As the P2P market grows, rates fall behind

The European P2P lending market is growing at an average monthly rate of 2.8% (3.6 M euros). At the same time, the average rate of return is decreasing by 0.03 p.p. every month. “There are some deviations in the trend caused by various global events,” Robo.cash analysts comment on the statistics, “However, in general, the identified dynamics continue.”

The specialists name a few possible reasons for such market behavior. One of them is excessive demand, when a platform can't provide enough loans for all users, so it lowers the returns to leverage the demand. 

Also, in such a situation, the platform may resort to financial leverage, such as issuing bonds or taking a bank loan, which may lead to a change in rates. “The bond or loan rate depends on the key rate of the Central Bank. In certain economic circumstances, it may turn out to be very high, and, in order to maintain its profits, the platform will be forced to reduce rates in the short term.” the analysts explain.

Another possible factor is the business scaling issue. “If the platform has already found the main niche for itself, then it makes no sense for it to keep the rates very high,” the experts add.

As for the long-term perspective, the analysts predict further growth in volumes with a decrease in the rates. In the short term, indicators may behave more randomly.