Peer-to-peer lending represents nearly $3 trillion market

By John EganAugust 19, 2014

Attention, lead generation professionals: A nearly $3 trillion opportunity is knocking at your door.

Speakers at an Aug. 15 session at LeadsCon New York highlighted the lead generation potential in peer-to-peer lending, also known as marketplace lending, online lending or non-bank lending.

“This industry is exploding,” said Wayne Mulligan, co-founder of Crowdability, which specializes in crowdfunding research and education.

There’s plenty of reason for Mulligan’s enthusiasm.

A new report from the Federal Bank of Cleveland shows peer-to-peer lending has expanded at an average clip of 84 percent per quarter since 2007. Meanwhile, Fitch Ratings has given further legitimacy to peer-to-peer lending by becoming the first bond-rating agency to track the burgeoning sector. Conservatively, Fitch estimates peer-to-peer lending could be a $114 billion industry, according to The Wall Street Journal.

Ron Suber, president of peer-to-peer lender Prosper.com, said that in the US, a combination of outstanding credit card debt, outstanding personal loans and outstanding small business loans represents a potential market of $2.8 trillion for peer-to-peer lenders and, subsequently, lead generators.

In peer-to-peer lending, individuals and businesses apply for loans backed by money from large and small investors. Generally, borrowers can snag interest rates below what banks and other traditional lenders offer. At peer-to-peer lender Lending Club, for instance, APRs for loans currently range from 6.73 percent to 35.36 percent. Another advantage for borrowers: Loan applications can be approved or rejected by peer-to-peer lenders within hours, compared with days for traditional lenders.

“This is just a completely different experience than what [customers] are used to with their bank,” said Tom Green, vice president of new business initiatives at Lending Club.

Speakers at the LeadsCon session insisted that peer-to-peer lending won’t be subject to the same bubble-and-bust cycles as the mortgage and for-profit education markets have ridden.

One reason is that the peer-to-peer market is disrupting the lending sector, with online lenders not needing to rely on bank branches or loan officers to do business, according to Green. That translates into lower costs for borrowers, he said.

Green insisted that his industry is “absolutely here to stay.”

“Everything we’ve done prior to today was just spring training, it was just practice. Our opportunity is really in the first inning that started today,” Suber said.

Just as the Internet has shaken up the travel industry, the peer-to-peer sector is shaking up the lending industry, according to Suber. “We’re part of this mega-trend in changing the way consumers behave,” he said. In the financial services area, banking customers are increasingly comfortable doing business online, and that comfort level is spilling over to the lending segment.

Speakers at the session said they’re not concerned about banks as competitors. Rather, they said, more and more banks will approach peer-to-peer lenders for partnerships. Suber said he could envision peer-to-peer lending “buttons” showing up one day on bank ATMs.

By all accounts, this peer-to-peer lending model is soaring. Green said Lending Club hit the $1 billion mark for loans it approved during the second quarter. During the same quarter, Prosper.com approved $369 million in loans — more than the total for all of last year, Suber said.

Peer-to-peer lenders at the LeadsCon session said they’re embracing an array of channels to generate leads, including email, direct mail, social media, video, affiliate marketing, SEO, search engine marketing and co-branding.

Speakers at the session said growth in peer-to-peer lending depends on attracting qualified borrowers. Suber said Prosper.com turns down 81 percent of potential borrowers.

“Our number one expense, and we’re happy to pay the money, is marketing. It’s paying partners, it’s paying affiliates, it’s paying people who are helping us find borrowers,” Suber said.

This article is brought to you by LeadsCon New York.

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