Orchard Publishes White Paper on Stress Testing of Marketplace Lending Platforms

Orchard in NeonOrchard Platform is holding a marketplace lending industry gathering today in New York City. The event is designed to help the industry scale and desires to be a positive catalyst in the evolution of online lending. Best practices, knowledge sharing and regulatory risk are key to the growth of the online lenders. Since Orchard has unparalleled access to capital flow into the marketplace platforms, it is a natural step to create a forum for frank discussion.

As part of the Partner Forum, Orchard has published a white paper on stress testing of marketplace lenders. This is an important topic as traditional finance has been critical of online lenders and the relatively short period of time they have been in operation.

Orchard poses the question;

“…How “marketplace” loans will perform in various economic environments persists. There are multiple reasons for this, which span the areas of industry dynamics, operational capacity, and consumer psychology.”

david snitkofThe report authors, Orchard co-founder David Snitkof, along with Larry Haertel Jr., Raymond Han and Michael Toth, believe;

“Developing a robust set of new account criteria along with predictive and stable credit risk model to be used in underwriting are the most important things an originator needs to do.”

Rather encouragingly, and echoing what some of the larger platforms have stated, Orchard’s research indicates that marketplace lending should prove to be “remarkably durable” during times of economic stress.  Sure, returns will be lower but the model holds steadfast.

Marketplace Lending peer to peerSo perhaps marketplace lending is superior to the highly concentrated risk seen in the traditional banking industry today? Is a distributed model preferable to one that is concentrated?  Orchard believes that during a time of economic stress (and we all know one will eventually show up), marketplace lenders may in fact shine.


The report may be downloaded here. embedded below.

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