, it is important to underscore that the online space is highly dynamic, with a number of business models emerging and evolving. i will touch on two business models in particular, recognizing that as these business models are tested, it is likely that some will prove more successful than others, and that some may adapt in ways that will cause us to revise our segmentation of online alternative lending. 8 first, online balance sheet lenders generally use their own examples of such studies include petersen and rajan ( 1994 ), berger and udell ( 1995 ), cole ( 1998 ), berger and others ( 2005 ), and cole and others ( 2004 ). as the industry has evolved, alternative online lenders have increasingly been referred to as marketplace lenders, a term that helps emphasize the growing institutional investor base of the sector. so while peer - topeer lenders initially allowed individual borrowers to connect with individual lenders, individual lenders increasingly are being replaced by institutional investors who are turning to online marketplace lenders for investment opportunities. because some balance sheet lenders are now originating small business loans for institutional investors to purchase, balance sheet lenders are also often referred to as marketplace lenders. in the treasury department ’ s recent request for information, they defined online marketplace lending as “ the segment of the financial services industry that uses investment capital and data - driven online platforms to lend either directly or indirectly to small businesses and consumers. ” ( see u. s. treasury, 2015, p. 6. ) bis central bankers ’ speeches capital to fund small business credit products that are originated either directly on their platforms or indirectly through brokers or referral partnerships. 9 credit products offered by these lenders are usually short term and include loans, lines of credit, or cash advances. 10 second, peer - to - peer lending platforms, by contrast, act as intermediaries to connect borrowers with lenders and to assist investors in identifying and purchasing loans that meet their investment criteria. these lenders can be individuals, banks, or institutional investors. 11 although data are limited on this sector, the data that are available suggest that the various types of online alternative lenders have captured a small but rapidly growing share of lending since the financial crisis. in aggregate, the outstanding portfolio balances of these lenders have doubled every year since the mid - 2000s. 12 it is estimated that online alternative lenders originated $ 12 billion in 2014, with unsecured consumer loans representing $ 7 billion and small

, p. 44 ) note that many alternative lending platforms charge yields ranging from 30 to 120 percent of the loan value, depending on the size, term duration, and risk profile of the loan. several alternative online lenders advertise lower rates, but industry sources note that lending is rarely done at those rates. for example, see clark ( 2014 ), cortese ( 2014 ), crowley ( 2015 ), and mills and mccarthy ( 2014, p. 46 ). bis central bankers ’ speeches while some see online alternative lenders as a disruptive threat to traditional lenders, banks increasingly are finding ways to partner with online alternative lenders, including through loan purchases and referral agreements. loan purchases by community banks of loans originated by online alternative lenders have been focused on unsecured consumer debt. as the percentage of unsecured consumer debt outstanding held by community banks has been declining in recent years, several banks have partnered with online alternative lenders to grow and diversify their portfolios of unsecured consumer debt. 16 in contrast to the consumer loan activity, the small business partnerships that have developed so far are largely fee - based referral partnerships. in these partnerships, banks refer to online alternative lenders some of their small business customers who are usually seeking loan amounts that the referring banks may see as too costly to underwrite and service, particularly in the size range below $ 100, 000. 17 for example, in 2014, ondeck announced small business loan referral partnerships with bbva compass and with the profitstars lending network, part of the independent community bankers of america preferred service provider program. another type of partnership that has been announced recently involves alternative online lenders and community development financial institutions ( cdfis ) that seek to provide loans to low - income and underserved borrowers and neighborhoods. these partnerships may enable the cdfi to use the online lender ’ s technology platform at no cost or for a reduced cost in order to make underwriting decisions faster and more cost effective. 18 these partnerships are still in the early stages. risks and opportunities across the federal reserve system, we are actively following developments in the alternative online lending space and have engaged with several alternative online lenders over the past few years to learn more about the industry, the technology, and the business models as well as engaging with bankers to understand how these developments are affecting their markets. 19 most recently, several alternative lenders have participated in in 1994, banks and thrifts with less