risk-taking and jobs are flowing to dozens of new alternative lenders. The start-ups aim to reinvent small-business and consumer lending by offering quicker approvals, relying on automated credit checks that include data feeds from bank accounts and tax returns, salted with inputs from social media....Bond Street is one of 25 digital small-business lenders that rely heavily on data analysis in making decisions, aiming at a market with $300 billion in outstanding loans, according to a report in April by Autonomous Research. Lending Club and several dozen other new lenders compete for an additional $450 billion in consumer and student loans. ...the loan approval rate of new small-business lenders is 62 percent, much higher than the 21 percent at traditional big banks
Meanwhile, a paper from the Federal Reserve reports:
From 1990 to 2008, over 2,000 new banks were formed, more than 100 per year. From 2009 to 2013 only 7 new banks were formed, fewer than 2 per year. Many industry observers have suggested that the decline is primarily due to regulatory burden, including new FDIC regulations and the 2010 Dodd‐Frank Act. But other influences could have played a role, in particular, the current weak economy. Low interest rates and depressed demand for banking services – both of which depress profit for banks, and particularly new banks – may also have discouraged entry.
Prediction: the banks and the press will call on the government to crack down with tougher regulations on these non-bank lenders, and the politicians will join in and gang up.