Borrowers, including business and consumers, are turning away from traditional sources of credit and are increasingly using digital platforms such as peer-to-peer lending, according to a BIS survey.

The report by the Committee on the Global Financial System (CGFS) and the Financial Stability Board (FSB) found that fintech platforms are gaining ground in the credit-provision industry. In short, borrowing money in the digital age doesn't necessitate going to the bank because credit activity is being facilitated by electronic platforms, which enable various forms of credit, including consumer and business lending, lending against real estate and business invoice financing. The report refers to these types of lending on e-platforms as fintech credit and says that policymakers should now consider the opportunities and risks such activity could entail.

The report says that, although fintech credit markets are currently small in size relative to traditional credit markets, they are growing at a fast pace. Klaas Knot, of the FSB standing committee, said: “The emergence of fintech credit markets poses challenges for policymakers in terms of how they monitor and regulate such activity. Having good-quality data will be key as these markets develop.”

On one hand the potential benefits of fintech credit include:

• increased access to alternative funding sources in the economy
• efficiency pressures on incumbent banks

But these should be balanced by consideration of potential risks, which could include:

• weaker lending standards
• more procyclical credit provision

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CTMfile take: This is a detailed report that goes into depth on the characteristics and business models involved in lending through electronic 'fintech' platforms. It's a nascent sector that holds some potential, maybe even for corporates looking around for some attractive credit sources?