Has P2P gone mainstream?
It has been one year since Peer2Peer Finance News launched, becoming the UK’s first dedicated peer-to-peer lending magazine. And in hindsight, the launch of the industry’s first trade mag was the first sign that P2P was moving away from its niche label, and joining the mainstream.
Over the past year, the industry has reached some significant milestones. The Innovative Finance ISA (IFISA) approvals came thick and fast, breaking all sorts of records for ISA-ready P2P platforms. Securitisation deals saw P2P lenders linked with established global names such as Deutsche Bank, while the bank referral scheme saw P2P loans being discussed in high street banks up and down the country.
To date, P2P financing has been discussed in parliament, at universities (the influential Cambridge Centre for Alternative Finance), and in the wider media. For an industry which is still relatively new to the scene, this is quite an achievement.
The industry has come a very long way since 2005, when Zopa launched its platform with a brand-new model for lending and investing. However, in the world of finance, 12 years is not a long time. Most economists believe that a full economic cycle can take anywhere between 15 and 20 years, and conservative investors like to see a full cycle before committing to a new sector.
By this logic, P2P is not due to attract mainstream investment until 2025. Yet already the sector is worth an estimated £10bn, with analysts predicting that it will be worth £16bn by 2020.
So how has P2P managed to grow so quickly? It may be partly down to timing. P2P’s rise has coincided with the falling value of the pound, historically low interest rates and rising inflation, which have put huge pressure on households and businesses across the UK. SMEs have been forced to look beyond the banks for financing, while savers have watched their cash ISAs gradually lose value. In contrast, P2P platforms shown that they have been able to consistently beat the rate of inflation, while helping investors to understand and manage the associated risk. It is no coincidence that cash ISA deposits have fallen, in the same year that IFISAs have taken off.
But the rapid growth of P2P should also be credited to the industry’s leaders and innovators. It would have been impossible for P2P to enter the mainstream without a valuable proposition for lenders and borrowers alike.
It will be interesting to see how P2P platforms marry their new mainstream appeal with the alternative ethos that gave rise to the sector in the first place.