How does Australia’s marketplace lending stack up globally?

Australia has long lagged behind the UK when it comes to adopting the latest innovations in marketplace lending (also referred to as peer-to-peer or P2P lending).

While the UK has reaped the benefits of P2P lending since 2005, the Australian market was still in its infancy as little as a decade ago.

This is all rapidly changing, however, with the Australian marketplace lending sector expected to post strong growth in years to come, bringing benefits to both borrowers and investors.

Given its success in the UK, marketplace lending could have a transformative impact on financial services in Australia.

This is particularly the case with specialised platforms like CrowdProperty, which leverages sector expertise to unearth opportunities for investors in the property market beyond traditional avenues.

The state of marketplace lending internationally

Marketplace lending is a new form of financial intermediation made possible by internet-driven innovations. Instead of channelling funds via a financial intermediary like a bank, marketplace lenders efficiently match investors and borrowers using online platforms.

The marketplace lending sector has seen thriving growth since the turn of the century, with a large number of P2P platforms springing up around the globe.

The technology first made its debut in the UK, with the launch of P2P lender Zopa in February 2005. Zopa was swiftly followed by a slew of other platforms such as Funding Circle, a P2P business lender founded in August 2010.

The UK was quick to embrace P2P lending, to the point of even employing it as a channel for government policy.

In 2012 the UK government provided funds worth £20 million to Funding Circle to support British small businesses. This was followed by another £40 million investment in 2014. The UK government’s British Business Investments committed £15m to CrowdProperty UK in April 2023 to help increase access to finance for small and medium-sized housing developers and support more housebuilding.

As a consequence, the UK has become home to one of the world’s most advanced and thriving P2P markets.

A report from easyMoney estimates that the UK P2P market grew a stunning 1600 per cent during the nine years from 2013 to 2022 to reach £370.7m in total.

The fortunes of the marketplace lending and P2P sector have been more ambivalent in other parts of the world, due to problems with fraud and regulatory concerns.

The US was quick to embrace P2P lending, with the emergence of leading platforms such as Prosper and Lending Club shortly following Zopa’s debut.

These companies have fallen well short of the stellar ambitions of their founders. Lending Club has seen its value plunge from $9 billion when it went public in 2014, to just $350 million by the start of the 2020s.

China initially adopted a laissez-faire attitude towards the P2P sector, leading to its flourishing growth in the first half of the last decade. However, widespread fraud led to a harsh crackdown by regulators, culminating in the complete collapse of the Chinese P2P market by 2018.

Analysts nonetheless expect the global P2P lending market to still have a very promising future.

Research and Markets estimates that the global P2P market stood at US$147.9 billion in 2022, and will more than quadruple over the next five years to reach US$626.5 billion by 2028.