The success story of P2P lending has been unprecedented. But what’s in store for the financial innovation in 2016?
Game changer announcements and general trends
The year 2015 was huge for peer-to-peer (P2P) lending, both in terms of gaining mainstream acceptance and increasing market share. The industry is expected to grow by another £1-1.5 billion in 2016, with an increased consolidation of platforms as the market matures. Funding Circle bought German platform Zancap in a trend that’s set to continue, as clear industry leaders emerge, such as SoFi and Lending Club in the US, and Zopa in the UK. Mainstream banks announced they would be officially referring customers to P2P lending sites in 2015. Warren Mead, Head of Alternative Finance for KPMG, told the Financial Times that 2016 may well be “the year in which peer-to-peer lending becomes mainstream – expect significant growth and continued investor appetite”.
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New saving opportunities with P2P
For UK residents, April 2016 will mark the arrival of the Innovative Finance ISA (IFISA), a new tax-free savings account designed especially for P2P, with a £15,240 limit. It’s predicted that the IFISA will start slowly, but will also bring new investors to the space. With returns from P2P investment much higher than any savings accounts – typically between 5% and 6%, it’s estimated that the number of investors could reach 500,000 in 2016. Crowdfunding’s reputation is growing and people are hungry for meaningful ways to invest their money. The typical investor entrusts between $7,000 and $15,000 USD (£5,000 – £8,000) each year.
China now stands as the largest P2P market in the world and saw an explosion of P2P lending platforms in 2015. However, with The China Banking Regulatory Commission (CBCR) announcing new regulations to take effect in 2016, aiming to “cleanse the market”, this growth is not expected to continue. The news is welcomed by many, with Asia viewed as the “Wild East” – lending still functions primarily within the family unit and though there has been a surge of P2P lending platforms springing up, without regulation many collapse and are open to fraud.
2015 saw Ratesetter join David Cameron on a trade and foreign policy mission to Asia. Rhydian Lewis, co-founder of the London-based P2P platform said, “these countries haven’t built out banking infrastructure, so there’s a massive opportunity for them to skip a generation, leapfrog, go online and adopt new forms of finance”.
Seeing how adaptable, visionary and cutting-edge P2P lending has proven itself to be, there’s no reason why 2016 won’t be its most interesting and exciting year yet. CompareLend.com is the world’s first comparator website, working to get the best out of the P2P lending opportunities for borrowers and lenders alike.