San Francisco, CA, US
January 3, 2007Up
Close and Personal with Online Lending
Report Published by Celent
Online originations are increasing across
all loan types, and opportunities exist to blend peer-to-peer lending
models with mainstream banking products.
Online lending has tremendous upside
potential across all loan types. However, banks will need to execute
exceedingly well to obtain market share, according to the new Celent
report, Up Close and Personal with Online Lending. Competing in this
market requires fully automating the lending process while ensuring tight
integration between online and offline customer service channels. Lenders
who cannot provide a streamlined and integrated user experience will fare
poorly with their online initiatives. Online borrowers are increasingly
tech-savvy (particularly repeat borrowers) and value the Internet for the
time and money it can save them.
Direct lenders such as Quicken Loans,
E-Loan, or ING Direct that offer transparent pricing and lower costs
already account for over 27% of retail online mortgage originations and
will continue to perform well. Leading brick-n-click lenders including
Countrywide, Wells Fargo and Bank of America are also responding
aggressively to the online opportunity and hold the dominant share of
retail loan originations. The Internet has also given budding peer-to-peer
lending companies such as Prosper, Zopa, or Circle Lending the impetus to
capture some of the online lending upside.
“Customers expect to see additional
benefits from choosing the online channel, such as the reduction or
elimination of paper documents, the ability to track the status of their
loan application in a comprehensive manner, faster processing and approval
times resulting from streamlined back office operations, and ultimately
lower prices,” says Madhavi Mantha,
co-author and senior analyst.
“Perhaps the ultimate example of just how
intensely personal online lending has become is peer-to-peer lending. Its
customers often view their financial activity as a means of self
expression. For these individuals, the personalization of online lending
has increasingly meant the ability to choose who they borrow from, who
they lend to, and what level of risk they should take in investing their
money as their own lender. P2P lenders have demonstrated that a growing
consumer lending market exists,” says Dan
Schatt, co-author and senior analyst. In this report, Celent profiles
companies and technology initiatives best positioned to deliver online
lending successfully. Celent profiles bank and nonbank initiatives that
are gaining traction and provides a glimpse as to how financial
institutions and social lending services will come together in the next
few years.
The 54-page report has 14 figures and 10
tables. A table of contents is
available online.
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