2015: The year P2P lending went mainstream

1. A record-smashing year

According to data from AltFi, UK P2P lending had a bumper year, with consumer lending and business lending each exceeding £1 billion. This chart shows the lending volumes and annual growth for the three P2P-lending segments:

Lending Segment	2015 Lending	Yearly Growth
Business Lending	£1,260m	74.6%
Consumer Lending	£1,088m	91.0%
Invoice Financing	£333m	31.6%
Total	£2,681m	73.6%

As you can see, P2P business lending is now the leading market segment, with lending of £1.26 billion in 2015 accounting for almost half (47%) of all UK P2P lending.

Consumer lending accounted for almost £1.1 billion of P2P lending in 2015, more than two-fifths (40.6%) of the total. In third place was invoice factoring and financing which, at a third of a billion pounds, accounted for an eighth (12.4%) of total lending.

To put these figures into context, total P2P lending in 2015 was just over half (50.7%) of all-time total lending of £5.29 billion since 2005. Such strong and continued growth clearly suggests that P2P lending is rapidly heading for the investment mainstream.

2. Business lending takes the lead

After a decade of existence, the industry still enjoys record growth, with total P2P lending in 2015 up almost three-quarters (73.6%) on 2014. The fastest-growing segment was consumer lending which almost doubled in size, thanks to lending growth of 91% last year.

Business lending -- Assetz Capital's speciality -- also hit new highs, thanks to yearly lending growth of almost three-quarters (74.6%). With bank lending to SMEs (small- and medium-sized enterprises) still in the doldrums, Assetz Capital expects P2P business lending to continue growing strongly in 2016 and beyond.

3. The 'Big Three' dominate the market

As in recent years, the market's 'Big Three' of Zopa, Funding Circle and RateSetter continue to dominate UK P2P lending. Zopa lent £532 million in 2015, narrowly pushing Funding Circle into second place (£531 million).

In third place was RateSetter (£518 million), to complete a trio of P2P lenders that each lent more than half a billion pounds in 2015. Two other lenders lent more than £100 million last year: LendInvest (£301 million) and Wellesley & Co. (£152 million).

4. Chancellor announces new IFISA

In his March Budget, George Osborne gave P2P lenders their best news of 2015: from 6 April 2016, P2P loans may be held inside a new tax-free ISA (Individual Savings Account) known as the Innovative Finance ISA (IFISA). This means that P2P lenders lending inside IFISAs (or transferring existing loans into IFISAs) will no longer have to pay tax on their interest income from the 2016/17 tax year onwards.

What's more, in a further bonus, the Chancellor also plans to allow P2P lenders to offset capital losses against their income gains from lending, providing a further potential boost to their returns. Thanks to these two fundamental changes, Assetz Capital is confident that 2016 will be the industry's best year yet.

5. Platform launches and closures

2015 saw the launch of several new P2P-lending platforms and one scandalous failure. Newcomers to the market included P2P consumer lender Unbolted (launched in March) and business lenders Crowdstacker (June) and Crowdahouse (August).

The shocking failure was Swedish P2P lender TrustBuddy, launched in 2009, which allegedly blew up due to either management incompetence or outright fraud. The company filed for bankruptcy in Stockholm in October 2015, with over £21 million of lenders' money at risk.

6. Listed funds come to market

In the early years of P2P lending, individual investors' money accounted for the entire market. However, as the industry gained scale, more and more institutional capital and listed funds have jumped aboard the bandwagon. Governments, banks and pension funds have poured money into P2P lending, keen to diversify their assets and stimulate business growth.

Demand for closed-end funds investing in P2P lending was very strong in early 2015, but tailed off as the year went on. For example, VPC Specialty Lending Investments (LON: VSL), which listed in March 2015, later raised £183 million in a C-share issue in September 2015.

In late November, Ranger Direct Lending (LON: RDL), which listed in May 2015, cancelled a proposed £135 million C-share issue, but later raised £14 million in a tap issue. Finally, almost at the very end of 2015, listed fund Honeycomb (target yield: 8%) raised £100 million on 23 December by listing on the London Stock Exchange as in investment trust.

7. China shows the way

Finally, to see how the P2P lending can achieve critical mass, we need only look to China -- the world's largest P2P-lending market. In 2015, P2P lending volumes quadrupled to exceed $150 billion (£103 billion), which is a simply staggering sum. Remarkably, P2P lending is now the third-most popular investment among Chinese retail investors. Disturbingly, however, a regulatory vacuum in this 'Wild East' saw an incredible 896 Chinese P2P platforms fail last year, triple the number for 2014.

Summing up last year, Stuart Law, co-founder and CEO of Assetz Capital, adds, "2015 was a great year for P2P lending in the UK, but the best is still yet to come. Assetz Capital -- and our lenders -- keenly awaits the launch of the AFISA in April, which we see as a potential game-changer for the entire market!"

WEALTH WARNING: "As with most forms of investment, peer-to-peer lending carries a degree of risk to your capital; in this case, if borrowers were unable to repay their loans. At Assetz Capital, we seek to reduce this risk to our investors by taking asset security on every loan, with the added benefit of a discretionary Provision Fund for some of our investment accounts."

- January 18, 2016