For most consumers, the relationship with a marketplace lender begins and ends with getting a personal loan. But what if, like Google and Amazon before them, fintech companies perfected the core business they began with and then expanded into other areas? Google started as a search engine and Amazon as an online bookseller. The pair are now among the Top 10 most valuable companies in the Fortune 500.
What the future might look like for consumers and lenders is at the heart of a new analysis from professional services firm PwC. “What I see is a more holistic solution around financial budgeting and financial planning,” says Roberto Hernandez, a principal in PwC’s consumer finance group. This reshaping of the industry could take on a number of looks. Marketplace lenders could begin to offer more services that focus on helping consumers answer basic questions, like how to budget to pay for property taxes or how to change a home’s air filter, Hernadez says. They could offer personal wealth management advice or could even obtain a bank charter.
“On the consumer side, marketplace lenders are also uniquely positioned to disrupt not just lending, but also customers’ broader financial services relationships,” the PwC report states. “There are fintech providers threatening to disrupt every aspect of banks’ traditional operations, and marketplace lenders have an opportunity to carve out a role for themselves across all of those products – or even beyond.”
The vision of the future comes at an interesting time for upstart online lenders. One industry watcher says May 2016 will come to be known as the worst month in marketplace lending’s history, with lenders finding it difficult to raise capital, one firm announcing layoffs and a scandal that could damage the industry’s reputation. Lending Club this week saw its CEO resign over $22 million in loans sold to an investor that didn’t meet the investor’s “express instructions.”
Still, Hernandez remains optimistic about the future and says lenders’ challenge mirrors what happened in other growing industries. Marketplace lenders have carved a niche for themselves because they’ve been better at technology and the customer experience than other lenders. Google and Amazon succeeded not because they had good technology, the PwC framework argues, but because they identified customer needs and used their technological prowess to build a better customer experience than their competitors.
According to the report, “the experiences of these leading enterprises illustrate the importance of constant innovation in building and sustaining market success. Marketplace lenders need to continually innovate in order to achieve a similar trajectory of market performance within, and beyond, lending.”