Are Europe’s smaller peer-to-peer lenders ‘struggling for scale’?

By Roger Baird on Monday 8 July 2019

Alternative Lending

In the first in our series of articles exploring the State of the P2P Lending Market, we take a look at how the structure of the European industry could shift.

Are Europe’s smaller peer-to-peer lenders ‘struggling for scale’?
Image source: from Pexels

Growth among Europe’s peer-to-peer lenders will almost halve this year as smaller rivals struggle to scale their operations.

Slowing economic growth across the continent and anaemic expansion among second-tier peer-to-peer players will lead the sector to grow by 47.5 per cent this year, compared to a 90.2 per cent jump in 2018, said AltFi's Peer-to-Peer Lending State of the Market Report 2019which is published today.  

This means European continental lenders, led by such players as Younited Credit in France and CreditShelf in Germany, are set to lend €4.9bn this year, compared to €3.3bn, according to specialist alternative credit data provider Brismo quoted in the report.   

By comparison, the UK, Europe’s largest online lending market, grew by 20 per cent last year to £6bn and is forecast to grow by another 20 per cent to £7.3bn this year. Impressive growth for Britain’s older market - led by Funding Circle, Ratesetter and Zopa - which began more than a decade ago.    


Slow start

The report said: “Europe’s very largest platforms continue to grow apace, pushing into the billions lent territory, rather than millions. Yet many of the platforms at the smaller end of the spectrum appear to be struggling to scale their operations; it is striking how many of these firms have made a slow start (if they can be said to have started at all) in 2019.”

It adds that pan-European passporting for these types of lenders, allowing them to operate across various continental markets would “quicken the pace of consolidation as larger platforms spread into smaller markets”.

The European Commission first proposed these passports in March 2018 as part of a 23-step Fintech Action Plan to allow a platform licenced in one country to operate across the EU.


Weak European activity

However, although October, Finland’s Fellow Finance and Spotcap are among a number of lenders growing beyond their home countries, these examples “are few and far between”.

Eurozone business activity picked up slightly last month but remained weak as a modest but broad-based upturn in the services industry offset a continued deep downturn in factory output, according to last week’s IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index.  

It nudged up to 52.2 in June from May’s 51.8, in an index where a reading above 50 indicates growth.

Many economists expect the European Central Bank to opt for another dose of monetary policy easing in September as it attempts to reinvigorate the region’s economy.


You can download the full report here.

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