One of the topics we have covered extensively over the years is the paradigm shift in the perception of old-fashioned peer-to-peer (P2P) lending, from a quirky experiment to a regulated sector commanding a book value of multiple billions and revenue in the hundreds of millions. So at this point, as a thought exercise on a quiet summer week for housing news, we are looking forward to the next 20 years, and making some assumptions and predictions as to where the sector will go next, and what could usher in a radical era of decentralised private credit lending.
One thing we won't do in this piece is delve too far, or at all, into technological advancements, as that curve is so steep that who knows where we may be in 20 years, it's unlikely that you will be reading the thoughts of a real human by that point, but don't worry, for now the 'Em dashed' benign factoids of a "off the peg" language model are not present here - ahem, but what we are concentrating on here is economic changes, and how the “alternative” will likely evolve into an institutionalised, systemically important asset class, governed by stricter regulation, funded heavily by pensions and insurers, and perhaps even guaranteed (in part) by government safety nets. These are predictions, so don't take them too seriously, but they are grounded in the roots of what has already been sown.
Realistically, our sector is still dominated by retail investors and a small pool of high-net-worth individuals. The scale of our sector is dwarfed by institutional credit markets, where private debt has surged into the trillions globally. Over the next 20 years, there is a strong possibility that our domain will almost certainly follow suit. Pension funds, insurers, and sovereign wealth funds are all hungry for yield and stability, in a macro environment that is and could remain highly inflationary for the foreseeable future; they are likely to treat P2P loans as a standard allocation, much like infrastructure or private equity today. Which is where the prediction gets interesting, because if you remove what you would like to happen from the equation and look at what needs to happen, institutional investors may end up dominating loan flows, which could eventually create a system where investors are investing in instruments or pools of loans rather than individual picks.
The second and perhaps bolder prediction is that if you look forward 20 years from now, the market may look very different. What tends to happen in any frontier market is that the most prominent players amalgamate the smaller ones, and you end up with several super entities at the top. You could very easily end up with a BlackRock or a Vanguard-type entity at the top of private credit, a giant conduit of investor capital, which would be helpful for a government looking to include private credit more heavily in all aspects of public finances, expanding out from property, into infrastructure, for instance, or green initiatives. One of the most obvious and likely predictions we can make is that p2p lending will emerge as a policy tool. This prediction is based on deductive reasoning: since the money must come from somewhere, it presents a sizable opportunity. By a policy tool, we mean that we envisage a future where private credit capital is funnelled at scale towards national priorities, which could be Tax-advantaged P2P loans funding home insulation, renewable projects, and EV infrastructure, channelled to SMEs in underfunded regions, with partial state guarantees, or positioned into affordable housing developments. Where there is a yield, there is a way.
Of course, with growth and institutionalisation comes danger. If P2P lending balloons into a trillion-pound global asset class, its failures will no longer be containable. A wave of defaults or a platform collapse could rattle pension funds, insurers, and retail wealth simultaneously. In that proposed scenario, it would be foolish not to consider at least once in the next 20 years that the UK will witness a mini-crisis that forces regulators and policymakers to act. It might resemble the subprime mortgage panic, with losses concentrated in highly leveraged property or SME portfolios.
The silver lining, if that were to happen decades from now? Such a crisis will accelerate the reforms that lock P2P into the core of the financial system, just as the 2008 crash reshaped banking oversight.
This future is just a thought experiment, but what we can say for fact is that the growth of the sector is happening quickly, and it will bring opportunities, greater stability, scale, and access to yield. It has already become hybridised from what it once was and begun its journey to becoming a marketplace model infused with institutional muscle, government oversight, and national strategy.
And that evolution will mark its actual arrival, not as a fringe experiment in private credit, but as a cornerstone of UK finance.
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