FICO 200 135FICO opines that seemingly every day there are more non-banks that are willing to provide loans to consumers and businesses. This explosion in alternative lending options is the result of several converging trends, including:

  • The millennial generation, which is a huge segment now entering their prime bank years and open to nontraditional forms of banking
  • Digital technology and social media, which are both facilitating innovations in how we conduct financial transactions
  • Traditional banks, which are still dealing with the aftermath of the financial crisis and are risk-averse to serving the unbanked and underbanked segments

The supporting evidence for the rise of alternative lenders is ubiquitous. For example, according to a recent article by, peer-to-peer (P2P) lenders in the US generated $6.6 billion in loans in 2014, up 128%.

At FICO, we’ve seen the rise of the alternative lenders first-hand through our participation with associations such as the Lend Academy. Founded in 2010 by Peter Renton as a resource for P2P lenders and customers, the organization’s membership has skyrocketed. Their flagship annual conference, LendIt, has grown from 350 attendees in 2013 to 2,500 attendees this past April, plus it’s expanded to events in Europe and China.

FICO states:  “We’re excited to help as many of these new businesses as possible with our solutions that span the entire credit risk lifecycle. However, the surge in competition means a much smaller margin for error for each alternative lender who wants to stick around for the long-term. It’s not just head-to-head competition that alternative lenders need to worry about; it’s also the complex and ever-changing regulatory landscape, the abundance of nontraditional credit data (not all of which is necessarily helpful), and the heightened customer expectations for service and ease-of-use.”

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Source: FICO