Potential new $7.27 billion P2P lending market

Potential new $7.27 billion P2P lending market

1 Apr 15

HorizonPoll surveys capturing more than 4,300 responses from adults nationwide reveal the huge potential for the country’s new peer-to-peer (P2P) lending and crowd equity funding markets.

P2P and crowd equity funding services, where newly authorised services match lenders with borrowers and investors, launched in New Zealand last year.

Horizon Research, in turn, has launched the country’s most in-depth monitor on the market’s performance and New Zealanders’ intentions to borrow and lend through it.

Horizon says results from nationwide surveys in August 2014 and March 2015 indicate that,overall, the amount being sought by those who said they were definitely likely to borrow through a peer-to-peer lending service in the next 12 months is $7.27 billion.

Horizon says its research service will allow market players to maximise performance and, in the case of traditional lenders and regulators, identify risks.

Awareness:

Results show the number who felt they did not know much about peer to peer lending or crowd equity funding has fallen 10% between August 2014 and March 2015 but the sector has a long way to go to lift numbers who feel “fully informed” from a base of 2.7%.

Borrowing overall:

This research profiles the 27% of adults, equivalent to 261,000 New Zealanders, who indicated they were likely to borrow money in the next 24 months, by 19 demographic criteria.

It finds a further 198,000 indicating they will borrow in the next 13-24 months and 396,300 in the next 12 and 13 to 24 months.

Amounts to be borrowed are primarily either under $15,000 or in the $100,000 to $499,999 range. Respondents who indicated they were definitely looking to borrow, regardless of the timeframe, were more likely than average to be looking to borrow in the $500,000 to $999,999 range and were looking to borrow, on average, twice as much as those who said they may borrow.

Borrowing through a peer-to-peer lending service:

The research finds 237,800 adults would “definitely” be likely and who “may” borrow through a peer-to-peer lending service in the next 1 to 12.

Overall, the amount being sought by those who said they were definitely likely to borrow through a peer-to-peer lending service in the next 12 months was $7.27 billion.

The four key purposes for borrowing using a peer-to-peer lending service in the next 12 months are identified by this research.

Lending through a peer-to-peer lending service or crowd equity funding:

The research identifies and profiles the number of adults who are definitely likely and likely to lend through a peer-to-peer lending service or crowd equity funding at some time in the next 12 months. It tracks increasing likelihood between August 2014 and March 2015 and finds the potential lending intention is 5% higher “next year” than in the next 12 months. This will help market participants to profile and target potential lenders.

Overall, those who said they were definitely likely to lend through a peer-to-peer lending service or crowd equity funding were prepared to lend the amount of money being sought by in the next 12 months was $1.54 billion – equivalent to 21% of the $7.27 billion sought by those who would definitely borrow through peer-to-peer lending.

Potential lenders indicate what purposes (personal and business) they are prepared to lend for and the business life stages preferred by those likely to lend to businesses.

Risk tolerance profiles:

The research measures the degree of risk New Zealanders will tolerate when making major financial decisions. This includes the degree of comfort and discomfort with rates of fall in the value of their investments.

In general, age was not a strong determinant of preparedness to take financial risks.

Important factors in peer to peer lending or crowd equity funding:

To help market players respond best to the this major new potential market, the research rates the importance of 30 factors related to peer to peer lending or crowd equity funding, and finds the six factors rated more highly as “very important” than the others.

Peer to peer lending or crowd equity funding companies:

Respondents were asked about awareness and likely use of companies in or reportedly wanting to enter the market.

In August 2014:

• Pledge Me had the highest awareness, with 15% of respondents either aware of it or having used it. It had the highest usage level.

• Snowball Effect had second highest awareness, at 5%.

By March 2015:

• Harmoney had by far the highest awareness, with 44% of respondents aware of it. It was just ahead of Pledge Me for usage.

• Pledge Me was in second place for awareness, with 20% of respondents either aware of it or having used it.

• Snowball Effect was in third place, with 12% awareness.

• Lendit had 10% awareness, and the other two organisations had less than 10%.

The research identifies which of the companies, if any, they would consider using for peer to peer lending or crowd equity funding services (respondents were asked to base this on their knowledge of the companies or from first impressions based on the company names.

Banks and peer-to-peer lending:

The research indicates the number of adults likely to use a peer-to-peer lending service if the bank respondents used most often for personal loans were to start one. A potentially significant market of more than 287,000 people is indicated, along with a risk to P2P lenders:

60% of those who had said they may borrow through a peer-to-peer service in the next 12 months appeared to be likely to use their bank if it offered peer-to-peer lending.

Financial Markets Authority supervision:

The research reports the number who has or lack confidence in the Financial Markets Authority to adequately supervise new peer to peer lending and crowd funding service.

Business decision makers were significantly more likely than average to not feel confident, with 52.5% indicating a lack of confidence.

Overall feelings about peer-to-peer lending and crowd equity funding:

41% of respondents felt that the start of licensed peer to peer lending and crowd equity funding service providers in New Zealand was a welcome alternative.

25% said they would not borrow through a peer-to-peer or crowd funding service.

A nett 51% selected one or more options related to negative perceptions of safety, risk or trust saying they would feel safer investing through banks and using other ways of saving; that P2P and crow equity funding were too risky, or they lacked trust in peer-to-peer lending.

Sample:

Horizon’s current Peer to Peer Lending and Crowd Equity Finding Market Monitor report is based on:

• A survey of 2214 respondents undertaken between 29 July and 11 August. This survey sought the views of New Zealanders 18+ on peer-to-peer lending and had a maximum margin of error at a 95% confidence level of ±2.1% overall.
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• A tracking survey of 2160 respondents undertaken between 19 and 26 March 2015. This survey tracked awareness and likelihood to borrow or lend through peer-to-peer lending or crowd funding organisations and has a maximum margin of error at a 95% confidence level of ±2.2% overall.

A summary of research available for clients now in the first Monitor report is here.

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