Much of this newfound desire for the business of C and D grade borrowers can be tied to the development of new and better credit assessment tools. Big-data analytics has made it possible to turn question marks about a particular borrower's credit worthiness into exclamation points. P2P lenders have capitalized on the availability of these technologies, giving them a leg up in the competition for underserved consumers.

That's about to change. Traditional lenders are right now evaluating and even building their own alternative credit scoring and underwriting methods. These tools leverage non-traditional information like SAT scores, social media interactions, checking account and payday lending information to approve higher quality borrowers.

Deeper into the world of data-driven risk assessment, some lenders are even using performance sensors to track the location and usage of financed cars or the structural status of financed infrastructure projects like bridges.

As these data-driven solutions pull more consumers out of C and D categories and into A and B, more traditional lending options will open up to them, putting P2P lenders in a more intense fight for their business.

Interestingly, P2P lenders are also finding that the typical borrower is anything but typical. In fact, alternative financial services are increasingly attracting even banked consumers. A TD Bank survey released in September indicated more than 20% of consumers with checking accounts had used check cashing, money transfer or payday lending services in the past three months.

Today, P2P lenders appear to be on pace with their traditional counterparts when it comes to portfolio performance. The Cleveland Fed report says between Q2 2010 and Q1 2014, 3.2% of P2P loans on average were past due. The percentage of standard, consumer finance loans that were past due during the same time period was, on average, 3.7%.

When fewer credit-worthy consumers choose the risk of a P2P lender over their trusted financial institution, however, that differential is likely to increase.

The other elephant-in-the-room question about the sustainability of P2P lending is regulation. Just as other emerging financial solutions have found themselves on the radar of the Consumer Financial Protection Bureau and others, so too is P2P lending likely to face innovation-stifling scrutiny. The solutions are already barred in some states.

Some institutional investors are predicted to hop on the bandwagon either by developing their own or buying up the loans of successful P2P platforms. Before jumping into the P2P lending game, credit unions should first examine what it is about the product category that has them excited. If it's the prospect of serving the high-value underserved segment, leaders should first consider a simple evaluation of their existing products.

By adding big-data analytics and other smart lending technologies, credit union lenders can improve their credit decisioning. With newfound consumer insights, these cooperatives can confidently extend more credit to more members, served and underserved alike.

Jon Sarvis is CEO of TMG Financial Services. He can be reached at 888-428-4720 or [email protected].