 | Peer-to-peer lending has been developing incredibly fast in the last few years across the world. In particular, hot areas for this new forms of debt finance are currently the US, the UK and China, where the markets have reached very relevant figures ($10 billion, $ 2 billion and $16 billion worth of loans respectively). |
But the speed of growth is not the only factor shared by peer-to peer lending in these areas. Reasons behind its rapid development are mainly the increasing difficulties for SMEs and individuals in accessing bank loans. Online P2P finance, connecting directly borrowers with lenders are providing very competitive terms and interest rates proving an easy and more accessible alternative solution to many businesses in need of capital.
However, P2P lending’s innovative disruptiveness has posed several challenges to both Eastern and Western markets, the main being how to provide adequate protection to consumers. The approach taken with this regard differs from country to country. In the UK the local authority has consulted the relevant stakeholders in order to build an ad-hoc regulation and increase transparency. This model was also adopted by other European Countries. Now, the UK financial authority is busy finding a way to protect retail investors from another risk: being squeezed out by institutional investors that are increasing their presence in P2P loans. Rumors are that a rule on this issue may be expected soon. The US, instead, has framed P2P lending within the existing legal framework for securities, leaving the players to find adequate solutions to adapt to it. The situations is again different in China, where the market has got very crowded in a short time, developing in a grey area, that allows each portal to play its own rules. As a consequence many portals shut down, also due to fraudulent behavior in some cases. Given the roaring numbers of the Chinese P2P market and the many shut downs of operating platforms occurred in the last recent years, the local authorities have finally decided to intervene and a legislation for the market is on their table.
Consumer protection is only one of the many challenges for P2P lending. The work to be done for this market to become a fully transparent, established market is still long,but it’s good to see that Eastern and Western countries are taking actions - each at its own speed and with its own modalities - to help achieve this.
However, P2P lending’s innovative disruptiveness has posed several challenges to both Eastern and Western markets, the main being how to provide adequate protection to consumers. The approach taken with this regard differs from country to country. In the UK the local authority has consulted the relevant stakeholders in order to build an ad-hoc regulation and increase transparency. This model was also adopted by other European Countries. Now, the UK financial authority is busy finding a way to protect retail investors from another risk: being squeezed out by institutional investors that are increasing their presence in P2P loans. Rumors are that a rule on this issue may be expected soon. The US, instead, has framed P2P lending within the existing legal framework for securities, leaving the players to find adequate solutions to adapt to it. The situations is again different in China, where the market has got very crowded in a short time, developing in a grey area, that allows each portal to play its own rules. As a consequence many portals shut down, also due to fraudulent behavior in some cases. Given the roaring numbers of the Chinese P2P market and the many shut downs of operating platforms occurred in the last recent years, the local authorities have finally decided to intervene and a legislation for the market is on their table.
Consumer protection is only one of the many challenges for P2P lending. The work to be done for this market to become a fully transparent, established market is still long,but it’s good to see that Eastern and Western countries are taking actions - each at its own speed and with its own modalities - to help achieve this.
 | About the author - Irene Tordera Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives. During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem. |
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