The firm’s Marketplace Lending report estimates that by 2025 marketplace lenders (MPLs), previously known as peer-to-peer (P2P) lenders, will account for up to around six per cent, or £35.5bn, of the market covering personal lending, SME business lending and the retail buy-to-let market.
This situation assumes current interest rates prevail and banks make no changes to their operations in relation to digital products and services.
But this rate could fall to £0.5bn, or one per cent, if interest rates normalise and banks innovate.
The report estimates that MPLs currently account for less than one per cent of market share in consumer and SME lending.
Neil Tomlinson, head of UK banking at Deloitte, said: “Contrary to a number of commentators, we do not see MPLs as a major threat to banks in the mass market. Borrowers like the benefits of speed and convenience of MPLs, but those willing to pay a material premium to access loans quickly are in the minority.
“While banks are yet to replicate the benefits of the MPL model, we believe it is only a matter of time before they use their size and scale to overtake and sustainably under-price MPLs.”
Deloitte defines MPLs as online platforms that enable investors to lend directly to retail and commercial borrowers. Unlike banks, they do no take deposits or lend themselves, making money from fees and commissions.
Initially they were known as P2Ps, but Deloitte now calls them MPLs because institutions have now begun investing in bundles of loans.
“While MPLs look unlikely to grow sufficiently to displace banks, banks can benefit from adopting some of their best practices, particularly around customer experience,” said Ian Foottit, banking partner at Deloitte.
“Unlike banks with legacy systems, MPLs use modern technology, streamlined processes and innovative risk scoring that can make it quicker and easier to get a loan. Collaborating with or acquiring MPLs, banks can benefit from this enhanced customer experience to deliver faster, more convenient access to credit at a very competitive price point.”