Alternative investments like P2P lending gains popularity

By Puja Sharma

P2P lending, as a significant component of the larger FinTech sector, is quickly becoming the most popular alternative investment option. It quickly transforms India into a credit-inclusive society while also providing investors with one of the most promising asset classes. In this regard, of all the recent FinTech disruptors, P2P lending is by far the most creative. With its unique provision of tech-enabled solutions spanning onboarding underwriting and disbursement, P2P lending platforms can meet such demands.

P2P lending refers to a method of online financial arrangement between individuals and businesses without involving banks or financial institutions. People can borrow loans at low-interest rates and flexible terms from this source of funding, which is easily accessible. It facilitates quick and easy loan applications with minimal documentation and no impact on credit scores.

With rising numbers of players entering the market, the sector must ground enter into a healthy competition where all the players cater to the audience as per their needs and demands. Recently, a new player is all set to enter the market, neobank Fi. Fi is also set to roll out a P2P investment option called ‘Fi Jump’ that allows users to earn up to 9% annual returns on their investments. For this, it has partnered with P2P non-bank Liquiloans.

The global peer-to-peer (P2P) lending market reached a value of $112.9b in 2021. Looking forward, IMARC Group expects the market to reach $525.3b by 2027, exhibiting a CAGR of 28.1% during 2022-2027.

In the top assets ranking, alternative investment instruments give way to traditional ones due to their simplicity and high volatility of the latter. At the same time, P2P lending ranks third in the aggregate of all factors, having proven itself to be a profitable and reliable asset.

Following are the FinTechs that have expanded their offering into P2P lending:

CRED (CRED Mint): In November 2021, CRED Mint has been rolled out in partnership with Liquiloans, an RBI-registered P2P non-banking finance company. CRED Mint focuses on the lending side of this transaction, or what it calls, ‘investment’. So, CRED members can lend – or invest – Rs 1-10 lakh on CRED Mint.

BharatPe: FinTech giant BharatPe has launched a new P2P lending product to enable consumers to lend any extra money they may have in their savings accounts to borrowers and earn higher returns on that amount versus traditional banking instruments.

Fi Jump: Fi is also set to roll out a P2P investment option called ‘Fi Jump’ that allows users to earn up to 9% annual returns on their investments. For this, it has partnered with P2P non-bank Liquiloans.

LenDenClub: LenDenClub is the largest peer-to-peer lending platform that provides an alternate investment opportunity to investors or lenders looking for high returns with creditworthy borrowers looking for short-term personal loans.  With 1 million+ investors on board, LenDenClub has become a go-to platform to earn returns in the range of 10%-12%.

Faircent: The established player of Faircent is enabling over 30,000 loans every month to be generated on its platform, which amounts to over Rs 120 crore. To date, loans totalling Rs3,100 crore have been passed on the P2P lender’s website and the company is aiming to facilitate another Rs2,000 – Rs3,000 crore in the next fiscal year.

With new players entering in, the current industry that is valued at around 5,000 crores is expected to be around Rs7,000 – Rs8,000 crore by next year and after that, it should be Rs10,000 – Rs12,000 crore upwards.