There has been no shortage of negative news stories about the financial landscape recently – and the P2P Alternative Investment sector has not been immune. But amid all the doom and gloom, a few potential upsides have emerged for the P2P lenders.
According to Statista, by 2025, the P2P lending market is going to be worth €1 trillion, while just in 2015, it stood shy at 64 billion. The industry develops astonishingly fast, and it's not just hype (unlike Bitcoin in 2017). There is a real demand for borrowing from the P2P platforms; it feels as there's some momentum behind it. Investors being more comfortable with this type of structure and showing more trust in P2P Alternative Investment platforms. Besides, they see a perfect opportunity to diversify the risk among lots of different platforms with reasonable high-interest rates.
The conditions for the growth of peer-to-peer lending have been excellent because of an emerging middle class skeptical of investing their money in volatile stock or speculative real estate markets. In other words, there is a lack of attractive alternative investments, why people are prone to invest in peer-to-peer platforms promising high and stable returns. At the same time, the investment threshold in P2P investing is low, enabling even tiny investors to engage themselves with peer-to-peer lending.
Besides, the P2P Alternative Investment market has experienced some turbulent phases – and probably will in the coming years as well. The effect of regulation has already caused the number of P2P platforms to shrink dramatically and exposed numerous cases of fraud. A comprehensive cleanup in the industry is now taking place with significant consequences for both investors and platforms. The regulation process is still underway, and we will most likely even see platforms shutting down and illegal activities being uncovered.
As more platforms are closing, we will see some consolidation by the biggest P2P platforms. Still, regulators will probably limit acquisitions and mergers to a size that will not pose a threat to the general stability of the economy in the case of platform bankruptcies. Robust P2P lenders with risk-management capabilities and stable funding access must be expected to gain market share.
The coronavirus pandemic has led to a near-global lockdown, shuttering many small and medium-sized enterprises (SMEs), forcing construction workers to abandon property projects, and causing families to cut back their spending due to employment uncertainty. These businesses, property developers, and families need access to finance, and it just so happens that SME lending, property-backed loans, and consumer P2P lending form the core of the P2P market.
The majority of P2P platforms have not stopped lending, and they are well placed to take advantage of the flood of new loan applications that is undoubtedly on its way. What's more, these loans will be requested by high-quality borrowers who have been left out of pocket through no fault of their own. This presents an excellent opportunity for P2P lenders to improve the diversity and liquidity of their platforms by matching lenders with SMEs and other borrowers who have a strong track record and a good future.
The pandemic has not just impacted borrowers – investors have been struggling with the historically low-interest rates on offer at the bank, and unprecedented stock market volatility. There has never been a greater need for an investment product that can offer steady, inflation-beating returns within an ISA tax wrapper.
Credit is a crucial enabler of consumption for consumers that might otherwise be unable to afford a particular product. As more and more shopping takes place online, new digital solutions for point-of-sale finance slickly inserted into the customer journey, have gained favor with customers. The loyalty and inertia that used to bind consumers to their banks are weakening across Europe, as regulation has made it easier than ever before to establish relationships with multiple financial service providers.
This is the list of supporting aspects why P2P lending will prosper:
- It is not a secret; the market for consumer lending is changing. This is one of the hottest, much contested, and rapidly transforming sectors.
- Credit is a crucial enabler of consumption for consumers that might otherwise be unable to afford a particular product.
- Historical preferences for different financial products and different approaches to financial innovation are likely to persist, even if regulatory and political trends suggest greater convergence.
- The future of the consumer credit market in Europe is exciting. It will be attractive for many participants for years to come. We think that European consumers will benefit from better propositions, offering more choice, lower prices, and an increased ability to tailor credit to meet personal needs and preferences.
- Given that we expect consumer spending to rise, it is very likely that there will be a corresponding growth in credit demand. Consumers will find themselves in the fortunate position that greater demand is unlikely to lead to higher prices, as tech-enabled improvements in efficiency will allow lenders not to raise rates significantly.
- Consumers in more precarious financial circumstances should profit from advances in risk scoring and reduced information asymmetries – although this may come at the expense of data privacy – a concern, especially in several continental European countries. Consumers at the other end of the financial spectrum may notice a reduction in credit card benefits as the trend towards micro-segmentation, as well as regulation, reduce cross-subsidization. Overall, however, the argument that consumers will enjoy a net gain looks strong. They will profit from more excellent choices and the information and tools to manage the increased complexity effectively.
- There is a lack of attractive alternative investments, why people are prone to invest in P2P platforms promising high and stable returns. At the same time, the investment threshold in P2P investing is low, enabling even tiny investors to engage themselves with peer-to-peer lending.
We want to assure you that FAST INVEST has a well-balanced business structure, and there are no solvency problems. The majority of loans listed in our loan list are installments. Installment is the type of credit issued at a defined amount for a set period:
- Payments are usually made monthly in equal installments, which generally lowers the risk of default compared to Payday lending
This is a reason why our loans are - low-risk types. Most of the lenders that we partner with have established full processes of credibility assessment.
One of the key criticisms leveled against the P2P sector has been its short track record. Financial advisers and analysts have repeatedly pointed out that P2P has yet to prove that it can survive an economic downturn. All the economic forecasts suggest that we are headed for a global recession, so P2P platforms can finally show skeptics that it is a valuable and robust business model that can adapt and evolve in any economic climate.
P2P platforms have the ability to respond quickly and decisively to a changing economic climate. The robust technology proposition behind the P2P platforms has made it easy for platform employees to work from home with minimal disruption. P2P lending was created for socially beneficial reasons, and financial inclusion is now more critical than ever. Now is the time for P2P platforms to show borrowers and investors what they can do, and how they can help. If they get it right, we might all emerge from the dark cloud of coronavirus with a substantial silver lining.
P2P Alternative Investment area is one of the fastest-growing industry with huge potential. Stronger regulation will, therefore, almost certainly be positive for the P2P sector over the long run. It's a great time to be in the P2P lending business. Not only are there still 3 billion unbanked people around the globe with no credit bureau score, but the technology we have makes it possible to get in the game without the huge investments.