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The rise of future finance
Nesta, along with Berkeley University of California and University of Cambridge, have published a report of the rise of future of finance. This suggests that in 2013 there were £480million of loans made through peer-to-peer and peer-to-business lending. We believe this is a slight understatement of the market based upon our own data, as we believe the figure will be closer to £495million by year end.
David de Koning of Funding Circle, the online marketplace for business loans, said:
We very much welcome this independent validation of the UK as world leading in the peer-to-peer business lending industry.
While traditional business lending shrinks, lending from online marketplaces, such as Funding Circle, is growing exponentially. Since the start of 2013 we have lent more than £120 million and at present we're lending more than £800,000 per day to businesses across the UK.
Peer-to-peer business lending has redefined the financial landscape and is playing a crucial role in the economic recovery. Over the next 12 months we expect more than 15,000 new jobs will be created by businesses using Funding Circle to access finance. We provide a better way for investors to lend and businesses to borrow. 77% of businesses who have borrowed through us would come back to us first, over a bank.
Responding to NESTA predictions for the growth of alternative finance, Stuart Law, CEO of Assetz Capital, commented:
The report’s projections are actually extremely low, and I’d be stunned if growth didn’t substantially exceed them – especially for P2P lending. The report’s authors concede that their growth forecast is based only on historic averages, whereas we believe that the next year will continue to bring exponential growth based on a number of factors.
2014 brings a ‘perfect positive storm’ for P2P lending platforms: not only will FCA regulation lead to increased consumer confidence in the industry, but there are strong rumours that steps will be taken to make P2P lending more tax efficient in 2014, such as inclusion in ISAs and SIPPs with the resulting increase in capital deployed in P2P lending.
We currently anticipate that we’ll facilitate loans worth £100m by the end of 2014, but if more tax-efficient measures are incorporated in to P2P alongside our rapid growth in attracting lending capital we’d expect to have lent £1bn within 3 years ourselves - with the market multiplying in size accordingly.
We would agree with the comments from both Funding Circle and Assetz Capital. Based upon our data we believe that the P2P sector arrange a further £1billion of new loans in 2014.