By Anna Irrera
NEW YORK (Reuters) - Financial technology vendor Misys is launching software to enable banks to provide peer-to-peer lending to their customers as competition from young companies in the sector heats up.
The technology would enable retail and corporate banks to connect their customers looking for loans with individual or institutional investors digitally, the private London-based software company said on Tuesday.
P2P lenders, which allow consumers and small businesses to borrow from investors online, emerged in response to a contraction in bank lending following the financial crisis of 2008.
By automating much of the lending process, companies like LendingClub Corp (N:LC), OnDeck Capital (N:ONDK) and Prosper were able to service borrowers that had become too risky or too expensive for banks to lend to from their more constrained balance sheets. They make money by charging fees for facilitating the transaction.
Misys said the software would allow banks to maintain a relationship with clients that they would otherwise have to turn away without have to originate loans from their balance sheet.
"Banks are losing market share to P2P platform providers. By embedding crowdlending into the overall credit lifecycle, a bank can maintain and expand its client base, recapture business from alternative finance marketplaces and boost lending growth," Jean-Cedric Jollant, senior product officer at Misys, told Reuters.
The launch comes as the nascent peer-to-peer lending sector expands, despite facing some growing pains. Research by Morgan Stanley (NYSE:MS) estimates that P2P lending companies, also known as marketplace lenders, could originate up to $490 billion (406.77 billion pounds) in loans globally by 2020.
Banks have been reacting to the trend by either partnering with younger companies or launching their own online lending operations. Spanish banking group Banco Santander (MC:SAN) in 2016 partnered with U.S. small business lender Kabbage to provide loans, while JP Morgan Chase & Co. (N:JPM) previously partnered with OnDeck.
Jollant said Misys was launching the product because it was already an established provider of financial lending software to many large global lenders. He added that the company was in discussions "with a number of interested banks in the U.S., Europe and India."