2017 Series • No. 17–7
Current Policy Perspectives
U.S. Consumers’ Awareness and Use of Marketplace Lending 
Marketplace lending is a new model of lending that matches borrowers and investors through online platforms without the use of a financial institution as an intermediary. It is unclear what role marketplace lending ultimately will play in consumer finance, but certainly consumer demand will be a major factor in determining that role.
With the premise that examining consumer awareness is the first step toward understanding demand, this study uses data from two nationally representative surveys—the Survey of Consumer Payment Choice and the Diary of Consumer Payment Choice—to report on the awareness and use of marketplace lending in late 2016.
Key Findings
- The most prominent marketplace lenders in the United States, Lending Club and Prosper, together originated more than $10 billion in personal loans in 2016, with the majority of these loans used for debt consolidation or to pay off credit card debt.
- Just 25 percent of U.S. consumers have heard of marketplace lending or recognize any of the names of the largest marketplace lenders (Lending Club, Prosper, SoFi, Avant).
- Very few consumers who are aware of marketplace lending seek out these loans: only 11.7 percent of consumers aware of a specific marketplace lender have ever applied for a marketplace loan. In all, only 2.4 percent of consumers have ever applied for a marketplace loan, and only 1.6 percent currently have a marketplace loan or had one at some time.
- Wealthier and more educated consumers are more likely to be aware of marketplace lenders, as are those with more revolved credit card debt and those who have experienced financial stress.
- While awareness is greater among higher-income, better-educated consumers, use of marketplace loans is more prevalent among lender-aware consumers with lower wealth and greater revolving credit card debt.
Exhibits
Implications
Marketplace lending remains unfamiliar to most U.S. consumers. Nevertheless, it is growing rapidly; loans outstanding grew by more than nine times from 2013 to 2015.
One of the surveys on which this study is based, the Diary of Consumer Payment Choice, included questions related to the participant’s experience with marketplace lending. It asked such practical questions as how much the loan was for and what interest rate the applicant was offered. It also included questions related to the applicant’s expectations, such as whether the terms of the loan were better or worse than he or she expected. The responses to these questions could have provided additional insights into whether marketplace lenders are serving the needs of their customers better than are other credit providers—and help to explain the extraordinary growth of marketplace lending despite the lack of consumer awareness. However, because of the relatively small sample sizes of the surveys and the relatively low rates of awareness and participation, the authors could not report conclusive results on the consumer experience.
Conducting further research that incorporates these factors would require fielding the survey with a much larger sample or conducting a survey with a targeted oversample of people who applied for, have had, or currently have a marketplace loan.
Abstract
Marketplace lending is a new kind of online lending that is unfamiliar to most U.S. consumers. A nationally representative survey finds that just 25 percent of U.S. consumers have heard of marketplace lending or recognize any of the names of the largest marketplace lenders (Lending Club, Prosper, SoFi, Avant). Of those consumers who have heard of a marketplace lender by name, 11.7 percent have applied for a marketplace loan (2.4 percent of all U.S. consumers).