Peer-to-peer lending platforms seem to be veering away from pooling funds from consumers in favour of taking money from institutional investors.
As the market matures, funding experts predict a two-speed market led by big platforms like Funding Circle backed by institutional cash and smaller firms playing catch up to try and remain competitive.
The revelation comes from a P2P report looking at the state of the UK market from consultancy AltFi.
The report explains that the successful stock market listing by Funding Circle has brought credibility to the P2P market.
The UK market has expanded to lend £6 billion of P2P funds in 2018 – with four big lenders having stakes in £5 billion of debt and representing a 20% increase on the year before.
The big hitters
Besides Funding Circle, the Big Four includes Zopa, RateSetter and MarketInvoice.
Another big player in property is LendInvest.
The forecast is for P2P lending to top £7.5 billion in 2019.
But the report points out the P2P market is still small.
“Against the background of uncertainties facing businesses and consumers, another year of 20% growth in originations would, therefore, be a commendable result for the UK’s marketplace lenders,” says the study.
Big tech firms stepping in
“That said, the marketplace sector is still tiny and clearly has ample room to grow: the stock of bank lending to small businesses, which has been shrinking for years, still stands at just over £100 billion, according to figures from UK Finance, while the value of outstanding consumer credit is around £216 billion, according to the Bank of England.”
Developments to watch out for are the big tech firms Amazon, PayPal and Apple dipping their toes into the P2P arena with loans and credit cards for businesses and consumers.
And the big question – what sort of returns are P2P lenders paying investors?
The average net return is around 4.1%, according to specialist market monitor Link Asset Services.
Where P2P money goes – Market share by sector 2019