P2P growth

Published on December 20th, 2017 | by Jenny

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Peer-to-Peer lending demonstrates strong growth throughout 2017

The peer-to-peer finance sector has been growing considerably in recent years, with the market experiencing a major upswing in interest across the board. The increased appeal of alternative finance has made itself felt across the financial industry and recent studies by the Cambridge Centre for Alternative Finance show striking growth of more than 40% in a single year. This report was created from an industry-wide survey of 77 different platforms and lenders, as well as 8,300 individual investors and borrowers, and shows major expansion in the alternative finance industry (of which the largest sector is peer-to-peer lending). The input from this report has been passed on to the Financial Conduct Authority as a strong indication of the market’s status to help inform their decisions on future regulation.

How has P2P lending grown so much?

In 2016, the UK’s alternative finance markets showed growth of 43% on the year before, reaching an overall value of £4.6 billion. This was partly because of the growing appeal of P2P lending as a savings vehicle; with interest rates at rock-bottom levels, more and more investors are turning to online lending platforms as a way to grow their savings. As these platforms became wider known, alternative finance started to become more mainstream, leading to a snowball effect – the industry continued to provide attractive returns on investment, and it became more and more popular. Peer-to-peer consumer lending grew by a staggering 47% from 2015-2016, demonstrating the appeal which P2P finance has in the current economic climate.

P2P Business Lending

Individual lenders and borrowers may have played a part in peer-to-peer lending’s success in 2016, but a major driver for the P2P industry has come from startup businesses and SMEs, which grew by 36%. Businesses are making use of the finance options available through peer-to-peer lending platforms to drive innovation, and many of these new companies have chosen P2P finance not because they can’t secure funding elsewhere, but because these lenders offer a more attractive option than mainstream finance providers.

P2P Real Estate Lending

As the peer-to-peer lending market has diversified, more lending platforms are providing real estate finance products. This market has seen a major upsurge in recent years, shooting up by 88% between 2015 and 2016 – this reflects a growing willingness for borrowers to seek finance through P2P lending platforms, and increasing consumer confidence in the peer-to-peer lending sector. P2P real estate finance remains the smallest sector of the industry, constituting £1.15 billion (as opposed to £1.23 billion in business lending and £1.17 billion in consumer lending), but is still a substantial element of the market and likely to grow in future.


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