IFGS 2019 Trending Topics: The P2P industry in 2019 – Blend Network’s top predictions for what to expect over the next calendar year
By Roxana Mohammadian-Molina, Chief Strategy Officer, Blend Network
These are the key themes and trends we think we’ll see in the P2P industry in 2019:
- Regulation. In its recent regulatory review of P2P lending, the FCA has announced a new consultation as it looks to firm up compliance for UK online lenders. The new consultation promises to be a positive step forward for P2P lenders (e.g. implementation of appropriateness tests, which Blend Network already has in place). We believe these measures will have a significant impact on the P2P industry, particularly on the way that loan risks and platform business models are assessed.
- More private money into peer-to-peer. A recent report showed that a quarter of high net worth investors are allocating at least one fifth of their wealth into alternative assets such as P2P lending as it helps them diversify their portfolios and enhance returns. At Blend Network we’ve seen that private investors – those who lend £1,000 to £3,000 on each loan - are also increasingly allocating part of their investment portfolio to P2P lending as this allows them to co-invest in the same deals with very sophisticated investors. We believe this trend will gain momentum in 2019.
- Growth momentum pick-up in 2019. The UK’s alternative finance sector saw strong growth in 2017. This growth momentum has continued in 2018 and we believe will extend into 2019. Peer-to-peer business lending volumes soared by two thirds year-on-year to surpass £2bn in 2017, according to the Cambridge Centre for Alternative Finance. Transaction volumes across – both debt and equity – grew by 35% year-on-year to £6.2bn in 2017. We believe this trend will gain momentum in 2019.
- Part of the ecosystem. P2P business lending made up 29.2% of all new bank loans to small businesses in 2017, according to the Cambridge Centre for Alternative Finance. P2P lending is increasingly becoming part of the UK’s mainstream financial ecosystem; less alternative and more a mainstream. It is opening up a huge, previously inaccessible pool of returns for everyday investors and a competitive alternative to bank finance for consumer and business borrowers. We see an increasing collaboration between traditional banks and alternative lending platforms; this is reflected in the success of the Bank Referral Scheme.
- Move towards specialisation. We believe we will see more platforms focusing on niche markets and offering very specialised products like we do at Blend Network. At Blend Network, we are specialists: we offer property-secured loans with first charge on assets in niche markets outside the M25 and preferably across the North of the UK – this is where we believe there are the greatest opportunities at the moment. We believe 2019 will see more specialist platforms and a trend towards specialisation.
- More government support for the FinTech industry. We believe the government has done a great job by supporting the FinTech sector in the UK in order to place the UK at the heart of global FinTech. Blend Network was recently selected by the Mayor of London’s TechInvest as one of the UK’s top-ten FinTech companies and offered the chance to participate in a Business Growth Programme funded by the Mayor’s office and the European Union. We believe this trend will gain momentum in 2019.