How do the US and UK Peer-To-Peer (P2P) Markets Compare?
Peter Behrens, Co-Founder of RateSetter, the UK’s largest P2P platform has kindly provided a guest blog on the UK and US P2P markets.
Lending Club’s recent announcement of its intention to launch an IPO shone a global spotlight on peer-to-peer (P2P) lending. It has also led some commentators to compare the UK and US markets – which are the leaders in modern finance’s most compelling growth industry.
I will be hosting a hopefully lively session on what we can learn from our US cousins at the Peer to Peer Lending & Investment Briefing on 15th October. I thought in advance it would be a good idea to outline what I perceive to be the key difference between the two countries.
Differences between the US and UK P2P Markets
- Essentially, the US P2P platforms are innovating on the borrower side, whilst we are innovating on the saver side.
- Banks in the US typically offer mortgages, credit cards and auto loans. But they no longer focus on instalment loans. To fill this gap, the nation’s platforms, such as Lending Club and Prosper, are refinancing the US consumer credit card market with cheaper instalment loans. P2P lending has been dominated by institutional capital, such as hedge funds which can match loans all along the risk spectrum.
- In the UK, however, P2P is designed with the retail saver in mind – which represents a much more fundamental shift. RateSetter has led the way in creating a modern savings alternative for the retail customers.
- The UK industry has also caught the eye of the institutions. Earlier this year, P2P Global Investments, a London Stock Exchange-listed investment trust, raised £200m from institutional investors to lend through the major platforms.
How will this mix of retail and institutional play out? For me, it is vital that open market principles are maintained – that retail and institutional customers are treated the same.
RateSetter offers a free market open to those who wish to invest on the same terms and we are determined to protect that market integrity.
I look forward to hearing what others think!
Image: Don Miller, Flickr.