Banks account for a quarter of P2P lending
Around a quarter of peer-to-peer loans are now funded by institutional investors, including traditional banks and government through organisations such as the British Business Bank.
A report by the University of Cambridge and Nesta shows that for business lending, 26% of total funding in 2015 could be attributed to institutional funding.
Peer-to-peer real estate lending recorded 25% of institutional funding with quarterly percentages increasing from 22% in Q1 and Q2 to 23% in Q3 to 31% in Q4.
The level of institutional funding for peer-to-peer consumer lenders has 'increased sizeably' over 2015, according to the report.
Funding stood at 17% in Q1, increasing to 30% in Q2 and remained at 38% throughout both Q3 and Q4. There are "clear signs that institutionalisation is a growing trend which is expected to continue in 2016", according to Nesta.
By way of comparison, the level of institutional funding in equity-based crowdfunding is still relatively low at only 8% for 2015 overall.
Stian Westlake from Nesta said:
“Banks can learn about both cost-effective loan origination and data-driven due diligence from the P2P platforms. I think most of the banks are sniffing around for acquisitions.”
The report also revealed that the peer-to-peer business lending sector almost doubled over the same period, growing from £749 million in 2014 to £1.49 billion in 2015.
Whilst the year-on-year growth rate of 99% is slower than the 288% jump between 2013 to 2014, this is expected as the market levels and fewer new entrants join the market, according to the report.
The largest segment of the peer-to-peer business lending market is for real estate mortgages and property development, which accounted for £609 million in 2015, around 41% of the total volume of peer-to-peer business loans.
In a similar fashion to peer-to-peer business lending, the peer-to-peer consumer lending market continues to grow, albeit at a slightly slower year-on-year growth rate of 66%. In total, £909 million worth of loans were facilitated through peer-to-peer consumer lending platforms in 2015, providing consumer credit to more than 213,000 individual borrowers.
Overall, the UK online alternative finance sector grew by 84% in 2015, facilitating £3.2 billion in investments, loans and donations.
While the market is increasing in volume, growth of the online alternative finance market is slowing down, with the annual growth in 2014/2015 being nearly half the 161% growth from 2013/14.