Lending markets

Alternative Finance Leading Countries and Next High Growth Markets

Since the financial crisis, borrowers have been eager for lower interest rates and better access to credit, while lenders have sought higher returns on their investments. Banks, struggling with regulatory constraints, have not been able to fully meet these needs. This left room for the growth of a new market: peer-to-peer lending.

BII UK Larger P2P Lending Market US Per Capita Basis 150430

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Peer-to-peer lenders like Prosper and Lending Club operate online platforms that can quickly and automatically match borrowers seeking a loan with an investor willing to provide the funds for that loan at a rate of attractive interest.

In a new report from BI Intelligence, we analyze the factors that have helped fuel the most successful markets for peer-to-peer lending, identify the next high-growth markets, and assess the risks that could impede industry progress. We also provide an accompanying report explaining how P2P lending works and why it solves the inefficiencies of the traditional lending model.

Here are some of the main takeaways:

  • The P2P lending industry is growing significantly, especially in developed countries with strong financial markets. P2P lenders in the US originated $6.6 billion in loans last year, up 128%.
  • The US has one of the largest P2P lending markets in the world by lending volume, but the UK’s is 72% larger on a per capita basis. Low consumer confidence in banks (even before the financial crisis), a high degree of comfort with online platforms and a positive regulatory environment have all helped sustain the UK P2P lending market.
  • Europe is the next big market for P2P lending: The alternative finance market in Europe reached almost 3 billion euros ($3.9 billion) in 2014, a jump of 144%, and the volume of P2P loans to small businesses in France increased by nearly by 4,000% last year, to reach 8.2 million euros (10.6 million dollars).
  • Although the industry is thriving, there are serious risks that could derail it: Interest rate hikes, new regulations, frayed banking relationships and other factors could put an end to the industry’s current surge.

In full, the report:

  • Represents the size of the alternative finance market in Europe up to the end of 2015.
  • Provides peer-to-peer lending volumes for the UK and the rest of Europe, as well as a country-by-country breakdown.
  • Compares the peer-to-peer lending markets in the US and UK, including on a per capita basis.
  • Identifies the next high growth markets for peer-to-peer lending, including growth rates.
  • Examines risks that could negatively impact the peer-to-peer lending industry.

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