By Kai-Riin Saluste, Bondora
The peer-to-peer lending market is looking for another massive growth from 2016, but before the holiday season kicks in, we here at Bondora have decided to dig deeper to see what will be the underlying trends shaping the surging industry in the new year.
We have started to see first signs of institutional investments coming into peer-to-peer lending platforms in Europe and we expect to see a significant rise in this trend, as fund managers seek higher yields when rates on money markets continue to be at historic lows. High net worth individuals and smaller institutions are already investing on P2P platforms in Europe, including on Bondora.
The surging growth of peer-to-peer lending has started to worry dominant banking groups around the world, and they are working on their responses. Some have started to look at nurturing their own FinTech startups, opening accelerators and incubators of their own (HSBC, Nordea), some have launched their own offering (Goldman), and others are buying stakes in newcomers to be best positioned in changing times. At the same time many banking groups are still ignoring this revolution. However, we are very confident that there is a lot happening in this field in 2016.
The peer-to-peer lending market is becoming increasingly global. The market was led for years by the United States and the United Kingdom, but China is already the largest P2P lending market globally, with more than 1500 platforms, according to Standard Chartered. We are seeing a rise in many new markets and we expect to see increasing demand for cross-country investment opportunities like the one Bondora is offering. It’s hard to see investors creating 30+ accounts to trade on every European market.
SMALL BUSINESSES LENDING GROWTH
Peer-to-peer lending was initially created to provide small loans for consumers — to find financing for repair-work or any other small loan which the banks were not willing to give or when their offering was too cumbersome for consumers to deal with.
Today we have seen a rise in small businesses using P2P as their financing platform and we expect to see a significant rise in this trend during the New Year. For many small enterprises lending a few thousand or a few tens of thousands of euros through a bank is still a no-go — P2P lending is offering an increasingly attractive solution for companies across Europe.
Like for any new financial service, the regulators role will also be important throughout 2016. They have had a massive impact on
the P2P lending business, and this is set to continue as officials in some of the key markets like the United States and Britain are working on the new rules based on the ‘golden standard’ set by the FCA in the UK. Estonia is already rolling out the new lending regulation that also covers P2P platforms.
The industry is entering another fascinating year with underlying fast growth coupled with some twists and turns.