November 2012

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COVER STORY L couple of years," said Mark Willard, leader of the financial services practice at Market Strategies International, a market research consultant with an extensive background in consumer lending and eCommerce. ately, it seems, consumers haven't exactly flocked to traditional lenders like they, well, traditionally have, according to experts. "We're probably seeing a destruction in traditional lending markets over the last borrowers generally obtain loans rang- ing from $1,000 to $25,000 that otherwise could be difficult or costly to obtain from traditional banks, while lenders fund such loans based on the promise of a capital return, reported the North American Securities Administration Association. P2P lenders are reaching individuals fact that many consumers now are turning to online—or peer-to-peer lenders (P2P)—like Prosper, Lending Club, and Quicken Loans, particularly after feeling largely abandoned by their local bank or mortgage broker during the apex of the economic free-fall, Willard says. In P2P lending, of course, those seeking loans are matched with those who want to make them. Through online borrowing and lending, That undoing can be attributed to the industry began back in 2006, Renton said. James Taylor, CEO of Decision Management Solutions, which specializes in helping organizations build decision- making systems, said many local and regional originators are facing increas- ing competition for consumer and small business lending from national and online lenders, "which will force them to get more serious" about providing automated and online lending, as well as "push them" to pick up the pace in terms of the new product development and release cycle. A trend to provide lending to more of who are retiring credit card debt and re- placing it with three- or five-year amortiz- ing loans, said Brendan Ross, president of Ross Asset Advisors, which specializes in private debt and P2P investing. "They're reducing their interest rate and setting a controlled, fixed payment. They're borrow- ing their way out of debt," Ross explained. "Hopefully, they won't ring up more." P2P on the Uptrend A Network, a blog dedicated to P2P lending, with greater than 100 percent year-over- year growth, P2P lending is one of the fastest-growing investments. Industry volume now totals more than $50 million in new loans a month. During the Memorial Day weekend, total loan volume passed the $1 billion mark since the ccording to Peter Renton, editor and publisher of the Social Lending the underbanked also is pushing banks to use a broader source of information for loan decisions rather than relying primar- ily on, for instance, credit bureau data, he believes. Last month, the Federal Deposit Insurance Corporation released the results of its 2011 National Survey of Unbanked and Underbanked Households, the most comprehensive survey on the unbanked and underbanked in the U.S. The survey indicates that more than one in four U.S. households, or just more than 28 percent, either is unbanked or underbanked, a slight increase from the findings of the FDIC's 2009 inaugural survey. The survey is conducted every two years by the FDIC in partnership with the U.S. Census Bureau. According to the survey, 821,000 more U.S. households have become unbanked since 2009, representing a 0.6 percentage- point increase. The FDIC reported that 8.2 percent of U.S. households are unbanked, representing one in 12 households in the nation, or nearly 10 million. Approximately 17 million adults live in unbanked house- holds, while 20.1 percent of U.S. house- holds are underbanked, accounting for one THE M REPORT | 23

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