WHO IS THIS BOOK FOR?
Lending and deposits are the core business of financial credit institutions. Most people have heard about peer-to-peer lending in one form or another, especially if they live in one of the financial centers of the world.
In light of increased interest by institutional investors in the peer-to-peer lending space, the sector has adopted an alternative name—marketplace lending—to better describe the asset class. Still, most literature about online lending is a glowing endorsement of the virtues of new entrants disrupting finance, without going into details of financial analytics and risk management. The exact mechanics, the technology, processes, people, and systems involved in the lifecycle of the credit are often a mystery to those outside of banks. There is no reference that is easy to understand for all stakeholders involved: traditional financial credit institutions, regulators, potential new entrants, and entrepreneurs. To improve the core functions of the financial system with innovative technology, they all need to be on the same level, with the same baseline of know-how.If you work in the financial sector and are interested in innovation, this book is for you. If you are a FinTech entrepreneur interested in a broader perspective of credit and its analytics, this book is for you, too. Marketplace lending is still in a state of flux and in its infancy, and the business model of alternative credit must become more robust to become a serious contender for market share. Existing established credit institutions and newly emerging shadow lending institutions have complementary strengths and weaknesses. The current technological, social, and regulatory environment creates a confluence of opportunities, which could become the launch pad to build the next generation of credit institutions. If all stakeholders work together, they can reach this next step. We need to research and understand the main strengths and weaknesses of conventional institutions, the informal credit institutions, and new FinTech ventures for this purpose.
Figure I.1 shows how this book is organized. Part I gives the lay of the land in today's FinTech sector, with a focus on lending. Part II introduces how banks analyze and manage their credit portfolios. Finally, Part III brings both perspectives together in the hybrid financial sector.
I.2