Since its inception in March 2005 the peer to peer sector has sparked significant financial innovation and Zopa’s first pioneering steps have now been followed by numerous other platforms. Whilst at the outset there was considerable inertia to overcome, increasing familiarity with this radical new model seems to have made things easier for the subsequent adopters.
In an attempt to understand how much easier things have become – we decided to look at how long it takes for Platforms to lend their first £25m. The graph in figure 1 plots launch date against ‘months taken to raise £25m”. The results demonstrate a clear trend – it is becoming significantly easier for young platforms to raise funds.
Whilst Zopa took 42 months to lend £25m, Wellesley and Co. – the most recently launched platform to reach the milestone – has taken just 10 months.
Of course, “Time taken to raise £25m” is but one indication of how easy it has become to launch. It must be noted that very few new entrants enjoy the same sort of success as Wellesley. There is a survivor bias in our data in that we have only included Platforms that have made it into the Liberum AltFi Volume index. That is to say platforms that have attracted at least 0.1% market share, which currently represents £1.7m. Furthermore, we have not accounted for four platforms within the index that have been around for well over 10 months but which have thus far failed to reach £25m. But there are numerous indications that the sector is coming of age, and it seems that the right offering can gain traction very rapidly, as both borrowers and investors become more familiar with alternative finance.
Whilst the number of new entrants within the sector remains large, it will be interesting to see whether the time taken to reach £25m continues to fall – or whether a delay is brought about by increasing saturation. We will continue to track this trend and report our findings.
21 March 2023
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