In one of our latest publications, we explored the Bulgarian P2P market players and the way they are growing and developing. They seem to be doing great job. However, Klear and Iuvo, and of course, Varengold exist and develop in a broader context and ecosystem. If we only take the direct competitors of Iuvo and Klear, we could count over hundred. In addition, the segment depends on thе banking system and whatever might shake it.
Yes, everyone seems optimistic about the future of P2P lenders but are those fintech startups ready to embrace challenges like the economic cycle turning downwards? What will happen if banks increase deposit interest rates or join their niche? What will be the impact of the expected EU-wide regulation?
We asked the key players on the local market what are their expectations for the near future.
Loic Le Pichoux, CEO of Klear: New players
The pace of growth will probably be impacted by what will happen on the stock markets and how investors will rebalance their asset allocation. Could P2P lending get part of this cake or will these investors switch drastically to assets like bank account or gold? That’s an interesting process to follow. Institutional investors are another interesting topic. In Europe, P2P lending investors are mostly individuals. In US, investors are mostly corporations, banks, and investment funds. I believe it will come eventually to Europe as well. But it’s also linked to the evolution of the regulation. For example, in Bulgaria, investment funds cannot invest in P2P loans while it could be interesting for them and their customers to diversify and allocate a portion to P2P loans.
Banks may enter in the game. Probably not by building full P2P lending platform but by setting up pure online lenders, getting the funds to lend from the bank. They could also decide to partner with existing online lenders if they believe it will be hard for them to close the technological gap.
Ivaylo Ivanov, CEO of Iuvo: Fails & Regulations
Security and proper risk management will be a very important topic because the economic cycle will start turning downwards. We had a period of upward movement in the past 5 years and people felt secure to invest in whatever. There are too many platforms on the market right now, over 100 on the European market alone, and I don’t believe all of them have prepared to manage the upcoming risks. Some of them will fail.
If the Regulatory Framework finally arrives and it is officially stated that the EU has observed the market and the business for over 10 years, P2P will gain credibility.
There will be institutional players such as diverse funds entering the market. Their return appetites are more modest but they require higher assurance in form of guarantee funds and mechanisms. So the return rates will probably shrink.
Sergey Pantaleev, General Manager of Varengold Sofia: Banks & Consolidation
There are broad expectations that the European Central Bank (ECB) will increase the interest rates that have been on zero level for long. However, since there have been signals that the economic growth in the Eurozone has been slowing down, some experts think the ECB could postpone the process until the GDP growth picks up again. I expect that such a scenario will further lift up the volume of investments that will be placed through lending marketplaces where the yield for the investor is much higher than the one generated via the conventional bank deposit.
A lot of experts believe that there will be a significant amount of consolidation in the business with lending platforms over the next 6 to 12 months as the largest platforms become bigger and others fail to achieve scale.
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