A recession could bring escalating credit losses, liquidity crunch and higher funding costs, testing business models in a relatively nascent industry. Peer-to-peer and other digital lenders sprouted up largely after the Great Recession of 2008. Unlike banks, which tend to have lower-cost and more stable deposits, online lenders rely on market funding that can be harder to come by in times of stress. If a downturn hits, however, it would separate the stronger online lenders from the weaker ones. SoFI, an online lender that refinances student loans and then securitises them, has been focusing on making its portfolio more profitable, even if that may mean lower origination volumes, CEO Anthony Noto told reporters in late-February.

Source: The Express Tribune April 15, 2019 10:18 UTC