It's not at all clear where the federal government's first formal inquiry into online marketplace lending will lead.
Perhaps to new regulations. Perhaps to a decision to leave the fast-growing sector alone, at least for now. Perhaps to gridlock between various federal agencies, none of which have jurisdiction over the entire industry.
But the Treasury Department's recent request for information a list of 14 questions that is currently open for public comment marks a key milestone in the industry's growth. Indeed, the launch of Treasury's inquiry may be remembered as the moment when marketplace lending, sometimes known as peer-to-peer lending, began to grow up.
"While still a small component of the total consumer and small business lending market, it is a rapidly developing and fast-growing sector that is changing the way consumers and small businesses secure credit," Antonio Weiss, a counselor to Treasury Secretary Jack Lew, wrote in a blog post last week.
[Coming this November: Marketplace Lending + Investing. Hear how participants in this fast-growth niche are using data and technology to propel lending into the 21st century.]
Marketplace lenders see the agency's interest, which appears to stem largely from a belief in the industry's innovative promise, as validation for a sector that barely existed just a few years ago.
"It's no longer a bunch of folks at industry conferences telling each other that this is for real," said Ethan Senturia, the chief executive officer of Dealstruck, a small business lending platform.
A spokeswoman for Lending Club, the largest company in the sector, said in an email, "We appreciate that the U.S. Treasury has decided to seek public comment on marketplace lending."
The public has until Aug. 31 to respond to the government's request for information. Here are three key questions about Treasury's inquiry, the answers to which will likely help shape the industry's future.
How will banks respond?
To the banking industry, the rise of online marketplace lending is part opportunity and part threat.
A handful of small banks, such as WebBank in Utah and Cross River Bank in New Jersey, have carved out a lucrative niche originating loans for the platforms. And some larger banks, including Citigroup, Union Bank and SunTrust, have found other ways to ride the industry's growth.
But the tech-driven lenders also pose a competitive challenge to banks, which generally operate with less speed and efficiency than their online cousins.
The American Bankers Association plans to respond to Treasury's request for comment, but not before the group takes the temperature of its members, ABA Executive Vice President Robert Davis said in an interview Tuesday.
He acknowledged the competitive threat posed by marketplace lenders, but also argued that many banks are well positioned to adapt.
"There's clearly some technological innovations with the platforms," he said. "But as it grows, I think it'll be duplicated by traditional lenders that haven't offered the same nimbleness."
One important question will be: to what extent does the banking industry call for the online platforms to be subjected to the same regulations that banks face?
"You can have a cheaper mousetrap just because you designed something better," Davis said. "Or you can have a cheaper mousetrap because you're not doing everything you're required to do."
In an April 21 op-ed in American Banker, ABA President Frank Keating argued that "many new technology-focused companies offer little in the way of consumer protection" and "have a significant advantage over banks."
How will the idea of risk retention be received?
The biggest U.S. marketplace lenders are currently set up to look more like tech companies than financial firms that maintain large balance sheets.
In some ways, the business model used by Lending Club looks more like Uber's than Wells Fargo's, to name two of the company's neighbors in San Francisco. Lending Club earned 89% of its first-quarter revenue from transaction fees that it charged for pairing up lenders and investors on its website.
So the notion, raised last week by Treasury, of requiring online platforms to retain a financial stake in the performance of the loans they originate would mark a significant shift for the industry. Marketplace lending would become a more capital-intensive business.
At the same time, a risk retention plan could help guard against the kind of credit deterioration that plagued the mortgage securitization market a decade ago.
"'Skin in the game' for the lenders would do a lot to make sure that they don't get a little crazy," said Nick Clements, a former credit card executive and co-founder of MagnifyMoney, a comparison-shopping site for consumer financial products.
Some marketplace lenders are already holding onto some of the risk associated with the loans they make. For example, Carlsbad, Calif.-based Dealstruck is on the hook for the first losses on many of the small-business loans it facilitates for investors.
Senturia, the firm's CEO, predicted that platforms with longer track records would have an easier time adapting to a potential risk-retention rule than less established firms. The details of any risk-retention requirement would be important, he said.
"Our goal is to have a say in how it comes about," Senturia said.
Michael Barr, a University of Michigan law professor and former Treasury official who serves as an adviser to Lending Club, also sounded open to the general concept of a risk-retention requirement.
"I think focusing on alignment of incentives is the right set of questions," he said.
How will this market be defined?
"Marketplace lending" is an umbrella term that lacks a clear definition.
Companies that embrace the label include both peer-to-peer platforms and balance-sheet lenders. What most of them have in common are an algorithm-driven lending model and no bricks-and-mortar footprint.
The terminology will likely remain murky until a regulatory scheme lays out clear parameters. After all, industries are often defined by regulation banking being a classic example.
In its request for information last week, Treasury did try to establish some boundaries. In a footnote, the agency stated that high-cost consumer lending sites, which are expected to be regulated by the Consumer Financial Protection Bureau, fall outside the scope of the market it's studying.
But determining where to draw the line is tricky. And online payday lenders operated by Indian tribes, which are chafing against the CFPB's authority, said they will ask Treasury to reconsider its initial decision.
"Unlike the CFPB, which has taken a narrow-minded view of the online lending industry and its impact, the Treasury Department has the opportunity with this study to conduct a much more thorough review," Barry Brandon, executive director of the Native American Financial Services Association, said in a press release.