People have been lending and borrowing from each other for centuries – it’s nothing new. But the power of the internet changed the world of lending and borrowing forever when peer-to-peer (P2P) lending went online in the mid-2000s – it was a game-changer!
Fifteen years on, the principles behind P2P are essentially the same: matching people who have the cash to lend and looking for a good return with people wanting to borrow, but external influences are driving change, and the industry is evolving. It’s going mainstream.
Banks, no thanks
After the 2008 global financial crisis, P2P lending gathered pace as small businesses found it increasingly difficult to secure loans from banks, and regulations increased capital costs for the banks themselves. Peer-to-peer lenders, operating by different rules and regulations, offered a solution to those underserved by traditional lending institutions; by using technology to match borrowers with individuals or companies who wanted to lend, these ‘non-banks’ gained a major foothold in the market.
“When we set up the business, one of our first clients’ was a peer-to-peer lender,” says Chris Notley, Managing Director at Chamberlain. “It was exciting to be part of the future, to find specialists for this newly launched innovative company. We’ve been a recruitment partner to many P2P lenders since.”
A crisis can truly test a sector’s resilience – the uncertainty of Brexit followed by a shrinking economy in the wake of Covid has certainly taken its toll. As a result, P2P lending companies have been faced with nervous investors wanting to withdraw funds but unable to access them due to the effects of the pandemic on borrowers. This has led to the collapse of major lending platforms and a slowdown in sector growth.
But out of crisis comes opportunity, and this economic downturn has boosted merger and acquisition activity in the P2P sector. Banks have seized the opportunity to acquire platforms and use the technology and efficient lending capabilities to drive their growth in lending. This has resulted in a shift in attitude as P2P lenders’ work with banks rather than against them. This trend is likely to continue as platforms prioritise secure funding lines and scalability.
P2P: a lifeline
With uncomplicated processes and quicker approval times, P2P is likely to remain in high demand. And at a time when the UK is facing a looming debt crisis, investors will likely seek out more favourable non-bank returns, presenting a major opportunity for P2P lenders. And these lenders in the alternative and challenger space will fill the funding gap between what banks are prepared to lend and the demand from small businesses.
And the swathe of platform closures? We’ll watch with interest as newcomers enter the market and the industry continues to evolve.
As specialists working with banks and other forms of lenders covering a wide range of disciplines throughout the UK, it makes us the obvious choice as a recruitment partner. We specialise in attracting banking and finance talent for sales, product, risk, operations, relationship management and compliance.
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