The next great Silicon Valley disruption is FinTech — tech companies that are changing the way we interact with our money.

That could include Apple Pay and Android Pay, which change the way you send payments. Or it could be the Level app, which lets you track your spending more easily than bank notifications. So far, most FinTech innovations sit on top of traditional banking. But one category is starting to move in on a prized area: lending.

It used to be that when you needed a personal loan, you shined your shoes and put on your nicest suit or dress, and went on down to the bank to see what you could get.

“Banks effectively got out of that business during the 2008, 2009 financial crisis,” said Matt Harris, who runs the fintech practice at Bain Capital, the venture arm of Bain Financial.

So sites like Prosper and Lending Club moved in.

These so-called peer-to-peer or marketplace lenders started off as places that would match people who needed a loan with other people who wanted to loan money as an investment. At Prosper, for example, anyone with a minimum credit score of 640 can qualify for a loan of up to $35,000. Interest rates depend on your credit and debt load, but range from 6 percent to over 35 percent.

Most people use these relatively small loans to do things like consolidate credit card debt, since credit card interest rates are usually around 15 percent or higher, on average. The loans can be used for anything — something Prosper somewhat painfully found out recently, when it emerged that the shooters who killed 14 people at a San Bernardino social services center had borrowed more than $28,000 using the site, and reportedly may have used some of it to purchase weapons. 

But a far more common example is someone Tina De Carolis, who recently got a loan of just over $18,000 to consolidate her debt.

De Carolis lives in Hayward, CA, with her two-year-old daughter, Alice. In 2013, while she was pregnant, DeCarolis got laid off from a tech job, helped cover some of her parents’ medical bills, and found herself in over her head.

“About six months ago I finally started getting my finances on track,” she said. “But I realized that all I could afford to pay was the interest.”

As peer-to-peer sites like have become more popular — Lending Club and Prosper have loaned more than $18 billion between them — financial institutions like hedge funds, insurance companies and other investment arms have begun to get in on the action. Now, the majority of the money loaned by these sites comes from big investors, and a small fraction from individuals.

“While the face may be the (peer-to-peer) website, what you’ll see is the actual cash is coming from more traditional source,” said Richard Magrann-Wells of Willis Financial Institutions Group, which assesses risks to banks. But the real innovation remains the funding model.

“What we’re seeing in reality is a whole new way to create loans,” he said.

And while loan marketplaces are still small, the model is growing, and banks are starting to pay attention. One Morgan Stanley estimate says marketplace lending will account for 8 percent of consumer loans by 2020, and 16 percent of small business lending.

According to media reports, Wells Fargo got so worried about the situation that last year it actually banned employees from investing in marketplace lenders. And Goldman Sachs plans to start its own lending marketplace in 2016, following a report from the company that said marketplace lending threatened to leach $11 billion out of the industry’s $150 billion in profits over the next five years.

“It’s just another barbarian at the gate for these truly large retail banks,” said Matt Harris. 

Harris predicts the marketplace lenders will continue to expand into banks’ territories. He said both Prosper and Lending Club have moved into healthcare lending, where people can take out loans to pay for elective procedures.

“Increasingly,” he said, “there will be conflict.”

Tina De Carolis is not worried about the conflict. She’s saving $400 a month after consolidating her loans, and laughs that she can now afford to take the occasional break from cooking.

“I could buy pizza if I wanted to,” she said. “I don’t have to like, take out a loan to buy a pizza.”

And more important, she said, “In three years, I know that I won’t have any more debt. Maybe I can actually buy a house.”