Since the financial crisis, borrowers have been eager to get lower interest rates and better access to credit, while lenders have searched for higher returns on their investments. Banks, saddled with regulatory burdens, haven’t been able to fully meet these needs. This has left room for the growth of a new market — peer-to-peer lending.
Peer-to-peer lenders like Prosper and Lending Club run online platforms that can quickly and automatically match borrowers seeking a loan to an investor willing to provide the funds for that loan at an attractive interest rate.
In a new report from BI Intelligence, we analyse the factors that have helped nurture the most successful markets for peer-to-peer lending, identify the next high-growth markets, and assess the risks that could stall the industry’s progress. We also provide a companion report explaining how P2P lending works and why it solves the inefficiencies of the traditional lending model.
Here are some of the key takeaways:
- The P2P lending industry is seeing significant growth, especially in developed countries with strong financial markets. P2P lenders in the US generated $6.6 billion in loans last year, up 128%.
- The US has one of the largest P2P lending markets in the world by loan volume, but the UK’s is 72% larger on a per capita basis. Low consumer confidence in banks (even before the financial crisis), a high degree of comfort with online platforms, and a positive regulatory environment have all helped nurture the UK’s P2P lending market.
- Europe is the next big market for P2P lending: The alternative finance market in Europe reached nearly €3 billion ($3.9 billion) in 2014, a 144% jump, and small-business P2P loan volume in France grew almost 4,000% last year, to reach €8.2 million ($10.6 million).
- Although the industry is flourishing, there are serious risks that could derail it: Interest rate hikes, new regulations, frayed bank relationships, and other factors could put a stop to the industry’s current surge.
In full, the report:
- Charts out the size of the alternative finance market in Europe through the end of 2015.
- Provides the peer-to-peer lending volumes for UK and the rest of Europe, along with a country-by-country breakdown.
- Compares the US and UK peer-to-peer lending markets, including on a per capita analysis.
- Identifies the next high-growth markets for peer-to-peer lending, including growth rates.
- Examines the risks that could negatively impact the peer-to-peer lending industry.
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