Robocash Claims P2P Lending Market Is an Attractive Investment Diversification Option, but Sector has Struggled due to COVID

Robo.cash, a peer to peer (P2P) lending marketplace, recently discussed which investments may be “advantageous” during the COVID-19 pandemic.

The P2P lender noted in a blog post that COVID, which began spreading in Europe in March and April 2020, led to “unrest” among P2P investors. Robocash pointed out that many P2P lenders were concerned about the expected increase in default rates, which is why some began exploring other investment options.

According to Robocash, diversification of a portfolio’s assets is “the cornerstone” of effective investment strategies. The lender believes that investing “is important even during the financial instability and lack of clear future prospects.”

The Robocash team states that the most common alternative to P2P investments are stocks for most investors. The lender confirmed that stocks have been “one of the most profitable investment instruments.”

Robocash further noted:

“As the pandemic proceeds, the market gets less predictable. First, there is a higher possibility of a slow economic recovery. This is clearly a negative factor in terms of investing in stock markets, because the value of an average stock will grow very slowly. This lowers the demand and the price, and returns on investment in the long term (because it will be necessary to begin from a lower starting point to win the positions back).” 

The lender added:

“Secondly, the number of players and sectors, which are traditionally considered stable, is decreasing. Today, the oil and gas sector, engineering, tourism, “physical” retail etc. cannot be called stable.”

Robocash also mentioned that when it comes to making direct investments in businesses through crowdfunding, the disadvantages (at this time) may be similar to the ones that can be found in the stock market. According to Robocash, some crowdfunding deals can “pose even greater risks, as mostly, they lack strong guarantees of return on investments.”

Going on to comment on the Fintech or alternative lending market, Robocash noted:

“The P2P lending market looks like one of the attractive diversification options for investors during the transitional period of coronavirus restrictions. The reasons are a potential long-term growth of demand for alternative loans during the economic recovery, the online nature of the segment and strengthening positions of players who successfully fulfilled obligations to investors even during the challenging time in March and April.”

It’s worth noting that many major P2P lenders have struggled during the pandemic. As covered in October 2020, UK based P2P lender RateSetter had been struggling to process withdrawals from investors.

RateSetter was recently acquired by Metro Bank. On September 14, the deal was approved by regulators. Going forward, RateSetter is migrating away from P2P lending as Metro Bank intends on funding loans from deposits while leveraging RateSetter’s technology.

As reported recently, Latvian P2P lender Grupeer has claimed that it’s still working with debt collection partners to ensure repayments.

The State Revenue Service of Latvian Republic had suspended the economic activity of SIA “Grupeer.” The P2P lender claims that it has now managed to “partly repay the labor force related taxes, the information about the accepted payment will be updated within the next few weeks.” The lender also mentioned that after making these payments, Grupeer will “resume full operation as a company and legal entity.”

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