What will P2P look like in 2023?
2022 was another transformative year for peer-to-peer lending. Rebrands, acquisitions, retail exits and regulation have characterised the year, upending the industry and leaving us with a brand new Big Three as we enter the new year.
So what new developments will the year ahead bring?
1. Rise in European P2P
The roll out of the European Crowdfunding Service Provider Regulation (ECSPR) has made European P2P lending a much more competitive space. The first few licences were handed out in 2022, with many more expected to follow in 2023.
This means that any P2P lender which is licenced to operate in one EU country will automatically be able to offer their services across the other P2P lender will be able to easily operate across the other 26 EU member states. ECSPR-licensed platforms will also be able to offer financing to borrowers in other countries, including the UK, which could place pressure on UK-based lenders.
2. Investors will seek out more alternative investments such as P2P
According to a recent survey by property lender Shojin, a third of UK retail investors are now more inclined to look beyond traditional investment assets amid concerns over the government’s economic policy.
Rising inflation and higher interest rates have made the search for yield much more challenging, and very few investment classes can offer the competitive returns, liquidity and diversification of P2P.
Furthermore, a recent study from European P2P platform Robo.cash concluded that interest in P2P is rising, and the British P2P lending market “remains a powerful financial segment”.
3. BTL property lending will rise
Invest and Fund has predicted that buy-to-let property lending will rise, in line with the trend for smaller property development projects.
“Is there a scenario where market entrants and smaller developers are also looking to build portfolios? We believe that may be the case,” said Invest and Fund in a recent blog.
Savills revealed that more than £5bn has been invested into the build to let private sector across 2022, citing rental income growth as the main driver. This trend is expected to continue in 2023 as the rental market continues to be an attractive prospect for property investors, amid declining property sales prices.
4. More consolidation
Towards the end of 2022, fintech merger and acquisition (M&A) activity began to tick up after a few relatively quiet years. Goji was acquired by Euroclear, Lime Financial acquired LendingRobot, and Funding Options was acquired by Tide.
Fintech M&A activity petered out due to Covid, and many market watchers have speculated that consolidation would spike again once the pandemic was behind us. This appears to be happening.
If economic volatility continues in 2023, larger companies may spot fresh opportunities to break into new markets and to acquire new technologies via consolidation. Perhaps we will even see some P2P mergers, as smaller platforms seek to scale rapidly to fill the gaps left by major players such as Zopa, Funding Circle and Assetz Capital.
5. More events
2022 saw the tentative return of in-person events, most notably with the recent Peer2Peer Finance Awards. After two years of isolation and remote working, the return of real life meet-ups promises new networking opportunities, more inter-company discussions, and a higher profile for UK P2P.
Read more: FCA cancelled 201 authorisations in 2022