Since its emergence in 2005, peer-to-peer lending has done more to disrupt the consumer finance paradigm than any other innovation. Following in the footsteps of P2P lending’s success, fintech applications such as P2P payment and money transfer, and digital currency have been able to flourish and spread across the globe. In 2013, the global P2P lending industry was valued at $3.5 billion USD. Analysts predict that by 2050 P2P’s global value will reach $1 trillion USD.
Peer-to-Peer Lending: Why is it so Hot?
Peer-to-peer lending makes up more than 70% of all global crowdfunding activities. P2P lending, also known as marketplace lending, provides a lane for investors and consumers to be financially successful. For consumers, P2P lending platforms provide an opportunity to easily access personal loans for a variety of needs. By moving banks out of the middle, P2P lending helps you become economically empowered. Peer-to-peer lending platforms share your digital space. This means you can find a P2P lender online, whenever you need one. The entire process is concluded online, easily and quickly. Further, as more and more consumers fall below the FICO scores required by banks, the P2P lending platform has come to save the day.
For investors, peer-to-peer lending has proven to be a very successful investment vehicle for both individuals and institutions. According to a Forbes article, investors were seeing returns of as much as 7% in some cases. Not bad in these economic times when you are lucky to earn 2%.
The variety of loans available through peer-to-peer lenders is another factor in the industry’s success. As loan volumes and P2P lending players have proliferated, so has the kinds of loans you can obtain. The early loan applications for personal and business use expanded to include: Student loans, Auto loans, Medical loans, Debt consolidation loans, Home Improvement loans, Relocation loans, Mortgage loans and more.
Let’s take a brief tour now and see what peer-to-peer lending has been up to.
Peer-to-peer Lending in Europe
The UK was actually the first country to offer P2P lending. It was soon eclipsed by US lenders, nevertheless, it has maintained a robust alternative lending market since its inception. Among Britain’s 23 primary P2P platforms, 13 exceeded 2016 performance. Loan volume grew from £3.3 billion in 2016 to £3.7 billion as of December 20th. Altogether, there are more than 50 peer-to-peer lending platforms in the UK, worth more than $9.42 billion as of early January 2017.
Across the rest of the European continent, nearly 80 peer-to-peer lending platforms are successfully operating, expanding market share and increasing loan volumes. The Baltic States have thus far captured the core of the P2P lending market, with 13 platforms across the nations of Latvia, Lithuania, and Estonia.
Peer-to-Peer Lending in America
The US was the second country to move into the peer-to-peer lending market. The 2016 loan volume was $34.5 billion, a 22% increase over 2015. The US P2P lending market was worth more than $32.8 billion as of summer, 2017. It continues to hold the majority share of the overall consumer lending market.
Peer-to-Peer Lending Gaining Strength in Asia-Pacific Region
The Asia-Pacific region has become home to the most thriving peer-to-peer lending industry. Countries such as New Zealand, Australia, Singapore, Hong Kong, China and South Korea are leading the growth of a global P2P lending marketplace. A 2015 report cites a 323% year-to-year growth rate, with loan volume reaching $102.81 billion that year.
Vietnam launched its first P2P lending platform in early December of this year. Vay Muon promises Vietnam’s consumers easy access to its peer-to-peer lending platform, via a smartphone app. First-time applications will be processed and disbursed within 4 hours and subsequent applications in only a half hour. Not bad for one of the new kids on the block.
China has probably had the most P2P lending platforms break out into the marketplace. The lending industry emerged in China in 2007, to become a $60 billion industry by 2016. P2P lending platforms proved to be attractive not only to consumers but to retail investors looking for fixed income assets to add to their portfolios. For Chinese consumers, peer-to-peer lending offered a much-improved way to access financing. Loan volume in China over the past three years was $129.53 billion.
Peer-to-Peer Lending Confronts Inflation in Brazil
Brazil is home to the largest fintech market in Latin America, with a significant share held by P2P lenders. The rise of P2P lending platforms comes in spite of an economy struggling with inflation. In fact, fintech innovators will tell you they are the answer to inflation. Brazil’s peer-to-peer lending market is expected to reach $27 million by 2021.
India’s Peer-to-Peer Lending Market is Young but Bold
P2P lending is still somewhat in its early stages of development in India, but that has not dampened enthusiasm. Analysists anticipate the peer-to-peer lending market to reach between $4 and $5 billion by 2023. India’s first P2P lending platform, i-Lend was launched in 2012. Since then, more than 30 other platforms have joined the market. Attractive to India’s investors too, peer-to-peer platforms secured a little more than $220 million from investors during the period 2015-2017. The Reserve Bank of India has promulgated operating guidelines which is expected to further strengthen the industry.