European P2P sector forecast to become more competitive
The European peer-to-peer lending market is set to become increasingly competitive over the next year thanks to “the growth of promising platforms”, analysts have suggested.
European platform Robo.cash assessed the competitiveness of the European P2P sector using the reverse Herfindahl-Hirschman index (HHI).
The HHI is a common measure of market concentration of an industry – the size of firms in relation to the industry they are in – and is used to determine market competitiveness.
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If the value of HHI (reverse) is greater than 8,500, then the market is considered highly competitive, if the HHI is less than 7,500, then the market is considered highly concentrated (or a monopoly).
Robo.cash said that the industry is experiencing high concentration around key players that occupy more than half of the market.
This is confirmed by the data, Robo.cash said, which showed that the average HHI (reverse) from the beginning of 2017 to May 2023 amounts to 7,095 points.
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“At some point, the activity of the industry leaders led to a decrease in the index and an increase in their monopoly power,” said Robo.cash analysts.
“But the P2P market, like others, is subject to various external events. With the Covid-19 [pandemic], market volumes declined and the HHI (reverse) rose, thereby opening the doors to future competition.”
The analysts predict that competition in the market will increase in 2024, as “the growth of promising platforms will lead to a decrease in the leader’s market share.”
The European P2P sector is going through the next stage of its evolution, thanks to the introduction of new pan-EU crowdfunding rules. The European Crowdfunding Service Providers Regulation (ECSPR) aims to harmonise the industry across the bloc, making it easier for platforms to expand geographically and attract new customers.