Digital lending exploded in 2015, and 2016 will be the year of consolidation and expansion. A few smaller entrants may cease to exist or be acquired, big banks will enter, and existing lenders will expand into new verticals. Our rationale for consolidation is that digital lenders look more like lenders as opposed to technology marketplaces.
As the digital lending environment becomes more competitive, platforms that retain and satisfy customers are best positioned. Originations alone, without a balance sheet, is not inherently a recurring revenue business. We are most in favor of digital lenders that plan to evolve the business model to serve customers across a full suite of financial services.