A fifth of credit experts believe that alternative lenders pose a “big threat” to the dominance of high street banks, but warned businesses to be wary of risks such as easy loans and fraud.In a survey released by the University of Edinburgh Business School to coincide with its biennial Credit Risk and Credit Scoring Conference, three-quarters of the attending global credit experts said alternative lenders such as Zopa and other peer-to-peer (P2P) groups posed a real threat to banks and traditional lenders. Almost 20 per cent said this group signified a “big threat” to banks. More than half of the credit experts emphasised alternative finance providers had made the market for finance more competitive, with 53 per cent believing alternative lending models are likely to increase access to finance in the next five years. However, they warned that the new lenders? models were not without potential risks with three-quarters highlighting ?dangers? in the methods they used to decide who to lend to and how much to lend. Around a quarter, 28 per cent, said alternative lenders are relaxing controls on lending too much whilst the same proportion felt that these companies could be ?circumventing regulations in order to operate?. One in five thought the newer lenders may be more open to fraud. More generally, around a half of the credit experts believed that credit will become more available in the country they live in during the next six months. However three-quarters believed financial stability can be improved by keeping lending criteria as they are or even tightening controls. ?The strong growth of alternative lenders over recent years shows no signs of abating and traditional banks need to adapt to keep up with this new nimble market and fast. In a market where a small difference to an interest rate can make all the difference in attracting a good customer?s business, banks that don?t push ahead with technological advancements in the way that newer challengers are could really begin to suffer,? said Jonathan Crook, director of the credit research centre at the University of Edinburgh business school. ?It?s all good news for consumers and small businesses who may be looking for loans and is actually positive for the market overall ? greater competition will encourage innovation in areas such as personalising interest rates for customers.?
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