After a bout of uncertainty earlier this year, the marketplace lendingbusiness model is expected to continue evolving as an alternative totraditional lending.
As 2017 approaches, marketplace lenders are working to provethat they can fund and govern themselves sustainably. During a marketplacelending and investing conference in New York, stakeholders discussed potentialways to diversify funding, reduce credit risk and partner with banks.
Barclays Vice President Eugene Golant said it is difficultto make a short-term call on the space. Over the long term, marketplacelenders' ratings should continue to rise as investors and rating agenciesbecome more comfortable with the business model and historical performance dataaccumulates, Golant said.
During the same panel, Karrie Truglia, principal at VictoryPark Capital, suggested that the marketplace lending space will move toward a"hybrid" model. By holding loans on their balance sheets and sellingloans in the marketplace, digital lenders with hybrid models could prove moresustainable in tough environments, Truglia said.
When it comes to the macroeconomic situation, Truglia saidmarketplace lending could be "at a standstill" until interest ratesrise.
In the short term, Golant said the presidential election maycause volatility in the space; Truglia said it could produce uncertainty forinvestors more broadly. Scott Talbott, senior vice president of governmentaffairs at the Electronic Transactions Association, said he expects littlechange to the regulatory status-quo if Hillary Clinton becomes president. IfDonald Trump is elected, however, the outcome for marketplace lenders is a bitmore unpredictable, he said.
Others at the conference suggested that the election willhave minimal bearing on the space. Conor French, director of the MarketplaceLending Association, said he does not anticipate that the election will createany "major seismic shifts." Similarly, Benjamin Lawsky, CEO of theLawsky Group, said a "sea change" in financial services regulation isunlikely to occur under either Trump or Clinton.
"Innovation will continue to happen in thisspace," said Daniel Gorfine, external affairs and associate general counselfor On Deck CapitalInc. "That's not impacted by an election."