The Rise of Peer-to- Peer Marketplace Lending

lendinvestRecently UK peer to peer funding platform LendInvest sponsored a gathering with Tech City News to chat about the emerging market of alternative lending and the challenge to traditional banks.  LendInvest, a platform that is associated with Montello Capital only launched in 2013 but has already completed over £43 million in loans. LendInvest specializes in financing residential and commercial mortgages that are secured by the property.

P2P lending is a significant challenge to the traditional banking industry but it is very early in the game.  This is clearly a case of disruptive innovation.  High street banks are certainly aware of the encroaching challengers but as the report P2Pstates;

“The banks would need to cannibalize their own revenue streams in order to pivot and move forward; we’ll have to wait and see if they will do that.”

“However, as the marketplace lending market develops and becomes a more important threat to the existing financial infrastructure, this could change. A general timeframe of three to five years was suggested before the banks will have the capability to react to peer-to-peer.””Today, the risk-reward ratio just isn’t there for bankers, said Cormac Leech, bank equity research leader at Liberum. That’s a clear reason why the banks won’t really get into marketplace lending in a big way for quite a while: it would result in a huge loss of profit.”

Julia Groves Managing Director of Trillion FundWith the forthcoming inclusion of P2P assets within ISAs (UK retirement accounts similar to US 401ks) demand for this new asset class is expected to increase dramatically.

Julia Groves, Chair of the UK Crowdunding Association stated that “ISAs are absolutely fundamental to the growth of the industry,” and “ISAs are held by 22 million people and represent £460 billion of  capital. Half of this is currently in stocks and shares, so even if marketplace lending gets just a couple of per cent, that is still a significant market.”

The report stated that only 150,000 to 200,000 individuals across the United Kingdom are currently engaged as either borrower or lender.  The potential for growth is enormous as technology delivers a more efficient process with better returns for investors and more competitive rates for borrowers.

The UK is the birthplace of the P2P industry- a concept that has quickly migrated to many corners of the world. The LendInvest – Tech City News report is available for download here.

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