Could online lending become the next systemic risk? (subscription)

When banks resisted expanding credit in the years following the financial crisis and passage of the Dodd-Frank Act, online marketplace lending seized on what seemed like a niche opportunity: targeting the credit markets deserted by banks.

But with issuance of marketplace securitizations now exploding — rising 300% cumulatively in the past two years — the idea of online lending as a niche is quickly deteriorating. This continues to prompt challenging questions including whether the industry imposes systemic risk, how it can weather an economic crisis, whether its underwriting model is sustainable and if the days of bank-managed financial intermediation are numbered.

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