P2P Lending Market Forecast to Reach $370 Billion by 2025

The P2P Lending Market is forecast to reach $370 billion by 2025, after growing at a CAGR of 5.6% during the forecast period 2019-2025. The P2P Lending Market growth is attributed to increasing transparency in P2P lending with technologies such as block chain and smart contracts being incorporated into lending platforms.

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P2P Lending Market Segment Analysis - By Operation Pattern

Online P2P lending is anticipated to hold majority of share in the P2P lending market throughout the forecast period 2019-2025. The digital operations for P2P lending platforms ensure that the overhead costs required for maintaining and staffing a physical establishment are circumvented. This benefit can be passed onto the borrower in the form of lower interest rates and processing charges. Additionally, the online lending platforms ensure relatively faster loan processing than the traditional loan platforms due to minimal paperwork involved. The growth in the fin-tech credit activity around the world gives an implication of the growth lending on e-platforms. According to the Cambridge Centre for Alternative Finance, the Fintech Credit globally has increased to $284 billion in 2016 compared to $11 billion in 2013.

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P2P Lending Market Segment Analysis - By Application

The real estate application is expected to witness the fastest growth at a CAGR of 14.7% during the forecast period 2019-2025. 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 real estate developers to acquire loans from financial institutions. This is a major reason driving developers to opt for P2P lending platforms. Additionally, restricting credit regulations in banks and other financial institutions is anticipated to benefit the growth of the market, as the demand from the SMEs and consumer credit front increases.

P2P Lending Market Segment Analysis - By Geography

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, due the lack of lending regulations triggered firms to expand. However, the market started to weaken after the Chinese Banking Regulatory Commission disclosed Ponzi schemes conducted by P2P lending platforms. While in 2015, the number of P2P lenders in China were around 3,500, the number dropped to 1,021 in 2018. The shrinking number of P2P platforms coupled with strict regulations on P2P lenders in China to restrict fraudulent activities is anticipated to constrain the growth of P2P lending market in future.

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P2P Lending Market Drivers

Demand from SMEs and consumer credits

P2P lending is seeing increased demand from small and medium businesses and consumer credits due to 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.

Block chain based P2P Lending

Block chain technology eliminates intermediaries from P2P lending process. Hence, adoption of block chain 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, and weakened investor and borrower sentiments. Hong Kong-based Alchemy Coin is a block chain-based P2P lending market place that facilitates instant and direct lending between borrowers and lenders by leveraging block chain and smart contracts.

P2P Lending Market Challenges

Competition from the big tech firms

P2P lending, along with the other forms of lending models is facing severe threat of disruption with the arrival of big technology firms in the lending sector. Players such as Amazon with large retail customer base have entered into the lending market place by partnering with various existent lenders. Similar to Amazon, Google and Facebook have also ventured into financial lending. Huge financial muscle coupled with technical expertise and firsthand experience of handling large customer bases give these multinational tech firms a great advantage in financial services market. In September 2018, Google has partnered with four Indian banks for availing digital loans. Such trends are anticipated to threaten the the P2P leading market, due to digitalization of traditional lending platforms.

Market Landscape

Partnerships and acquisitions along with product developments and up gradation are the key strategies adopted by players in the P2P Lending Market. The major players in the P2P Lending Market include Upstart Network Inc., Funding Circle, Lending Tree LLC, Lending Club, Perform, Circleback Lending, Zopa Ltd., Social Finance Inc., and Kiva Micro funds among others.

Partnerships/Mergers/Acquisitions

In March 2019, investment management company, Downing acquired P2P lender Funding Empire, which had developed investment platform Downing Crowd for an undisclosed amount.

In April 2019, the U.S. based Lending Club, 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 expand its services to small and medium businesses.

R&D Investments/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. The company plans to use the fundraising for establishing themselves as a brand and build credibility.

Lend invest, a real estate P2P lending platform based in the U.K., raised $35m in a Series C funding round in September 2018. Since its operations from 2013, the company lent over $2 billion to about 5,000 developers in the U.K. The company plans to use the funding to develop its technology and grow into more traditional mortgage business.

Key Takeaways

The P2P Lending market is analyzed as fragmented; and the top 10 players in the market are Upstart, Funding Circle, Lending Tree, Prosper Lending, Lending Club, Perform and others.

Online P2P lending holds majority of market share in the global P2P lending market, owing to advantages such as faster loan approvals and disbursals. Additionally, the operational costs involved in physical establishments is one of the reasons for P2P companies to operate in offline pattern.

While China is the major market for P2P lending, the markets in the U.S. and the U.K are poised to grow at CAGRs of 19% and 23%, respectively during 2019-2025. Lower interest rates, simplified online platforms and faster loan approval processes are reasons leading to growth of the P2P lending market in these countries.

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