business loans accounting for approximately $ 5 billion. 13 while this amount represents only a small fraction of u. s. unsecured consumer and small business lending overall, the rate of growth is notable. much of the growth in online alternative lending has been supported by innovative uses of technology that allow lending platforms to streamline and automate loan applications, expedite underwriting and quickly price risk, and provide loan applicants with quick loan decisions and access to funds. online alternative lenders use algorithms to provide rapid decisions on loan applications, often taking into account information from a wide range of sources that are not typically involved in bank underwriting of loans. for example, aggregated information for small business underwriting may include data on online banking, accounting, bookkeeping, credit card, shipping, supplier, and social media. so, while traditional banks often focus on personal credit scores for underwriting consumer loans and the majority of small dollar, small business loans, online alternative lenders may analyze a broader variety of data to develop different metrics to measure and price loan risk. currently, the largest platforms typically offer online or mobile applications that allow consumers and small business owners to easily submit information and aggregate vast amounts of data to complete loan applications. although rates vary by platform and borrower characteristics, when taking into account origination fees and repayment periods, the average annual cost of borrowing, or apr, associated with loans and credit products offered by online alternative small business lenders tend to be higher than those associated with traditional bank products. 14 reports suggest that some borrowers are willing to pay a higher price in exchange for an easy application process, a quick decision, and rapid availability of funds. 15 online balance sheet lenders include companies such as ondeck, square capital, fundation, can capital, kabbage, and paypal credit. cash advances, sometimes known as merchant cash advances, capital advances, or business cash advances, are credit products that allow businesses to convert future credit card or payment account receivables into capital ( lipman and wiersch, 2015 ). peer - to - peer lending platforms include companies such as prosper, lending club, and funding circle. see mills and mccarthy ( 2014, p. 42 ). for information on online alternative lenders, see u. s. treasury ( 2015, p. 6 ) ; for more on unsecured consumer loans and small business loans, see morgan stanley research ( 2015 ). for example, mills and mccarthy ( 2014

##rcumvent the consequences of inequality fuelled financial instability ahead of the crisis. 2 but while income inequality may have driven the credit boom see in particular piketty, t., capital in the twenty - first century, harvard university press, 2014. see raghuram, r., fault lines : how hidden fractures still threaten the world economy, princeton university press, 2010. bis central bankers ’ speeches that preceded the us subprime crisis, comparative and historical evidence suggests that there is little relationship between rising inequality and financial crises. 3 more generally, inequality is of interest to central banking discussions because monetary policy itself has distributional consequences which in turn influence the monetary transmission mechanism. for example, the impact of changes in interest rates on the consumer spending of an individual household depend crucially on that household ’ s overall financial position – whether it is a net debtor or a net creditor ; and whether the interest rates on its assets and liabilities are fixed or variable. such differences have macroeconomic implications, as the economy ’ s overall response to policy changes will depend on the distribution of assets, debt and income across households – especially in times of crisis, when economic shocks are large and unevenly distributed. for example, by boosting – first – aggregate demand and – second – employment, monetary easing could reduce economic disparities ; at the same time, if low interest rates boost the prices of financial assets while punishing savings deposits, they could lead to widening inequality. insofar, central bankers have a technical, non - judgemental interest in the distribution of income and wealth in a society. the distributional effects of monetary policy : theory and evidence so what do we know about the impact of monetary policy on the distribution of wealth, income and consumption? a comprehensive study published recently by the national bureau of economic research ( nber ) outlines five potential channels by which more accommodative measures might affect inequality. 4 the first is the “ income composition channel ” : while most households rely primarily on earnings from their work, others receive larger shares of their income from business and financial income. if more expansionary monetary policy raises profits more than wages, then those with claims to ownership of firms will tend to benefit disproportionately. since the latter also tend to be wealthier, this channel should lead to higher inequality in response to more accommodative monetary policy. the second is the “ financial segmentation channel ” : if some individuals and organisations frequently trade