New research confirms online payments are taking off, however alternative e-lending is sputtering.
Online payment services are the most popular alternative to traditional banking with 19% of consumers, but customers who borrowed money from peer-to-peer or marketplace lenders remained flat, with no signs of growth.
FICO’s latest consumer finance trend research has revealed that a growing number of US consumers are making transfers and payments over the internet and via mobile apps.
Innovation and convenience are driving usage of alternative products and services like online and mobile payments. However, not all areas have seen strong adoption. Our research shows that marketplace lending is suffering from sluggish adoption because of either insufficient value to switch or a lack of trust in the financial services provider.
According to the survey, the number of alternative lending customers has stagnated from last year, with only 1% of respondents borrowing money from peer-to-peer/marketplace lenders.
While the alternative lending market is forecast by consulting and research firm GrowthPaxis to be worth $350 billion by 2025, today it is closer to $20 billion. This means it is still some way from becoming mainstream as it represents only 0.6 percent of the overall consumer credit market in the U.S.
Another potential challenge for the industry is the quality of customers they attract. According to FICO’s survey, consumers who had already experienced delinquency events were the most likely to consider services from peer-to-peer lenders (48%).
FICO conducted an online survey of about 1,000 US consumers over the age of 17 in October and November 2015. Data was weighted by age and region to reflect U.S. Census data.
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