P2P lending platforms, otherwise known as peer-to-peer lending, have sprung up in countries since the global financial crisis. In fact, P2P lending is now the largest category of alternative finance in Europe. So is P2P lending the future?
Peer-to-peer lending platforms enable individuals to acquire loans directly from other individuals, cutting out the need for a middleman such as a bank or building society. There are several benefits of P2P lending. Not only does P2P lending offer investors better returns on cash savings than a bank, but they also offer borrowers better rates than what they would receive from a bank.
While this sounds amazing, the question is, can we trust this borrowing and lending channel to stand the test of time? And if we can, does this mean that this type of lending will become the future of the global economy? Keep reading below to find out all about peer-to-peer lending, the benefits of P2P lending and whether this type of lending will continue to be popular and successful in the future:
The Basics of Peer-to-Peer Lending
Peer-to-peer lending businesses bring together borrowers who are searching for a loan with people who are looking to invest their money. They are essentially the middleman of the operation, assisting in matching the two sides and moving the funds between the two.
The Benefits of Peer-to-Peer Lending
One of the main benefits of peer to peer lending is that there’s no traditional financial institution involved in the process, and therefore none of the expenses connected with banking. This means that both borrowers and lenders can take advantage of more favourable interest rates.
With interest rates on cash ISAs and savings struggling to beat inflation, investing in P2P lending could allow you to safeguard your money. Not only that, but P2P lending is also less complex and volatile than investing in stocks and shares. However, although P2P lending is an attractive option for people who want to boost their investment portfolio, it is important to remember that this type of investment does come with a small amount of risk.
If you want to know more about the benefits of peer-to-peer lending and why this type of lending could be a good option for you, then contact Northern Provident Group. This innovative finance services group provides a huge selection of financial services including P2P lending and investment propositions, ISA management and a full range of compliance and financial services to businesses in the UK. They also understand the impact Covid-19 has had on peer-to-peer lending and are ready to adapt and deal with future changes.
The Future of P2P Lending
P2P lending was first established in the mid-noughties. Since then, it has seen nothing but growth, and this trend is unlikely to change in the near future. If we look at some of the facts, in 2015, the P2P market was worth £909 million, but by 2016 the market had grown to a whopping £1.17 billion. Not only that, but in 2016 alone, there was a 46% growth in the UK’s alternative finance market.
Today, the UK’s alternative finance market is worth £4.6 billion. In the last year, this sector grew by a whopping 35%. These facts tell us that there is a good possibility that P2P lending will continue to increase in popularity over the next few years.
Here are some of the reasons why P2P lending is so popular:
- Banks and building societies have been unable to offer decent rates to savers
- People are looking for new ways to invest their money
- There has been an increase in confidence in peer-to-peer networks and online financial services
Peer-to-peer lending has grown in popularity over the last few years, and evidence suggests this is unlikely to change anytime soon. In fact, a recent survey suggested that this sector is nowhere near achieving its full potential. Although P2P lending may have a few challenges to overcome in the future, such as regulatory pressures and rising interest rates, the future of peer-to-peer lending looks extremely bright indeed.