It was a bumpy ride for peer-to-peer (P2P) lending in 2020. How did the sector handle the biggest economic shock it has ever faced and what was the impact of Covid on P2P Lending? Which platforms did lose the most and which gained ground? We reflect on last year’s extraordinary events and the story in eight charts, based on numbers reported by platforms to P2PMarketData dating back to 2016.
About the P2PMarketData numbers
At P2PMarketData, we track the monthly funding volumes of real estate crowdfunding, peer-to-peer & online marketplace lending platforms. Please note that:
- We currently track data from 84 participating platforms, including originations operating in 27 markets and with 12 different currencies.
- The statistics exclude some prominent platforms such as Lending Club, Funding Circle, Credimi and Prosper, which do not accept individual investors and remain open only for institutional and corporate investors.
- None of the numbers cited is an estimation – the amounts are reported directly to us or pulled from the platforms’ publicly available loan books and statistic pages.
- However, we have converted all amounts to EUR for comparison reasons, using exchange rates from January 1, 2021.
Peer-to-Peer Lending Market Development during Covid
Here are the key highlights of 2020 wrapped in data.
Chart 1. Annual funding volumes, 2016-2020 (billion €)
We recorded a total funding volume of €5.1 billion in 2020. This included:
- €3.2 billion funded in the main tracked currency – EUR;
- £1.2 billion (approx. €1.3 billion) funded in GBP; and
- €595 million worth of loans financed in other currencies.
Across all currencies, the volumes were much lower than in 2019. However, funding in GBP and other currencies declined much more drastically, dropping below 2016 and 2018 levels, respectively. Total recorded funding remained on a decent level mainly thanks to a relatively better performance of the biggest market we track – the EUR market.
Chart 2. YoY funding volume growth, 2017-2020 (%)
The sustained good performance of the EUR market is visible even better in this chart. It grew at a very impressive rate in 2017-19 and declined the least in 2020. In comparison, the growth of the British P2P lending in 2017-19 was more modest, and its drop in 2020 steeper.
Chart 3. Total monthly funding volumes, 2020 (million €)
Here, we can clearly see when the market slumped. As the first wave of COVID-19 hit and lockdowns were administered, we saw probably the largest retreat from P2P lending assets in the sector’s short history. At the lowest lows in April, the funding volume was less than a third of that recorded in January. The good news is that lenders and borrowers have been returning, albeit slowly, and even the subsequent COVID and lockdown waves did not alter funding volumes drastically. By the end of the year, monthly funding volume was already almost two-thirds of that at the beginning of the year.
Chart 4. Total funding shares by currency, 2020 (%)
Continental European market is dominated by Mintos (36% market share in 2020) but open to many platforms with significant market shares. The top three European platforms accounted for 52% of the total funding volumes in EUR, leaving a relatively big piece of cake for smaller competitors. In comparison, the top three British platforms in our dataset account for 89% of the funding volumes in GBP, and the market leader – Zopa, funds over half of all loans. However, since we lack data from the largest real estate crowdfunding (LentInvest) and business lending platforms (Funding Circle), the market concentration is likely to be lower in the whole UK market.
Chart 5. Total funding shares by financing type, 2020 (%)
Looking at market shares across the four main financing types we track, we can spot a couple of interesting insights:
- Personal lending is dominated by the largest UK-based platforms – Zopa and RateSetter.
- Large international European platforms, on the other hand, specialise in marketplace lending, i.e., they aggregate loans from multiple loan originators. Mintos alone accounted for more than two-thirds of all investments in 2020.
- Swiss platform CreditGate24 is the largest player in the business lending category, although they also offer real estate and personal loans. October remains the most popular international and strictly SME-focused platform.
- Real estate lending is the most dispersed market, according to our data. In particular, there are plenty of smaller “national” platforms focused on specific real estate markets.
Chart 6. Ten platforms with the highest funding volumes, 2020 (million €)
Mintos was an undisputed leader in 2020, funding more than twice as much as the second-largest platform – Zopa. Continental Europe dominated this sphere too – six out of ten highest-funding platforms operated in EUR, two (ZOPA and RateSetter) in GBP, one in USD (Sharestates) and one in CHF (CreditGate24).
Chart 7. Ten fastest-growing platforms, 2019-2020 (%)*
Chart 7 beautifully shows where the investor sentiment lay in 2020:
- Investors preferred low-risk, low-return investments. Nine out of the ten fastest-growing platforms offered average returns below 10% and many closer to 5%. A retreat to safe assets is a natural move when uncertainty and crisis kick in.
- Investors chose “national” platforms. Nine out of ten platforms above are focused on a specific market, be it Italy (BorsadelCredito and Soisy), France (WeShareBonds and Raizers), Sweden (Kameo), the UK (Blendnetwork and Loanpad) and Germany and Austria (Rendity), and most are available in only one language. This is somewhat more surprising and might be a sign of investment patriotism and/or distrust towards international markets in a time of crisis. Or maybe investors simply preferred better-regulated and “robust” platforms over international loan originator aggregators, which tend to offer relatively high-risk microloans.
- Business and property lending thrived. All the above platforms had exposure to business loans, real estate or both. None of the consumer lending platforms made the list, despite having the largest shares in P2P lending in “normal” times.
Chart 8. Ten most declining platforms, 2019-2020 (%)*
It was an adventurous year for peer-to-peer finance, just as for many economies, sectors, firms and individuals. The COVID crisis was the first massive stress test for the sector. A previous universal big shock – the financial crisis of 2008-2009, did almost not affect peer-to-peer finance at all as it was still in its infancy with only a few fast-growing platforms.
Has the sector passed the stress test, though? After a big drop in spring 2020, the investment volumes have been recovering – a sign that investor trust has not suffered over the long term. Few platforms faced serious risks of collapse, and some even contributed to mitigating the adverse effects of lockdowns by distributing the governmental relief funds to SMEs. In the UK, for instance, Funding Circle has been the 5th largest Coronavirus Business Interruption Loan Scheme (CBILS) lender, having distributed roughly 20% of all loan volume approved by the British government. The pivotal role of SME-focused platforms has also been realised in the EU – the European Commission is working on a referral scheme, which will require banks to direct SMEs, whose credit application they have turned down, to providers of alternative funding.
Finally, 2020 also brought about some significant shifts in the market structure. Continental Europe strengthened its leading position, especially in contrast to the declining UK market. Many investors moved away from big international consumer lending sites to more specialised real estate and business financing platforms. A shift to safer P2P assets was also profound. Will these trends continue or reverse as uncertainty and recession diminish? We will keep our hands on the pulse and continue tracking key developments. The best way to stay tuned is to follow our monthly funding reports – the last one, which looks into data from March 2021, is available here.