Ask the Expert
From peer to eternity
Q
The future of peer-to-peer finance
Suzie Neuwirth Editor-in-Chief Peer2Peer Finance News
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eer-to-peer (P2P) finance connects borrowers with lenders via an online platform which takes a fee for providing the service. The lenders, some of which are NACFB Patrons, tend to be retail investors, high-net-worth individuals and institutions. Borrowers range from property developers and professional landlords to SMEs and consumers. We caught up with industry expert Suzie Neuwirth to find out how the industry is faring today.
What caused the P2P lending market to grow so quickly?
The sector’s growth was spurred by the financial crisis of 2008-9, as traditional high street banks stopped lending and interest rates approached zero. This created a perfect environment for P2P lending platforms to fill the gap, simultaneously serving an array of creditworthy borrowers and investors seeking yield. Free of the legacy technology issues that blight the banks, P2P lenders offer speedier credit decisioning and lending, which has boosted their popularity and supported their growth. 20 | NACFB
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How many platforms operate today and how much lending do they facilitate annually?
has created onerous compliance costs for P2P lenders.
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There are around 50 platforms in the UK market today. Assetz Capital is the largest P2P lender in the UK and has to date lent over £1.5 billion. Some platforms choose to publish loan book data but unfortunately the industry does not have a comprehensive data resource so we do not know total collective annual lending volumes. To give you an idea of the size of the wider industry, a report from the Cambridge Centre for Alternative Finance (CCAF) released last year found that UK alternative finance transactions hit £10.3 billion in 2020.
What part do commercial finance brokers play in the P2P market?
Recent research shows that many SMEs are still unaware of the array of funding options available to them and this is where brokers can help. As well as offering competitive rates and a quicker service, P2P firms can also be used for more niche forms of funding, so brokers can help connect them with the right customers.
What challenges have most affected the market? The biggest change and challenge is undoubtedly tougher regulation, which
How did the P2P market fare during the pandemic? One of the biggest criticisms of the P2P sector has always been that it hasn’t proven itself during a turn in the cycle, but now it has! There were a couple of platform closures but on the whole, the industry has not only survived but thrived during the COVID crisis.
Recently, we’ve seen some lenders step away from the P2P market, why is that? This tends to be due to reasons that are specific to lenders’ business models. For example, Funding Circle has strong relationships with institutional funders and participated in the government’s COVID loan schemes which could only be funded by institutions, so it made sense that it would step away from P2P retail investment.
What’s next for the P2P market?
New platforms are ready to enter the market with innovative propositions, using technologies such as open banking and blockchain. I also expect to see greater collaboration between platforms on deals, particularly in the property space.
