HYDERABAD, India, June 28, 2019 /PRNewswire/ -- The P2P lending
market is forecast to reach $370
billion by 2025, after growing at a CAGR of 5.6% during
forecast period 2019-2025. The growth in the P2P Lending market can
be attributed to increasing transparency in P2P lending with
technologies such as blockchain and smart contracts being
incorporated into lending platforms.
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The P2P lending market is poised to witness accelerated growth
owing to increased awareness among the public regarding the lower
rates of interests and greater transparency offered by lending
platforms, as compared to financial institutions. The real estate
application is expected to witness the fastest growth at a CAGR of
14.7% during the forecast period. The real estate industry is
looking at P2P lending as the best alternative to traditional
financial institutions. Real estate projects often require large
amounts of investment which makes it difficult for developers to
acquire loans from financial institutions. This is a major reason
driving developers to opt for P2P lending platforms. Hence, growth
in the real estate sector will offer opportunities for the P2P
lending market.
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In 2018, China was the largest
market for P2P Lending, registering a share of over 68%. The size
of the Chinese P2P lending industry is larger than the rest of the
world collectively, with outstanding loans worth over $215 billion. The country witnessed significant
growth in the P2P lending market during 2011 to 2015 as the lack of
lending regulations triggered firms to expand. However, the market
started to diminish after the Chinese Banking Regulatory Commission
disclosed Ponzi schemes conducted by P2P lending platforms. While
in 2015, the number of P2P lenders was around 3,500, the number
dropped to 1,021 in 2018. The trend is expected to continue in the
forecast period as the number of P2P platforms continue to shrink
dramatically amid tightening regulations on P2P lenders to restrict
fraudulent activities. However, other major markets for P2P lending
are the U.S. and the U.K., which are poised to grow at CAGRs of 19%
and 23% respectively. Lower interest rates, simplified online
platforms and faster loan approval processes are reasons leading to
growth of the P2P lending market in these countries.
P2P Lending Market Growth Drivers
- Demand from SMEs and consumer credits
P2P lending is
seeing increased demand from small and medium businesses and
consumer credits due to the strict credit policies followed by
banks. This is driving customers to turn to P2P lending platforms
that have relatively faster credit approvals. According to
statistics from the Peer to Peer Finance Association (P2PFA), the
net lending flow to small and medium enterprises on P2P platforms
has seen significant growth compared to net lending by major high
street banks. In Q2 2018 in the U.K., net lending to SMEs was
recorded at over $210m, while the
high street banks lent around $140m.
- Blockchain based P2P Lending
Blockchain technology
eliminates intermediaries in the P2P lending process. Hence,
adoption of blockchain in P2P lending will make the entire process
transparent and reliable for both lenders and borrowers. The
increased transparency is expected to help the declining market in
China, which is severely dented by
fraudulent activities, as well as weakened investor and borrower
sentiments. Hong Kong-based
Alchemy Coin is a blockchain-based P2P lending market place that
facilitates instant and direct lending between borrowers and
lenders by leveraging blockchain and smart contracts.
Investments and Funding
In January 2019, the U.S.-based
investment firm Matrix Partners invested over $1.7m into Liquiloans, a P2P lending platform
based in India.
Lendinvest, a real estate P2P lending platform based in the
U.K., raised $35m in a Series C
funding round in September 2018.
Having begun operations in 2012, the company lent over $2 billion to about 5,000 developers in the
U.K.
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The Major Players in this Market Include
Major players in the P2P lending market include Upstart, Funding
Circle, LendingTree, Prosper Lending, LendingClub, Peerform,
Mintos, Grupeer, Circleback Lending, Zopa, Social Finance Inc., and
Kiva Microfunds.
In recent developments, investment management company Downing
acquired P2P lender Funding Empire, which had developed investment
platform Downing Crowd.
In April 2019, U.S.-based
LendingClub, a major P2P lending platform, collaborated with
Funding Circle, a business lending platform for small businesses;
and Opportunity Fund, a nonprofit lender for small businesses;
aiming to expanding its services to small and medium
businesses.
Conclusion
The market for P2P lending is anticipated to benefit from the
strict credit policies implemented by financial institutions around
the world, while faster approval rates and simplified processes are
set to drive the market among SMEs and consumer credit
applications. Additionally, incorporation of advanced technologies
such as blockchain and smart contracts within lending platforms is
set to enhance transparency in the system and drive the market's
growth.
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