US Peer-to-Peer (P2P) Lending Market: A Sector Snapshot

The LTP research team has come up with another crisp three-page sector snapshot on the US P2P lending market based on research and insights collected on the P2P lending market and the participating players.

In the financial services industry, the P2P segment emerged first in 2005, focusing on lending and borrowing. P2P lending platforms, also known as marketplace lending platforms, offered an alternative to traditional banking and payment systems since they cater to the underserved with services like consumer lending, student loans, real estate and small-business lending products. While these online providers create a marketplace for lenders and borrowers, lenders can expect a higher rate of return on their investments compared with traditional bank deposits. Borrowers who are unable to qualify for loans from banks turn to these alternatives to obtain credit—possibly at a lower interest rate than they would have received from their bank, based on their respective credit profiles.

The historic growth of P2P lending in the US shows that it will become one of the top growing segments in the financial services industry. US P2P platforms issued loans worth $889 million in 2012, $2.9 billion in 2013 and $6.6 billion in 2014. By 2025, P2P lending in the US is expected to reach $350 billion, according to the report.

Unlike banking platforms, Web-based platforms—which connect borrowers with investors—are not burdened by the internal infrastructure, regulation and bureaucracy. This enables them to offer competitive interest rates to borrowers.

P2P lending offers fund managers a diversified portfolio with consistent, monthly returns which are not correlated to the stock market or fixed income markets.

The US P2P lending market is dominated by two major players: Lending Club and Prosper. In 2012, Lending Club and Prosper issued new loans worth $871 million out of the total $889 million in loans. In 2013, these two companies issued loans worth $2.4 billion out of the total $2.9 billion in P2P loans in the US. In 2014, Lending Club had a market share of 64%. It issued approximately $4.6 billion in new loans in 2014, whereas Prosper issued approximately $1.6 billion in loans in 2014.

According to the recent trend, banks and FIs are also entering online lending services by way of partnerships with established and emerging lending platforms. The lending market is gathering increased interest from established financial institutions.

Table of Contents:

1. P2P Lending Forecasts in the US, 2012-2025

2. Addressable Market for US P2P Lending

3. Market Share of Players in US P2P Lending

4. Market Trends in US P2P Lending

5. Technology Trends in US P2P Lending

6. Consumer Trends in US P2P Lending

7. Regulations in US P2P Lending