an extensive history of representing clients in new and disruptive financial markets like marketplace lending. We are at the forefront of the opportunities and challenges facing marketplace lending platforms and institutional investors entering this space. Our lawyers draw upon more than two decades of experience in alternative investment strategies and secondary market trading. RK&O conducts a highly collaborative legal practice focused on the financial markets with lawyers based in New York, Washington, D.C. and London. For more information, visit www.rkollp.com.
About Wharton FinTech
Wharton FinTech is the first student-led FinTech initiative and is dedicated to connecting innovators, academics and investors with the ideas and companies that are reinventing global financial services. We are committed to education, career development and idea promotion by connecting innovative, established, disruptive and proven FinTech enterprises with students and industry professionals. For more information, visit www.whartonfintech.org.