CONSOLIDATION of mainstream banks in Germany could provide an opportunity for institutional investors to back P2P lending platforms in the country, Orca has claimed.
The analyst said there was an opportunity for investors to get exposure to Europe’s largest economy through Germany’s established P2P lenders including Auxmoney, Exporo and Funding Circle.
Analysis of Germany’s P2P lending sector by Orca found returns are slightly higher than in the UK, at five to seven per cent compared to four to six per cent among Zopa, Funding Circle and RateSetter.
However, it warned P2P makes up a small amount of roughly 0.08 per cent of lending in Germany, which was attributed to a tougher regulatory environment where platforms essentially have to partner with banks to be able to lend.
There are also lower levels of debt in the country, Orca said.
“If P2P platforms, or other direct lenders are not doing the lending, it’s worth taking a look at the wider market to investigate if this market is likely to grow,” Orca said.
“The German banking system, in part government owned, is being drastically consolidated. In particular, the regionalised savings banks and co-operatives of old who typically lend to consumers and small businesses are being acquired, merged, or replaced.”
Orca said P2P platforms position themselves as a much more convenient alternative.
“An online only process gives offers or rejections within hours, compared to the arduous hoops the traditional lenders require borrowers to jump through,” it added.
“There are opportunities for this market to grow particularly in underserved markets.
“The low levels of borrowing in the private sector in comparison to the UK might be an indication that this market needs capital.”