Not a threat, the firm says.
Deloitte has some news for piping hot financial startups—news they might not like to hear.
Despite the hype about their potential to upend lending, the upstarts do not, in fact, imperil the livelihood of incumbent banks, the accounting and consulting firm said in a new report .
Deloitte’s tepid outlook for financial technology upstarts is counter to the disruptive world-conquering storyline that is the norm in Silicon Valley. Big banks are unlikely to be unseated by less regulated, more nimble upstarts, the report said.
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“The rise of Marketplace lending has urged many commentators to highlight the potential disruption that such new business models may bring to traditional banking,” the report said. “Our research presents a different opinion and instead concludes that MPLs”—that is, marketplace lenders—”do not currently have the competitive advantage needed to threaten this traditional banking model.”
The paper doesn’t go into detail about individual companies, although it mentions several in passing like Prosper, OnDeck, and Lending Club among the new crop of lenders, and J.P. Morgan Chase JPM -0.02% and Citigroup C 0.47% in the incumbent camp. (It’s worth noting that Deloitte no doubt has big bank customers.)
Adding support to the report’s conclusions, financial technology firms have hit turbulence in recent months. Prosper, the first peer-to-peer lending company in the U.S., said it would lay off 28% of its workers, Lending Club’s CEO departed under a huge cloud over its lending practices while its share price tumbled, and OnDeck’s stock price took a pummeling because of increasing doubts about its ability to find loan buyers.Meanwhile, big banks are trying to keep up with innovation by, among other things, experimenting with new technologies like the blockchain , the software underpinning Bitcoin, that could streamline their IT […]
