Peer to Peer Lending Market Expected to Reach $1701.2 Billion by 2032—Allied Market Research

According to a new report published by Allied Market Research, titled, “Peer to Peer Lending Market, By Business Model (Traditional Lending and Alternate Marketplace Lending), By Loan Type (Consumer Credit Loans, Small Business Loans, Student Loans, and Real Estate Loans), and By End User (Business and Personal): Global Opportunity Analysis and Industry Forecast, 2022-2032". The peer to peer lending market was valued at $152.98 billion in 2022, and is estimated to reach $1701.2 billion by 2032, growing at a CAGR of 27.5% from 2023 to 2032.

Peer to peer (P2P) lending, also referred to as marketplace lending, is a method of online debt financing, which allows creditors to lend varying sums of money to small businesses and individual borrowers. P2P lending transactions are not only economical for borrowers but also a profitable investment opportunity for retail lenders. The key objective of P2P lending is to boost the returns for lenders and to reduce the rate of interest for borrowers.

Furthermore, P2P lending attracts investors looking to grow their money. Unlike putting money in a savings account with low interest rates, P2P lending can offer higher returns. Investors can spread their money across multiple loans, which reduces their risk. When borrowers repay with interest, investors make a profit. This potential for better earnings draws more people into the P2P lending world, allowing them to potentially grow their savings faster than traditional options.

The lesser operating cost and low market risk associated with P2P lending is one of the primary drivers of the peer to peer lending market. P2P lending platform helps in reducing operational costs by decreasing the cost of physical branches, staffing, and maintenance of branches, thus augmenting the growth of the market. Furthermore, an increase in technological advancements in P2P lending platforms accelerates the peer to peer lending market growth. However, one significant factor hindering the growth of the peer to peer lending market is regulatory challenges. Many countries have struggled to create clear rules and protections for both borrowers and lenders in the P2P lending space, making it riskier and less attractive for potential participants.

Moreover, risk associated with peer to peer lending investing such as the higher risk of default limits the growth of the peer to peer lending market. On the contrary, increase in demand for alternative lending options is expected to provide lucrative growth opportunities to the peer to peer lending market trends in the upcoming years. Furthermore, technological innovations make peer to peer financing more attractive to both borrowers and lenders, opening avenues for growth in the peer to peer lending industry.

By business model, the traditional lending segment acquired a major share in 2022. This is attributed to rise in adoption of traditional peer to peer lending in developing nations and lack of availability of modern technologies. However, the alternate marketplace lending segment is the fastest-growing segment during the forecast period. This is attributed to the increase in digital data points & credit scores due to rapid deployment of online payments that encourage non-traditional lenders to assess credit risk.

Region-wise, North America dominated the market in 2022. This is attributed to different factors such as higher interest rates in traditional banking and an increase in loan rejection rates in small and medium-sized businesses. However, Asia-Pacific is considered to be the fastest-growing region during the forecast period. This is attributed to factors such as development in financial institutions, minimal lending regulations, and rise in number of crowd lending platform in the emerging countries such as India and Japan.

The COVID-19 pandemic had a negative impact on the peer to peer lending market size, owing to the fact that many borrowers faced financial uncertainty, leading to a decrease in loan demand. People were worried about their jobs and income, so they were less likely to borrow money through P2P lending platforms. However, lenders became more cautious, fearing that borrowers might not be able to repay their loans due to economic instability. This cautious approach led to a decrease in the supply of loans from P2P lenders. However, the COVID-19 pandemic also acted as a catalyst for the peer to peer lending market, owing to the low-interest-rate environment created by central banks in response to the economic downturn made P2P lending more attractive to investors seeking higher returns. As a result, the overall size of the P2P lending market was moderately impacted during the pandemic.     

Key Findings of the Study

• On the basis of business model, the traditional lending segment accounted for the highest peer to peer lending market share, in terms of revenue in 2022.
• On the basis of loan type, the small business loans segment attained the highest market share in 2022.
• On the basis of region, North America generated the highest revenue in 2022.  

The key players operating in the peer to peer lending market analysis include Funding Circle Limited, LendingClub Bank, SocietyOne, Harmoney Australia Pty Ltd, Linked Finance, Lending Loop, LendingTree, LLC, Prosper Funding LLC, Upstart Network, Inc., and goPeer. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.