Over the last decade, business peer-to-peer lending, also known as crowdlending, has become an appealing alternative financial source for many European companies. Although lending platforms are not immune to the disruption caused by the pandemic, the latest data show that P2P investments may be unrelated to the stock market slides caused by the coronavirus outbreak.
The UK largest peer-to-peer lender Funding Circle has reported a significant increase in searches for business loans since the start of coronavirus pandemic, and a huge number of European P2P investors continue to invest without making changes to their portfolios.
According to data gathered by Finanso.se, the entire European business P2P lending industry is forecast to maintain its growth this year, rising 12.2% year-on-year, and reaching $6.5bn transaction value.
Transaction Value Increased 75% in Three Years
The rise of the global peer-to-peer lending industry started during the 2008 financial crisis when banks cut back on loans to individuals and small firms, fearing defaults. It set the groundwork for modern peer-to-peer platforms, which have become one of the fastest-growing sectors in the financial industry. Instead of borrowing from a single source, companies were given the ability to lend directly from tens or even hundreds of individuals.
By using sophisticated computer algorithms to make lending decisions, P2P platforms removed the banks from the equation and connected borrowers directly to lenders. For investors, this new type of arrangement meant up to three or four times the rate of return compared to traditional brick-and-mortar savings accounts.
In 2017, the European business P2P lending market reached $3.6bn worth, revealed the Statista survey. In the next three years, the transaction value of the unified market grew by more than 75%. Statistics indicate the steady growth is set to continue in the following years, with the European business P2P lending industry hitting $7.1bn worth by 2023, or nearly double the 2017 figures.
The United Kingdom is the Leading European P2P Lending Market
Statistics show recent years have also witnessed a steady growth in the number of successfully funded alternative loans in the business segment, increasing from more than 63,000 in 2017 to 71,600 in 2020.
Also, the average funding per loan rose by nearly 50% in the last three years, jumping from almost $58,000 in 2017 to over $86,000 this year. Analyzed by geography, the United Kingdom represents the leading European P2P lending market expected to reach $2.6bn transaction value this year. Switzerland follows with $1.4 bn worth P2P business loans.