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Author(s): Peer to Peer (P2P) Lending Market Overview:
Peer to peer (p2p) lending market is projected to grow at a CAGR of 51.5% from 2016 to 2022, to reach $460,312 million by 2022. Peer to peer (P2P) lending is also referred as marketplace lending. P2P lending industry is among the fastest growing segment in the financial lending market. It is an alternate way of lending money virtually. The core functioning of marketplace lending platforms is connecting consumers/burrowers with investors/lenders, majorly through online medium. The p2p lending market is driven by growth in emerging markets owing to increase in knowledge of marketplace lending, greater investment transparency, and lower interest rates to consumers.
The report segments the global peer to peer lending market based on end-user types, business model type, and geography. By end-user types, the market is segmented into consumer credit loans, small business loans, student loans, real estate loans. On the basis of business model, the market is categorized into alternate marketplace lending, and traditional lending. Geographically, the market is further analyzed across, North America (U.S., Canada, and Mexico), Europe (UK, Germany, France, and Rest of Europe), Asia-Pacific (China, Australia, and rest of Asia-Pacific), and LAMEA (Latin America, Middle East, and Africa).
Market Segmentation
Source: Primary Research, Secondary Research, and AMR Analysis
Small Business Lending is the Major Driver
After the financial crisis in 2008, banking and financial institutions are trying to deleverage traditional market and market loss risk by divulging in alternative lending activities such as crowdfunding, peer to peer lending. This has led to the reduction of loan finance for small and medium-sized businesses and individual borrowers as they are considered to be risky by the traditional banks as they might not be able to repay the loans at all. The P2P lending industry has successfully filled a massive and long required need for an alternative lending platform other than traditional banking system. The evolution in technology have led to easy access capital for micro, small and medium enterprises.
Peer to peer lending companies have stepped-in, to capitalize on the opportunity available to help grow small business borrower’s needs. Alternative small business lending platforms use machines and digital tools to provide credit facility to a wide range of small businesses quickly and efficiently, predominantly to those who have been rejected by banks. Thus small businesses acts as a major end user in peer to peer lending market. For instance, small businesses forms the backbone of the U.S. economy of all jobs, according to the U.S. small business administration. And these businesses need capital in order to grow.
Source: Primary Research, Secondary Research, and AMR Analysis
Asia-Pacific is a Lucrative Peer to Peer Lending Market
P2P lending market share took off in China in 2015 and have attracted much investment as well as controversies. Investors were frustrated by the low rates offered by traditional banks in China, so P2P service providers have replied too well to banking also known as shadow banking in lieu of finding better returns. P2P lending market uses online platforms and allows effective access for borrowers and lenders. In China, the model has been quickly adopted by alternate banking systems and has also attracted significant venture capital. Over the past two years, the P2P lending market share of companies in China has nearly tripled. Despite some of China’s headline grabbing P2P lending market scandals, both the supervisory environment and business quality for P2P loans are improving. In 2015, the Chinese government released a new set of rules targeting peer to peer loans. These rules are aimed to offer much-needed protection to investors as well as operational guidelines for P2P operators.
Lesser Operating Cost and Low Market Risk
P2P lending is a type of crowdfunding which involves easy availability of loans outside of the traditional consumer banking system by providing borrowers a platform to interact with lenders, or investors, via the P2P lending service providers. The use of internet platforms reduces costs by excluding operational expenses which are associated with traditional banking system, such as the cost of maintaining and staffing, physical branches etc. In some cases this cost saving is passed to borrowers through lower interest rates than those offered by traditional banks.
In general a bank would sit in between the two parties, taking the risk but also the bulk of the return. For example; the marketplace model offered high returns to lenders at a time when interest rates are at historic lows and the UK stock market has been volatile.
According to data from peer-to-peer finance association, peer-to-peer lending has been growing very fast and provided £1.6bn ($1.76bn) in loans at the end of June 2016.
The peer-to-peer websites offer a protection from market losses incurred due to non-payment of loans by maintaining certain funds. Example: Zopa has established the Zopa Safeguard Trust, which currently holds £9.6m ($10.56m) to cover any losses incurred due to non-payment of loans. Also peer-to-peer lending allows one to participate in pools of loans, thus, limiting the market risk which got evident during the recession period.
Key Benefits of the Report
- A comprehensive analysis of the current trends and future estimations in the global peer to peer lending market are provided.
- The report elucidates on key drivers, restraints, and opportunities along with a detailed impact analysis from 2014 to 2022.
- Porter’s Five Forces model of the industry illustrates the potency of the buyers and suppliers in the market.
- A quantitative analysis of the current scenario and the forecast period highlights the financial competency of the market.
- The report provides a detailed analysis of the global peer to peer lending market with respect to end-user types, business model types, and geography.
Peer to Peer (P2P) Lending Market Key Segmentation
By End Users
- Consumer credit loans
- Small business loans
- Student loans
- Real estate loans
By Business Model
- Alternate marketplace lending
- Traditional lending
By Geography
- North America
- U.S.
- Canada
- Mexico
- Europe
- UK
- Germany
- France
- Rest of Europe
- Asia-Pacific
- China
- Australia
- Rest of Asia-Pacific
- LAMEA
- Latin America
- Middle East
- South Africa
Market Players in the Value Chain
- LendingClub Corporation
- Funding Circle Limited
- Prosper Marketplace, Inc.
- Daric
- Social Finance, Inc.
- Zopa Limited
- Avant, Inc.
- onDeck Capital, Inc.
- RateSetter
- Kabbage, Inc.
Other Players in the Value Chain Include (profiles not included in the report)
- LendUp
- Peerform
- Circleback Lending, LLC.
- Isepankur
- Auxmoney GmbH
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