Analysis of Peer-to-Peer Lending Platforms in the UK (PDF)

Essay from the year 2016 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,0, Edinburgh Napier University, language: English, abstract: Due to the exponential rate at which technology has developed in recent years, plentiful new businesses have established. The digital revolution is challenging many well situated, regulated and often conservative industries, such as the financial service industry. Several financial technology start-up companies, also known as Finance Technology Companies (FinTechs), thereby constitute as competitors to traditional retail banks by accessing technological innovations.

While the FinTech "eToro" is challenging the investment divisions, start-ups like "Transferwise" are putting pressure on the prices for payment and transfer services. The largest market volumes of so-called alternative finance models in the United Kingdom (UK) have peer-to-peer (P2P) lending businesses, such as ZOPA. P2P, or social lending allows individuals to borrow and lend money to each other directly, without intermediate financial institution, such as retail banks. Subsequently, the global trend of disintermediation also arose in the banking industry.

After reviewing relevant literature the market power of P2P lending as well as its impact on the financial services industry over the last ten years will be assessed. Furthermore, this essay will illustrate the current situation by evaluating the extent to which P2P FinTechs replace personal finance functions of retail banks in the UK. Finally, major aspects will be summarised and future aspects will be discussed.