by: Grow VC Group
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Access to credit has always been crucial to achieve economic growth in the United States, a country where small businesses are responsible for two thirds of the new jobs created over the past twenty years. Originally connecting individual borrowers and lenders, online marketplaces are now structured networks that include partnerships with institutional investors and financial institutions, engaging in both direct lending and securitization transactions.

On May 10, the US Department of Treasury published Opportunities and Challenges in Online Marketplace Lending, an overview of the market landscape that underlined the benefits and risks associated with online marketplace lending. It appears that the majority of loans are used for refinancing purposes; Lending Club for instance notes that 68.5% of its borrowers report using loans to refinance existing debt or to pay off credit card debt.

This white paper identifies several areas of focus to foster sustainable growth and access to credit through the continued development of online marketplace lending.

  1. The use of data and modeling techniques in underwriting processes.
  2. The opportunity to expand access to credit for underserved markets.
  3. Untested business models and underwriting tools developed in a period of low interest rates and overall strong credit conditions.
  4. Enhanced safeguards needed for small business owners.
  5. Increased transparency to benefit borrowers and investors alike.
  6. Underdeveloped secondary market for loans.
  7. A need for regulatory clarity and harmonization.

​Looking forward, the document also lists several trends that might impact the online marketplace sector. Amongst them, the US Treasury Department underlines the need for all stakeholders to use digitalized credit scoring processes carefully. Today, online marketplace lending seems bound to grow in the short-to-medium terms. However, recent setbacks experienced by prominent actors stress the importance for all not to sacrifice long-term sustainability and stability while shaping this promising sector.

Read the whole article and find the white paper on Crowd Valley News.

Opportunities and Challenges in Online Marketplace Lending

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Grow VC Group The Grow VC Group is the world leading, global pioneer of securities crowd funding, peer to peer marketplaces, new investment models and global business development. Established in 2009, the Group has developed new investment models on six continents and continues to innovate the global market.

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