It’s the 21st century and banks are slowly losing their credibility, especially when it comes to savings and investments. Fortunately, the emerging technologies are filling the niche. One of them is peer-to-peer investing, that emerged 13 years ago in the UK. P2P provides agile investment opportunities, by utilizing the power of technology to connect investors with loan originators worldwide.
P2P allows non-banking financial institutions to be more flexible with their borrowers, by giving them a platform to list portions of each issued loan, so they can get financing from external parties. The first company to offer this service was UK’s ZOPA, founded in 2005. ZOPA has lent more than £3.46 billion to UK consumers to date. Not long after, more companies emerged. As of this year, the country boasts over 130 P2P investment platforms to choose from.
Since its initial success in UK, P2P investing has spread over the whole world and now it has significant presence on key markets, like US, China, Canada, Australia and New Zealand, among many. Most countries already have regulatory frameworks that allow supervisory organs to monitor P2P platforms. There’s still a lot to be done in certain regions, where P2P is relatively new to the investment landscape.
The lasting success and bright future of P2P platforms is supported by the stable returns index they have measured the last 10 years. It hasn’t seen major fluctuations and has kept its average level at around 5%. Besides achieving this level of stability, the sector has developed a lot in terms of service offering. Right now it caters to Consumer lenders, Business lenders, Property lenders and Receivables financing.
Why do investors trust P2P investing?
P2P investing has taken banking instruments, like deposits, by storm. In the bigger part of Europe bank deposits no longer offer decent returns, let alone any flexibility in accessing and managing your funds. In most countries you barely get 1% in annual profit. Adding that to the bureaucracy you have to go through if you want to work with a bank, it’s no surprise that people lose trust in traditional banking. Here is a brief list of reasons why P2P is gaining trust around the world:
High and stable returns
Most P2P platforms offer an average annual return of around 8%. Provided that you diversify your strategy and can stomach more risk you could raise the bar up to 15%.
Easy to use
The learning curve for P2P isn’t as high, as with other investment instruments. As long as you get familiar with general loan terminology and closely monitor the types of loans offered in the platform, you will get around effortlessly.
Low starting point
You can start with as low as 10 euro. Nothing more to say about that!
High liquidity and opportunities for diversification within the instrument
Thousands of loans are being published every day by different originators, with diverse borrower profiles, as well as varying interest and payment plans. You can choose whatever suits your strategy and preferred level of risk.
Some platforms, like us, offer a Buy-back guarantee. It ensures that in case of loan default, you will get your initial investment back in up to 60 days. Thus, you only lose the opportunity to profit, but you don’t lose your own money.
P2P landscape in Europe: iuvo
When founding iuvo we saw an opportunity to contribute to establishing P2P as a preferred investment method. We recently registered the company as a licensed credit intermediary in Estonia. Besides being one of the most progressive P2P lending markets, Estonia is a country that has proven to adopt new technology very fast. It already has a regulatory framework for alternative financing instruments like P2P platforms.
We currently work with five originators: Easy Credit (Bulgaria), Viva Credit (Bulgaria), iCredit (Romania), Fast Finance (Romania) and BBG (Georgia). These are the consumer and business financing market leaders, but they still went through a very tough compliance procedure to get to join (as will all of our future partners).
Besides the strong partnership potential, we saw the financial culture of Europeans maturing a lot. People are educating themselves about investment instruments and are interested in alternative methods that could help them avoid traditional banking. The growing interest for P2P lending as a savings instrument has already brought over 6000 investors to iuvo, with over 24 million EUR turnover for two years.
You can also save money and build your future – register with us!