Institutional investors taking leap into marketplace lending

Institutional investors are turning their favourable attitudes about the marketplace lending industry into action, increasing their investment in the sector over the past year, according to a new report by Richards Kibbe & Orbe LLP and Wharton FinTech. 

Their 2016 Survey of US Marketplace Lending finds that half of all institutional investors surveyed have made some form of investment in marketplace lending, up from less than 30 per cent just one year ago.

The second annual survey illustrates solidifying confidence among investment funds in the disruptive industry of marketplace lending, which challenges the traditional bank lending model by connecting borrowers and lenders directly over Internet-based platforms. The survey of more than 300 institutional investors also reveals that optimism about marketplace lending continues to grow among institutional investors, running counter to the widespread predictions by other observers of an industry contraction. More than 80 per cent of respondents expressed high or moderate levels of optimism for marketplace lending’s future, up from 71 per cent last year.

“Last year, it was clear that institutional investors saw the promise of marketplace lending. This year, they stepped off the sidelines and into the action,” says Richards Kibbe & Orbe partner Jahan Sharifi (pictured).

 “Institutional investors are right to identify potential regulatory developments as a key factor in the industry’s continued growth, which means they will want to arm themselves with better knowledge about the evolving regulatory framework,” says Scott Budlong, also a partner at the firm.

“Our second survey gives us a chance to compare data with last year’s baseline,” says Steve Weiner, co-founder of Wharton FinTech. “We predicted that the views and actions of institutional investors toward this nascent industry would change rapidly, and this year’s results bear that out.” 

Wharton FinTech President Uday Seth, adds: “The unchecked optimism toward this industry, combined with the fact that it is still maturing, makes it an interesting one to watch, particularly for institutional investors that sense opportunity.”