P2P loan market predictions for 2021
2020 was quite a year. No one could have predicted that. However, that’s not going to stop us from making peer-to-peer market predictions for 2021. The global peer-to-peer lending market grew at a CAGR (compound annual growth rate) of around 25% during 2014-2019. From this point forward, the global P2P market is expected to continue its strong growth during the next five years. Based on our experience, here’s what we think this year will have in store for the P2P lending sector.
What is peer-to-peer lending?
Peer-to-peer, or P2P lending, is a monetary arrangement between two entities without various financial institutions’ involvement. It involves loan originators (micro-financial institutions) and investors seeking higher ROI. The transactions occur through a P2P lending platform, such as Esketit, that acts as an intermediary and risk mitigator between the two parties. Compared to the traditionally used financing alternatives, P2P lending is quick, paperless, offers higher returns, does not impact the credit score, and is more flexible.
New platforms are joining the market
Now that we’ve mentioned Esketit, let’s take a closer look. Esketit is seemingly a newcomer to the P2P world. However, its main partner is Creamfinance Group, an already established and respected name in the personal loan market with its 2019 revenue reaching $70M.
The founders of Creamfinance Group, Davis Barons and Matiss Ansviesulis, are among the most successful Latvian entrepreneurs in the segment. They’re also among the Group’s shareholders. Creamfinance Group has been profitable since its commencement back in 2012.
A rising global debt crisis presents a significant opportunity for alternative lenders, while the low-interest-rate setting will prompt more investors to seek out non-bank returns. Add in a row of recent platform closures all over Europe and Asia, and there is clear room in the market for a few bright newcomers.
European P2P market will recover by Q4 2021
Analysts of the European P2P lending platforms forecast that the market will fully recover by Q4 2021 and hit EUR6.2 bn under a neutral scenario. Researchers analyzed the volume of loans funded through P2P platforms in the past five years and proposed a possible market development outline. It suggests that the segment went through its lowest point in Q2 of 2020, which corresponds with the peak of the pandemic, and the market will be recovering gradually in 2021.
There will be more consolidation
With numerous high-profile mergers and acquisitions in the P2P space, market consolidation finally started happening in 2020. We see this trend extending as platforms increasingly prioritize secure funding lines and scalability.
All in all, the year 2021 is beginning to look a lot brighter when it comes to the private loan market. P2P lending is not without its issues. If you invest via the wrong platforms or don’t diversify correctly and only choose high-risk loans, your returns could be in the red. If investors, such as yourself, diversify correctly by spreading their money across several trusted loan originators, countries, and products, peer-to-peer lending can be a very positive investment vessel. Some companies are hard to understand and have a higher investment learning curve; however, Esketit has been developed to make this process easy for investors of all levels. With its main partner’s Creamfinance Group’s success in mind, we can be sure this is a serious new player in the P2P lending arena.