Credit unions should be engaging with marketplace lenders

Financial institutions have bristled at the success of online “marketplace lenders” for some time.

These firms have built high profiles and even higher valuations by encroaching on what has long been considered financial institutions’ turf: extending moderate-sized personal and small business loans.

So when marketplace lenders encountered difficulty recently in reselling loans to the secondary market to free up capital—an obstacle that sent valuations tumbling, and led to executives getting fired—credit unions understandably could be tempted to say, “I told you so.”

That would be a missed opportunity.

Notwithstanding the shortcomings of their business model, marketplace lenders have clearly demonstrated that consumer and small business demand exists for a new credit delivery vehicle.

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