Peer-to-peer lending platforms have become a ready alternative to traditional bank loans, offering quick access to cash at favourable rates. Lending money with just a click of the mouse, without visiting a bank manager, has made this method of raising cash appealing to consumers.
The number of loans in the consumer peer-to-peer lending market is expected to hit 31m this year, growing by 10.5% year-on-year, according to data gathered by LearnBonds.com. The number of consumer peer-to-peer loans is forecast to hit 36.6 million worldwide, over the next three years.
Covering large expenses and existing debts
Peer-to-peer lending works differently to a loan from a bank or credit union. These platforms use complex algorithms that crunch a mix of data, ranging from credit scores to social media activity, to directly connect borrowers to lenders.
This type of online lending is primarily focused on borrowers looking to refinance existing debt at a lower rate. But these loans are also used to cover large expenses such as medical bills, home repairs, or student debts.
The value of the consumer peer-to-peer lending is set to reach $93.5bn this year, growing by 8.4 % compared to 12 months ago, revealed the Statista Marketplace Lending Survey. This data indicates the overall market is expected to reach $100.4bn value by 2023, a jump of 40% compared to 2017.
The number of people using this type of loans has also increased in recent years. In 2017, more than 24.5 million people globally used peer-to-peer loans to finance expenses. This number is set to lift by 35% in 2023.
The average size of a consumer peer-to-peer loan hit a peak last year, reaching $3,077. However, data forecasts this will be a high point, with individual loans sliding in value from $3,017 in 2020 to $2,743 by 2023, largely due to changes in the Chinese market.
China, US, and UK as the leading players on the market
As the largest single market in the global fintech industry, China also holds the most significant share of the consumer peer-to-peer lending market. Data estimates that personal peer-to-peer loans in the country are set to reach $64bn this year, which by comparison is less than three times the size of Chinese business peer-to-peer market.
However, due to the increased government regulation, which exposed a large number of frauds, China is likely to see more peer-to-peer companies shutdown this year. In 2019, the number of peer-to-peer lending platforms fell to 343, or nearly eight times less than the 2016 figures.
China’s central Shanxi province shut 26 peer-to-peer platforms last year, while its remaining 15 lenders all failed to meet industry standards and must exit the market before June. Although the country is faced with a peer-to-peer lending crisis, the demand for online loans in China is still huge.
With a $24.7bn value, the US ranked as the second-largest consumer peer-to-peer lending market in the world.
The UK’s consumer peer-to-peer industry is the third-largest in the world, forecast to hit $1.8bn value this year. Germany and France, as the fourth and fifth market globally, are both expected to reach around $240 market value this year.