The report, Marketplace lending: A temporary phenomenon?, found that peer-to-peer or so-called marketplace lenders are unlikely to pose a threat to banks because of their low-cost funding model, which is likely to prove more powerful if and when base rates rise.
However, over the medium-term, Deloitte noted that the sector may look to exploit profitable niches that fall outside of banks’ risk appetites.
In contrast to banks, P2P lenders, do not take deposits or lend themselves, meaning they take no risk onto their own balance sheets and receive no interest income directly from borrowers. Instead, they generate income from fees and commissions created by matching borrowers with lenders.
P2P lending has grown in popularity since the first lender, Zopa, entered the UK market in 2005. The process allows investors to select the return on their investment by specifying maturity or risk profile, or both.
The report said: “We believe that MPLs [marketplace lenders] will not be significant players in terms of overall volume or share. We do not believe that marketplace lending will fundamentally disrupt or displace banks’ core function as lenders in the mass market.
“That is not to belittle MPLs’ undoubted achievements or the innovation they have brought to the market. But we see them as a sustaining innovation, likely to be limited to serving profitable, underserved segments that are currently overlooked by incumbent banks.”
It added: “However, even while MPLs look unlikely to grow sufficiently to displace banks, banks can benefit from adopting some of their best practices, particularly those around customer experience.”
