A turbulent global economy, an increase in individual debt, a low return on savings, and increasing asset prices are changing consumers’ borrowing behavior. New research from TowerGroup finds that peer-to-peer online lending exchanges — direct lending by investors to individual borrowers — are emerging in the US and UK as an alternative platform to traditional savings and investment options, a trend that will have an impact on unsuspecting financial services institutions.
“Given the instability we’re experiencing in the global economy and an increase in bad debt, many banks are reacting by adopting more sophisticated risk management frameworks,” said Ted Iacobuzio, managing director of the European Banking & Payments research practice at TowerGroup. “By being more selective about to whom they lend and not offering the most competitive rates, banks are making it more expensive for consumers to borrow. TowerGroup finds that a growing number of consumers have responded by exploring alternative investment means in order to get better returns on their money — a potentially disintermediating force over the long term for traditional lending institutions.”
Highlights of the research include:
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