Yesterday, two major reports were published on the p2p lending industry. First, the Federal Reserve Bank of Cleveland put out a positive report on the future potential growth of this industry and the same day Fitch Ratings published a more sobering report on where the p2p lending industry stands today. Both make for some very interesting reading.
First let’s take a look at the report from the Cleveland Fed. This is a quick read containing some very interesting graphs. It is focused on interest rates, particularly their comparison with average credit cards rates. I found the chart below interesting.
So, on average credit card interest rates have been significantly higher than the average rates at Lending Club. It appears that the Cleveland Fed did not use data from Prosper in their analysis. What is even more interesting is the fact that peer to peer loans have been performing slightly better than credit cards when it comes to the percentage that are delinquent.
On average, between 2010:Q2 and 2014:Q1, 3.2 percent of peer-to-peer loans were past due compared to 3.7 percent of standard consumer finance loans. Over this period, peer-to-peer loans had a lower share of poorly performing loans in 10 of 16 quarters.
The conclusion of the report is that p2p lending will continue to grow because borrowers find it an attractive alternative to credit cards and there is strong investor demand.