Value Nomad

February 22, 2020

A Fresh Start for the P2P Lending Market in 2020

Let’s take a look at how a fresh start for the P2P lending market will influence 2020 and beyond.

The peer-to-peer lending market has come a long way. A fresh start for the P2P lending market is on its way, proving that it can not only fill key financial gaps but also disrupt the financial industry.

fresh start p2p lending

Despite the impressive gains, the P2P lending market has also seen its fair share of failures. The dramatic collapse of the P2P platform Lendy in May and Funding Secure in October 2019 raised serious questions.

Both platforms specialized in crowdfunded real estate development loans, with Funding Secure also offering pawn-broking style loans secured using valuable items.

In the aftermath of their collapse, questions have been raised as to how to protect retail clients. Many industry stakeholders are calling for a ban on non-advised P2P investments.

Potential P2P Industry Changes in 2020

The failure and collapse of firms are only natural. Poorly managed companies fall giving way to nimbler competitors. The P2P industry is no different.

Thurs, the collapse of Lendy and Funding Secure brought more attention to the P2P lending industry. It also showed the importance of the underlying asset classes that underpin the peer loans.

A closer examination of the industry and models that P2P platforms use could help improve understanding of what peer-to-peer lending is, and how it works.

P2P investors must look under the hood to understand what they’re investing in, and where their money is really going.

There’s also a need for greater investor education to empower them to make better decisions.

The Financial Conduct Authority, in a bid to curb loss of investor funds, introduced investor protection regulations. The rules prohibit investors from investing more than 10% of their assets in P2P investments without financial advice.

It’s a move that has been well received by the industry. Some players urge the watchdog to expand the restriction to all non-advised sales.

Towards a More Transparent P2P Lending Market

According to industry experts, the FCA is helping build a more robust P2P lending industry by strengthening the rules. Platforms and providers must now be more transparent about their historic performances, loan book, and overall financial situation. They must also put in place measures to manage risk and valuations.

An increasingly transparent P2P lending space is also attracting financial advisers. They yearn to understand the sector, understand risks and rewards and the industry’s ability to solve real client problems.

Additionally, they are interested in the quality of underlying loans, collateral, and the screening processes used in qualifying loans.

Overall, a rocky 2019 might just be the catalyst for a more vibrant P2P lending market in 2020 and beyond.

Crowd Investing Resources

Looking for investing options? You might want to read some of our crowd investing and peer to peer lending reviews. There are many peer to peer lending and investing platforms currently available, and you can diversify your interest income by using several of them simultaneously.

Check out our posts on the best peer 2 peer lending platforms in Europe, and theĀ best real estate crowdfunding platforms in Europe.

Are you already investing in a peer to peer lending platform? Leave your thoughts and questions about your experiences below.

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