What will peer to peer lending look like in 2020?
The peer to peer lending market has experienced a turbulent time over 2019 with the uncertainty generated around Brexit in the UK. However, the providers appear to have adapted to the changes by changing the way they operate. Recent changes in the way investors withdraw their money from funding circle have been well received and the overall market has seen growth in the last months. Here are some of our projections of what may happen in the P2P market in the next coming year.
- Increased regulation will put greater changes on providers
For many years peer to peer lending operated somewhat outside the jurisdiction of financial regulatory bodies, however since the FCA started regulating the market more rules have been put in place to try and protect investors. For example, firms now have to give investors greater clarity on the risk of the loans they are participating in.
On the whole regulations like this are aimed at safeguarding the market, and this is good news for SMEs who will continue to be given access to this simple way of raising funds.
- P2P may continue to shrink in the Chinese market
The ‘shadow banking’ sector in China has been shrinking since 2018, and the trend is likely to continue in 2020. A lot of the P2P loans that were live on the market in China were from smaller firms experiencing financial problems. This inevitably led to higher default rates which have threatened the stability of the underlying loans.
- Poor Backing of Funding Circle may affect the price of Zopa
As peer to peer is still a fairly new industry when one provider experiences troubles this can often lead to a downturn for other providers. This is what has happened with Funding Circle and Zopa. A Zopa backer has cut the valuation of the peer to peer lender by half, in part due to the poor performance of funding circle. This trend is likely to continue in 2020 due to the inherent connections of the market.
Get in touch if you have any further questions on peer to peer lending
The changing environment in the peer to peer market is likely to continue as governments get stricter on the types of loans that can be offered and the rules that must be followed for them to be completed.
If you have any current investments in the peer to peer market and are unsure about where to turn to fill out our contact form and we will get back to you.
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