Marketplace lenders gain ground
Marketplace lending providers are pinning their hopes on challenging economic conditions to persuade investors that they can disrupt the lending market.
The current lending environment has proved fertile territory for alternative finance providers, and they have made great headway against traditional banks. A report published by The Business Research Company last December estimated that the global peer-to-peer lending market expanded by a third in 2022 to $106 billion, and will be worth $302 billion by 2026.
According to Iwoca’s small and medium-sized enterprise expert index for the fourth quarter of 2022, more than eight in 10 SME finance brokers in the UK believed that big banks had reduced their appetite to fund small businesses despite a similar proportion predicting that demand for small-business finance would rise in 2023. Just under half of these brokers reported an increase in the number of rejected applications.
Venture capital firms allocated €200 million to European lending technology startups last year. Research conducted by Fintech Global found that UK-based lenders accounted for one third of all European deals. Plend topped the list, having raised more than €45 million.
Danny McGowan, Biwesh Neupane and Santosh Koirala from University of Birmingham agree that fintech services have made some inroads into online lending and note that the digital algorithms used to screen applications are less prone to conscious and unconscious biases than loan officers, although this may be offset by investor preference for funding loans to borrowers with similar characteristics to themselves.