Peer-to-Peer vs Credit Cards and Bank loans

Senior research economist for the Cleveland Fed, Yuliya Demyanyk, published a report, “Peer-to-Peer Lending Is Poised to Grow,”.

In comparison to bank-originated consumer finance loans, peer-to-peer loans performed either similarly or slightly better. 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.

Here are some very interesting charts and data:

p2p inflection point

average p2p vs consumer credit card rates

p2p performance p2p rate

From The Future of P2P one last very interesting historic chart:

Consumer-Finance-History since 1943

“Circled in red are four dramatic inflection points in reverse-chronology, 2010 (bailout), 2003 (structured finance hits a ceiling relative to banks), 1988 (structured finance begins to cannibalize bank consumer credit) and a mysterious 1946 event that sidelined non-bank lenders until structured finance came along.”

The peer-to-peer market is currently hundreds of times smaller than the consumer finance and credit card markets. However, the data suggest that the peer-to-peer lending market will continue to grow. One reason is that the supply of funds from investors for such lending has been increasing.

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