As the FT points out - How all this plays out can only really be understood through the prism of a full credit cycle. What happens, for instance, when the growth imperative collides with a recession that leads to soaring loan losses? Will institutional lenders fly as they did in the crisis from traditional finance companies?
In early 2017, at a time of difficulty for US online lenders, Prosper Marketplace, the grand-daddy of the sector, struck a deal that would assure it access to what it needed most: investors’ cash. Like other so-called “marketplace” or “peer-to-peer” lenders, the San Francisco based fintech company acted as a broker, bringing together those with capital to lend out and consumers who wanted to borrow. But there was a problem: after years of attracting cash with ease, lenders were no longer coming forward in sufficient numbers. Spooked by a recent scandal at another US online platform, Lending Club, they had grown wary of the sector. Some say competition for borrowers had also pushed down returns too far, leaving them at unappealing levels.
https://www.ft.com/content/e71b5592-b2af-11e8-8d14-6f049d06439c
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