Peer-to-peer lending - the £1bn mark is in sight

To date nearly £400m has been loaned through peer-to-peer and peer-to-business lending and Rajkumar expects that to comfortably top £600m in 2013 with the £1bn mark in sight before 2014.

On regulation, Rajkumar says:

“This industry is undoubtedly on the cusp of a huge growth curve. Those who have already reaped the rewards of borrowing and lending in this innovative way have confidence in the model. Adding an extra layer of security for potential users through regulation can only be a positive move for those yet to become involved.”

Rajkumar says high levels of confidence has led to increased competition from lenders on established sites and subsequently driven down the rates lenders receive on their cash, but created lower cost borrowing for businesses.

“The exciting auction element of the transaction means lenders and borrowers will forever be seeing their returns rise and fall. At the moment, lenders would do well to shop around to make sure they’re not lending money at rates lower than the risk they see in the business or individual borrower.

“The important part for those facilitating the market will be to keep raising the industry’s profile and ensure a steady stream of new borrowers and lenders to keep the market turning over. I anticipate further variations on the theme to arise in 2013. If the security and returns are right, you can fund almost anything using the method.”

He also foresees a rise in competition for borrowers and lenders from rival platforms:

“I expect to see a rise in online platforms, like rebuildingsociety.com or Funding Circle this year as entrepreneurs realise the potential of facilitating the industry.”