Peer to Peer Lending (P2P) or marketplace lending has proven itself to be a permanent player in the fintech (financial technology) industry. Apart from a few dark clouds in China, there are no signs of a slowdown in the phenomenal growth of online lending platforms.
While P2P lending has yet to disrupt the financial industry in the same way as Airbnb disrupted the hotel industry, or Uber the taxi industry, there is no doubt that marketplace lenders have emerged as serious competitors to banks.
New Technologies Strengthen Peer to Peer Lending Platforms
The ability of borrowers to engage with lenders over an online platform is the primary engine behind the growth of the peer to peer lending marketplace. The technology enables borrowers who have less than stellar credit scores or no credit history at all to access loans. These factors have contributed to the proliferation of online lending platforms around the world.
From a limited number of loan options, P2P lending platforms today are involved in student loans, mortgages, small business loans, debt consolidation and other forms of financing. Advances in technology, such as artificial intelligence, help to facilitate a broader and more efficient reach into the consumer market.
The greatest traction in online lending has been seen in Africa, South America, the Asia-Pacific region, Europe and the Middle East. P2P growth primarily parallels the growth in digital device use.
Peer to peer lending platforms create a portal to financing for thousands of new consumers who have had challenges accessing loans. According to the World Bank, the global underbanked and unbanked population in 2019 was 2.45 billion. Online lending has become one of the best equalizers in the financial marketplace, enabling rural, female and unbanked populations around the world to secure life-changing financial independence.
Chinese Peer to Peer Lending
The only net loss was in China, where the country’s P2P lenders now face increased regulatory activity and capital requirements. China’s P2P woes stemmed primarily from over-eager investments. Nevertheless, the popularity of online lending has not waned among China’s population of consumers and small businesses eager to access financing. New regulations and capital requirements will streamline the overall online lending industry in China. There were around 2,680 P2P lenders in China in 2016. This number fell to 343 in 2019. Lenders who remain in the market will be much stronger.
Southeast Asian Peer to Peer Lending Market
The Indonesia fintech industry continued to grow, keeping pace or outpacing other countries in the Asia-Pacific region. According to the Asian Development Bank, peer to peer lending represents 43% of the total fintech industry. With a population of 260 million and the growth of internet users from 92 million to 150 million from the period 2015 to 2019, Indonesia is sure to hold on to its leadership spot.
Vietnam’s Hanoi and Ho Chi Minh City fintech startups snagged 36% of ASEAN’s total fintech investment in 2019. Venture capitalists primarily focused on peer to peer lending, mobile payments and credit scoring startups.
Africa Continues to be Fertile Ground for Online Lenders
Africa with a population of 1.3 billion, accounts for 50% of the 700 million global digital financial services consumers. The fintech startup market remains strong and includes a few peer to peer lending platforms that are contributing to the continent’s goal of boosting financial inclusion. Notable are online lending platforms such as Branch, a Kenyan startup, that allows consumers to apply for loans over their smartphone. The loan funds are deposited directly into their mobile money account. Another promising online lender is Lidya, which is headquartered in Nigeria. Lidya provides online loans to consumers and small businesses. Its mission is to help consumers improve their credit score and meet their long-term financial goals.
Worse Than Going to the Dentist
In Latin America, it is said that people prefer to go to the dentist than the bank because of the bureaucratic hurdles. The number of banking institutions across the Latin American region is limited, eliminating any incentive among the institutions to improve their services or lower fees. This reality has created a fertile marketplace for online financial services, including mobile banking and peer to peer lending. While still in its infancy, 2019 saw measurable improvements in non-bank finance-related deliverables to consumers.
The United Kingdom is dealing with Brexit, but this hasn’t impacted its thriving peer to peer lending industry. One of the earliest P2P platforms in the world emerged there in 2005. According to IBIS World 2019 loan value among only the top five P2P lenders hit more than $11 million.
Robo.cash, a peer to peer lending platform headquartered in Croatia, serves customers in eight countries in Europe and Asia. The number of loans serviced by the platform grew from 296,430 for 7 months of 2018 to 427,390 for those same 7 months in 2019. The volume of loans increased significantly: a 3.9% growth in the Philippines and 3.3 growth in Spain.
It is obvious the global peer to peer lending industry is here to stay. And this is very good news for consumers around the world.