P2P lending changes an investor. Or quite the opposite?

There is a steady growth in peer-to-peer lending. Ten years ago, there were only few tech companies with investors who had relevant experience, but the situation has changed. The leading p2p platforms demonstrated their stability in crisis times, added new products and are ready to collaborate with the government authorities. Robo.cash studied the changes on the market and existing expectations of investors.

New investors set new trends

The rise of popularity of p2p lending has brought new investors to the market. The own findings of Robocash Group about the profile of p2p investors last year proved that the number of newcomers will increase: 52% of respondents were investing in p2p lending for less than a year and only 12% — for more than 3 years. The annual survey by Peer2Peer Finance News in 2018 showed that 37.4% of investors are definitely willing to invest more on p2p platforms in the next couple of years and 46.2% will probably do so.

New investors on the market can supply a significant potential for its growth. Currently, only 6% of investors are women and 2% are pensioners — both groups are known to be conservative in the choice of investment opportunities. However, stable returns on the market and participation of the leading p2p platforms in large investment programs supported by the state authorities may attract the conservative audience.

In order to realize new opportunities, platforms should understand the needs of new investors. The negative attitude towards banks caused by the crisis in 2008 is already in the past, and several p2p platforms have obtained banking licenses themselves. Nevertheless, the majority of players are focusing on the trends, which existed when they entered the market. The main driver for them is the rapidly introduced technical innovations. There are numerous offers to invest in cryptocurrency or use blockchain and smart contracts, which appeared recently. Are they really interesting for the investors who just started dealing with p2p lending?

This question is particularly relevant when comparing high-tech investments with traditional methods of attracting investors. These include proving business reliability through banking licenses, IPO and expansion of branches. Tech geeks are simply not interested in this, and owners of traditional bank deposits do not understand the principles of cryptocurrency and blockchain investments. In this sense, automated investments that became especially popular in 2017 serve as a good example of how quickly technological innovations can lose their attractiveness for end users.

Old questions — new answers

Studying preferences of investors, Robocash Group conducted a survey among the most active investors of the European p2p platform Robo.cash asking two simple questions. The first one asked what functions make a p2p platform the most attractive given the equal profitability. Over 42% of respondents chose buyback guarantee on investments, 25% — automated investments and 17% — a high turnover of funds.

A similar question was asked by the platform in the survey of 2017. Then, 39.2% of respondents mentioned automated investing and reinvesting as a priority and only 19.2% were interested in buyback guarantee. At the same time, according to the Annual Survey of Peer2Peer Finance News this year, the most popular factors are the securitization of funds and the use of provision funds, and automated investing is ranked fifth.

It can be stated that the interest for automated investments started decreasing, as soon as most large players introduced it. At the same time, due to the growth of default in the p2p lending and the situation with Collateral, the safety of investments has become a topical issue again.

Does it actually mean that the race of technologies makes no sense anymore? The second question of Robocash Group asked the focus group to specify the technologies they would like to see on p2p platforms in the near time. 36% mentioned biometric identification first to provide a quick access to asset management from any device and protect against fraud. Other 35% preferred integration with banking services and robo-advisors, while only 18% were interested in blockchain technologies.

We see that today’s investors prefer solutions that simplify the daily management of investments and transfer of funds, and choose the convenience in everyday use, rather than having the latest technology. This becomes clear looking at how actively investors diversify their investments. According to Peer2Peer Finance News, only 5.8% of respondents invest in one platform, while 40.4% use 2–4 platforms and 32% invest in 5 or more.

What should p2p platforms expect?

Market players have already estimated the volume of potential investments. It can be expected that p2p platforms will strive for the most user friendly interface. How will this affect the p2p lending?

Investments will be characterized with higher transparency and security facilitated by the adoption of specific legislation and government regulation. To attract conservative investors preferring long-term perspectives, platforms will hedge risks through insurance, obligatory diversification of investments and hard scoring of borrowers. Unfortunately, it will also mean decreased revenues in p2p lending.

The further development of open banking will enable investors to transfer funds between various platforms and banks quickly and easily. This will increase competition and reduce the average investment period.

Blockchain will certainly be introduced and cease to be a marketing trick. Details of its use will leave the investor’s sphere of interest like the location of servers conducting the transactions now. At the same time, there are expected legislative requirements for cryptocurrencies issued by p2p platforms. Probably, only stable coins with rates tied to fiat currencies will get access to the market.

However, the described changes should not be taken as a radical change in the p2p lending model. The profile of potential investors is changing, and the market will adapt to meet its requirements too.