What is peer to peer lending and how does it work?

P2P lending platforms leverage machine learning algorithms to assess borrower creditworthiness, often approving loans for individuals with lower credit scores than traditional banks.

The average P2P loan size has increased from $13,000 in 2019 to over $18,000 in 2024, as platforms cater to a wider range of borrowing needs.

Institutional investors now account for over 60% of funding on major P2P platforms, blurring the line between traditional and alternative finance.

P2P lending has seen a surge in refinancing of student loans, with over $5 billion in student debt consolidated through these platforms in the past 3 years.

Regulatory sandbox initiatives have allowed P2P lending platforms to experiment with embedded insurance products, providing borrowers with additional protection against default.

The average interest rate for P2P personal loans has decreased from 12.5% in 2019 to under 10% in 2024, as competition among platforms intensifies.

Blockchain-based P2P lending platforms are emerging, leveraging distributed ledger technology to streamline loan origination and reduce operational costs.

P2P lending platforms are expanding into small business financing, with over $2 billion in loans issued to SMEs in 2023, often at more favorable terms than traditional bank loans.

The COVID-19 pandemic led to a temporary spike in default rates on P2P loans, but platforms have since implemented more robust risk management practices to mitigate such disruptions.

Several P2P lending platforms have integrated with digital banking apps, allowing users to seamlessly access and manage their P2P investments alongside their traditional banking activities.

Regulators in several countries have introduced specific guidelines and licensing requirements for P2P lending platforms, aiming to protect investors and borrowers while fostering innovation in the sector.

The growing popularity of P2P lending has sparked interest in the development of secondary markets, where investors can trade existing loans, providing additional liquidity and investment opportunities.