Over the past four years, the peer-to-peer (P2P) lending market has grown by more than 1,000%, reaching USD 119 billion. Moreover, it could reach has high as USD 1 trillion by 2025. But what does this mean for lending at traditional financial institutions? Traditional financial institutions, unlike P2P platforms, accumulate all risks themselves and are more strictly controlled by government regulations. This causes huge bureaucratic and operational costs. On the other hand, P2P platforms do not carry these burdens and can effectively replace financial institutions as lenders. They are able to provide faster and easier application processing, a quicker turnaround time to receive funds and an individualized approach to loan approval. For small businesses, this has become a huge revolution. An individual approach to analysis instead of stiff patterns lead to the most efficient entrepreneurs not experiencing problems with obtaining financial resources, allowing their businesses to develop many times faster than with traditional financing options.
Financial institutions are starting to fight back, however. The most efficient banks are spending billions of dollars on technology companies and startups to regain an advantage in this industry. For example, Goldman Sachs recently acquired the startup Financeit, which deals with POS-crediting to help small- and medium-sized businesses finance clients. It has become clear that the landscape of financial services and, in particular, lending will look radically different in 5-10 years. The future is clearly moving behind flexible, decentralized P2P platforms. It only remains to be seen how (or if) traditional financial institutions will adapt to this inevitability.