Peer-to-peer lending platforms which offer lower interest rates tend to grow faster and more sustainably, new research has found.
According to Croatia-based P2P lending platform Robo.cash, platforms which offer high interest rates – of 12.6 per cent or more – are more volatile and experience inconsistent growth.
“The difference in growth tempo depends on various factors, such as geography, lending conditions, quality and reliability of services and some other,” said Robo.cash analysts.
“Interest rate reflects all of these factors, hence with better stability and predictability come lower interest rates.
“If a P2P platform is solid, places loans from countries with healthy market economies and solvent borrowers, provides buyback guarantee and other ways to secure investors’ money, the returns are normally lower than they are in less predictable projects.”
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The research was carried out by analysing the monthly funding volumes of 13 European P2P platforms over the course of 2019. Low returns were categorised as being between 6.5 per cent and 10 per cent per annum, while medium returns were judged to be between 10.6 per cent and 12.5 per cent.
After inputting data the platforms’ returns versus funding volumes, Robo.cash analysts found an inverse correlation between the growth of a P2P platform and its average interest rates. Robo.cash suggested that this trend can be explained by the fact that European investors are careful and prefer lower risks to bigger profits.