Has P2P already peaked?

Just 12 months ago, the UK’s peer-to-peer lending sector was on the up and up. P2P lending was growing in popularity, with IFISA subscriptions rising, new platforms launching, and innovation a-plenty.

But since then, the P2P sector has had to contend with a slew of obstacles including harsh new regulatory measures, high-profile platform closures, and – of course – the coronavirus pandemic.

Covid-19 has had an unprecedented impact on the financial services sector, and P2P lending platforms have been on the frontlines.

Locked out from government-backed lending schemes, and unable to access term funding from the Bank of England, many platforms have struggled to maintain their momentum in 2020. Some have paused all lending activity, or closed to retail investors. Others have changed their business models, or closed down their platform entirely.

With a no-deal Brexit looming on the horizon, it seems like the odds are against the success of P2P lending, at least in the near future.

But there are still plenty of reasons to believe that P2P has yet to reach its potential.

P2P lending rose in prominence in the wake of the last financial crisis, so they were built to be resilient and flexible in times of economic strain.

What’s more, it has been a point of frustration for many platforms that advisers have kept the industry at arm’s length until it could prove that it could survive a downturn. While this is not the downturn that we expected, it certainly presents a chance for platforms to prove themselves. And many already have.

In the early days of the pandemic, P2P lending platforms stepped up to offer all manner of support to their borrowers and investors, including taking forbearance measures for their borrowers, funding solutions for front line workers, and increasing their communication with investors.

One platform manager recently told Peer2Peer Finance News that he had been “humbled” by the response of his investors since the start of the crisis. Others have hailed the patience and understanding of their investors, and the diligence of their borrowers – a testament to the high standards of P2P due diligence.

Our own Back Our Industry campaign has shone a light on the extraordinary work that P2P platforms have been doing, and several platforms have already won British Business Bank approval to offer government-backed loans.

There will be some big challenges ahead, but a year from now there is every reason to expect to see a new and improved P2P lending sector – one which has survived a recession, won the loyalty of its investors and borrowers, and inched ever closer to the mainstream.

Read more: P2P sector ready to play greater role in next wave of Covid-19 funding