Consolidation in the peer-to-peer lending industry may finally come to fruition in 2020, stakeholders have predicted.
Tougher regulations on the sector are forecast to speed up this process, with executives predicting mergers to share costs, as well as more platform closures.
“The costs of regulation, technology and marketing all quickly add up, and when added to the core business of deal origination, due diligence and oversight, many platforms could not make the economics work,” said Jatin Ondhia, chief executive of Shojin Property Partners.
“I do expect many more to close. “Some of those will close because of poor quality deal flow, but many more will close because the business just could not make the numbers work, which is a real shame.
“To succeed in this space, businesses will need to be well capitalised and will need to monetise the business properly. “I totally believe that there will be some M&A or joint-venture activity.
“While no market player is significant enough to warrant buying them out or merging, amongst some of the stronger players there is already talk of tie-ups to open up the investor base while reducing overheads and sharing resources.”
John Cronin, financial analyst at brokerage Goodbody, said he expects to see much more industry consolidation during 2020 and beyond.
“This is a function of the degree of fragmentation which has seen many new entrants in recent years as well as the fact that some platform owners will look to a sale as a rescue play,” Cronin said.
“The refreshed Financial Conduct Authority regulations will only accelerate this trend in my opinion – indeed, I believe that these regulations will facilitate a deeper recognition on the part of interested market participants that there are players of strength in the P2P market who will survive for the long-term.”
However, newly-launched property lender Nexa Finance said that changes to business models are more likely than consolidation.
“There is always the possibility that some property P2P platforms may consider cease trading and either run off their book or look for a platform to buy them, but we believe it is more likely that they will change or adapt their model, such as withdrawing from retail investors,” said Mark Williams, chief operating officer and director of credit risk at Nexa Finance.