Australians could be borrowing an estimated $22 billion from each other rather than banks within five years, but experts say the rise of peer-to-peer lending shouldn't bother the country's major banks.
Morningstar head of financials, David Ellis says the big four banks - the Commonwealth, ANZ, Westpac and National Australia Bank - will be able to withstand the rise of the nascent sector without much fuss.
That's despite investment bank Morgan Stanley's prediction peer-to-peer lenders could account for six per cent of personal loans and 12 per cent of small business loans by 2020.
He says while peer-to-peer lenders are targeting the low hanging fruit - unsecured loans, where interest rates can be exorbitant - the banks' bread and butter of mortgages and higher level business lending was not under threat.
"There's opportunities for peer-to-peer lending, good opportunities, but that doesn't mean it's going to be a negative for the major banks of Australia," he told AAP.
"I can't really see it really making any inroads into lending that's more complex and where there's a security involved."
Peer-to-peer lending allows borrowers to source loans directly from individuals willing to lend to them, though the loans are spread out over a significant number of investors to reduce risk.
Matt Symons, co-founder of Australia's largest peer-to-peer player, SocietyOne, agrees the banks' stranglehold on the mortgage market isn't under threat but says there are huge opportunities in consumer and small business lending and niche areas like agribusiness.
"Whilst the core of banking might not be under threat any time soon, if ever, that doesn't mean that there aren't opportunities to create more value for customers," he said.
"Mis-pricing is not necessarily occurring in the big rocks of retail banking, like mortgages, but once you set out into the onion skins...you find there are credit-worthy borrowers who are really not getting funded at the rate that they deserve."
SocietyOne, which counts James Packer, Rupert Murdoch's News Corp and Seven Network owner Kerry Stokes among its shareholders, launched in August 2012 and has so far originated more than $30 million in loans.
And the interest rates can be substantially more attractive.
Borrowers can source a rate as low as 8.95 per cent through SocietyOne, while returns to investors have averaged more than 10 per cent since the company started.
Compare that to the country's biggest bank, the Commonwealth, which is currently offering a 13.9 per cent interest rate on personal loans, while investors funding the bank's lending through term deposits can expect a maximum return of 2.5 per cent.
But Mr Ellis questions how healthy the returns to investors will be if a recession hits.
"When the next recession rolls around and loan losses increase, it will be interesting to see how peer-to-peer lenders go," he said.
However, there is evidence peer-to-peer lenders may do a better job of getting money back than the bigger banks.
The sector's leader in the UK, Zopa, has recorded a default rate of just 0.6 per cent for the past decade, including the GFC, which is well below that of major banks.
