Peer-to-peer (P2P) lending or crowdlending/-funding is a new way of borrowing and lending money without any middleman. P2P-platforms operating online connect those who need the money with those who are ready to lend money. No bank is needed in this process.
Borrowers can be either individuals or companies, and there can be tens or even hundreds of individual lenders contributing to one single loan. Crowdfunding is easier to get than traditional bank loans, which makes it an easy option for startups. P2P-lending is also more flexible, less time-consuming and often a cheaper alternative compared to traditional business loans that banks are offering.
P2P-lending has become very popular in recent years
The first online P2P-lending platform, the UK’s Zopa, was launched in 2004. However, P2P-lending did not become mainstream investment option until few years ago. As we can see from the graph below, crowdlending has grown steadily during the last 5 years in Finland. At a global scale, P2P-lending did not achieve (early) mainstream adoption until in the 2010s.
P2P-lending in Europe
Europe is one of the pioneers in the P2P-sector. The first P2P-platform was launched in UK, which has been the market leader in Europe ever since. In 2017, the UK represented 68% of the overall market volume. In Continental Europe, France and Germany were the two biggest players in P2P lending space. As a small country with a population of only 5.5 million, Finland was doing relatively well compared to the bigger European countries.
Baltic countries, especially Latvia are growing fast in the European P2P-lending scene: their favourable regulation and entrepreneurial mindset has produced some decent results. However, most of the investments in Baltic P2P-platforms come from international investors and loans.
In general, there are many platforms in European P2P-markets to choose from. Mintos, a Latvian P2P-platform is the largest and most popular P2P-lending platform in Europe and it’s growing fast.
P2P-lending in Finland growing
In 2019, there are 4 different P2P-platforms that are operating from Finland: Bondora, Fixura, Fellow Finance and Fundedbyme. Fellow finance provides consumer loans also in Germany, Sweden, Denmark and Poland being the leading P2P-platform in Nordic countries.
According to P2PMarketData, Finland was the leading Nordic country in P2P-crowdfunding in 2017. Sweden was pretty close, but Denmark and Norway were far away. When it comes to geographical regions, the Nordics beat Benelux countries, Italy, Baltic countries and other big regions in volume. Rankings have probably changed after 2017, but this gives an idea about the P2P-lending scene in Europe.
In Finland, P2P-lending has become a popular way to borrow and lend money. According to Finlands Bank, in total of 150,1 million Euros was borrowed in P2P consumer loans in 2018. The number was 40 % higher than year before that (2017), so the growth of P2P consumer loans has been quite strong.
However, borrowing money via P2P consumer loans is not that popular among Finnish families; P2P consumer loans cover only 1% of the total household consumer credit.
Joonas Saloranta covers Northern Europe investing, macroeconomics and more at the Financial Nordic blog.
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