Prime Retail Debt - Alternate Investment Opportunity
1. What is Peer to Peer (P2P) Lending:
Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. The development of financial technologies, or fintech, by integrating banking processes with information technology has enabled the creation of financial products and services that can be delivered to consumers at scale, and at a fraction of the cost incurred by conventional banks and NBFCs. Since P2P lending companies operate online, they can run with lower overheads and provide the service more cheaply than traditional financial institutions. As a result, lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates.
2. Global P2P Businesses:
The research report published by Transparency Market Research states that the opportunity in the Global P2P lending market was worth US$26.16 bn in 2015 & analysts have predicted that the market valuation will reach US$897.85 bn by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024. In a report in 2015, Morgan Stanley also predicted that marketplace lending would grow to USD 490 billion globally by 2020. The new loan volume for USA alone in 2018 is expected to be $38.9 billion, a year on year increase of 46%. By 2050, the overall P2P lending value is expected to be close to 1 trillion U.S. dollars.
3. Indian P2P Landscape:
P2P lending service providers have been in business in India since early 2014, but until last year, there was no regulation around it. In September 2017, RBI notified that these will be registered as non-banking financial companies (NBFCs) and came out with guidelines for P2P lending platforms a month later i.e. in October 2017.