P2P rates are meaningfully better for savers (& borrowers)

Returns remain one of the greatest lures for investors looking at the peer-to-peer lending space.

A survey (commissioned by secured peer-to-peer lender Wellesley & Co.) revealed several weeks ago that a superior rate of return is the key to attracting ever more savers to the sector. The survey of over 2,000 people revealed that:

1. 44% of respondents were more likely to increase the size of their current p2p investment if it offered better interest rates than those currently offered by traditional banks.
2. Clearer regulation (19%) and better interest rates (21%) were key factors in attracting investment from those who don’t currently use p2p platforms.
3. Of those who invest, 31% said they did so because they were tired of poor interest rates from banks – with men more likely than women to cite this reason (38% vs. 21%). 

At March’s AltFi Summit – Cormac Leech, Analyst at Liberum, delivered an insightful presentation on the peer-to-peer lending opportunity. A chart was featured in that presentation which highlighted the sizeable gulf in returns between traditional investment options and p2p loans.  We have adapted that chart – below – to show returns on a 3 or 5 year investment with Zopa – which returns 4.0% and 5.2% respectively – versus other investments.  Zopa – the world’s first p2p lender – is perhaps the most appropriate platform to compare against, given its substantial historical data.

Comparative tools such as this offer us a clear understanding of point 3 from the recent survey – it’s highly likely that, of those who currently invest via p2p lending, at least 31% see superior interest rate as a motivation to do so (if not their primary driver).

In terms of points 1 and 2 from the survey, our chart would suggest that a flood of savers would come pouring into the peer-to-peer space if only they were aware of the benefits. The chart shows Zopa’s 3 and 5 year deals to return much more than the interest rates offered by traditional banks, which based on the survey results would herald 44% of current p2p investors to increase the size of their investment, and 21% of those who don’t currently use p2p platforms to begin using them.

The challenge facing the p2p platforms is how to disseminate this kind of information across the country in order to raise the profile of the sector as a whole.