Survey finds traditional banking threatened by alternative lenders

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5th October 2015 10:59 - Financial Services

According to a recent finance survey of 200 leading credit experts, 75 per cent of people believe that alternative lenders are a threat to banks and Survey finds traditional banking threatened by alternative lenderstraditional lenders, with 19 per cent identifying alternative lenders as a “big threat”.

The researchers revealed that peer to peer lending and crowd funding is expected to notably shake up the banking market.

The survey of 200 global conference delegates from 40 countries - who were all present at a recent University of Edinburgh Business School's Credit Risk and Credit Control conference – discovered that 55 per cent of the Credit Analysts believe the increase in alternative banking will make the wider market more competitive. However, 73 per cent of the survey respondents feel that there are dangers in how alternative lenders are selecting who to lend to and the level of funding available.

The findings also revealed that 20 per cent of the survey respondents regarded newer lenders as more susceptible to fraudulent activity.

Approximately a quarter (or 26 per cent) of the survey respondents cited that alternative lenders are relaxing controls on lending too far. The same percentage believed that these businesses could be dodging regulations in order to stay in operation.

Of the respondents, 48 per cent said that they feel credit problems will ease in their own countries in the coming six months, whilst 73 per cent feel that financial stability will be enhanced by keeping lending criteria at the same levels as it is currently or by increasing controls.

Director of the credit research centre at the University of Edinburgh Business School, Jonathan Crook, said of the findings:

“The strong growth of alternative lenders over recent years shows no signs of abating, and the view of our expert delegation was that traditional banks need to adapt to keep up with this new, nimble market – and fast.

“In a market where a small difference to an interest rate can make all the difference in attracting a good customer’s business, banks that don’t push ahead with technological advancements in the way that newer challengers are could really begin to suffer.”

“It’s all good news for consumers and small businesses who may be looking for loans, and is actually positive for the market overall – greater competition will encourage innovation in areas such as personalising interest rates for customers.”

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