WHO NEEDS DIGITAL STRATEGY?
In the last chapter we discussed some of the digital dilemmas that banks and marketplace lenders face. This should help us understand some bottlenecks and roadblocks on the way to the hybrid financial sector.
Yet knowing about challenges on the road forward is just one part of the equation. We also need tools and strategies to solve those problems. Let's agree that marketplace lending has made a big splash in recent years and that the idea of connecting lenders directly with borrowers is here to stay. This is good news for entrepreneurs founding or operating marketplace lending platforms, but how can they improve the odds that they will reach escape velocity from the startup stage? How will they compete in the battle for larger market share with the incumbent financial institutions in the prime lending sector and mortgage finance? At the same time, those incumbent banks may be scratching their heads as well. They need to gain innovative capacities to stay relevant in the digital future, but where should they begin? It is uncertain if there is still ample time to come up with a strategy after waiting for a FinTech shakeout over the next few years, or if the last chance to catch up with the innovators has already passed. Examples abound of large multinationals disrupted by upstarts and in bankruptcy within a few short years. What can banks do to avert the same fate?In any event, banks need to embrace digital technology in their interactions with customers. Simultaneously, to become more relevant to a larger pool of investors and borrowers, marketplace lending platforms will need to leave behind the stigma of subprime and move forward into the prime and mortgage finance sectors. Both players need to face their digital dilemmas and formulate a solid digital strategy. As always, no sure-fire recipe will guarantee success. The dominant players in the marketplace lending space might change a few times until the sector has matured to the point where it can challenge on credit on a larger scale. By integrating into their own operations some of the innovations related to marketplace lending, banks will also become more attractive for digital natives. Learning on both sides will make the credit sector safer and more attractive to lenders and borrowers.
At the heart of formulating strategy is the analysis of the lay of the land. Several frameworks for this exist. The next paragraphs will introduce some of them.
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