Operational risk is declining as the sector evolves

07-Jun-2019

As technology and online infrastructure have grown and developed, so have the industries and business that use them--including marketplace lending (MPL), which is likely to be a hot topic of conversation at the upcoming Global ABS conference in Barcelona.

MPL's growth is not the only change in the industry: Its business models have evolved, and MPL lenders have become competitors in the mainstream lending market.  Our attached report analyses these changes, looking at the factors influencing the industry's growth, from more sophisticated funding models to an increasing use of securitisation as a funding tool.

The report also reviews the risks associated with the MPL sector that S&P Global Ratings takes into consideration when evaluating securitisations, including business strategy and operating history, management, and funding sources, among others. These risks remain a key focus of our analysis, however, we have also observed a greater number of mitigants to these risks, leading to an overall increase in the maximum credit rating achievable for these asset-backed securities.

We expect further significant growth in the MPL sector as business practices continue to evolve and the regulatory environment matures.