[13] Funding Circle, launched in August 2010, became the first significant peer-to-business lender and offering small businesses loans from investors via the platform.
This action was criticised for creating unfair competition in the UK, by concentrating financial support in the largest platforms.
[25] Since April 2014, the peer-to-peer lending industry has been regulated by the Financial Conduct Authority[26] to increase accountability with standard reporting and facilitate the growth of the sector.
[32][34] The registration process was an arduous one; Prosper and LendingClub had to temporarily suspend offering new loans,[35][36][37][38] while others, such as the U.K.-based Zopa Ltd., exited the U.S. market entirely.
[35] Both LendingClub and Prosper gained approval from the SEC to offer investors notes backed by payments received on the loans.
[12] Both LendingClub and Prosper formed partnerships with FOLIOfn to create a secondary market for their notes, providing liquidity to investors.
[citation needed] More people turned to peer-to-peer companies for borrowing following the financial crisis of 2007–2008 because banks refused to increase their loan portfolios.
[33] Executives from traditional financial institutions are joining the peer-to-peer companies as board members, lenders and investors,[44][45] indicating that the new financing model is establishing itself in the mainstream.
[47] Ezubao, a website launched by Yucheng Group in July 2014 purporting to offer P2P services, was shut down in February 2016 by authorities who described it as a Ponzi scheme.
In June and July 2018, scores of Chinese online P2P lending platforms fell into financial or legal troubles because of tightened regulation and liquidity.
[53] In late June, Shanghai police detained four senior executives of Tangxiaoseng, an online lending platform controlled by Zibang Financial Service Internet Technology Co. Ltd. and told investors on June 28, 2018, that Zibang Financial was suspected of "illegally raising funds from the public.
[56] In April 2019, one of China's top peer-to-peer (P2P) lending platforms, tuandai.com, collapsed, resulting in financial losses for scores of Chinese investors.
[59] In New Zealand, peer-to-peer lending became practicable on April 1, 2014, when the relevant provisions of the Financial Markets Conduct Act 2013 came into force.
[65] Even with first-mover advantage many sites were not able to capture market share and grow their user base, arguably because of the reserved nature of Indian investors or lack of awareness of this type of debt financing.
However, peer-to-peer lending platforms in India are helping a huge section of borrowers who have previously been rejected or have failed to qualify for a loan from banks.
[70] Launched in 2007, the company Trustbuddy AB was first out on the Swedish market for peer-to-peer-lending, providing a platform for high risk personal loans between 500SEK and 10,000SEK.
[71] Several peer-to-peer lending services initiated operation and loan origination during 2014, Following the economic uprising of 2011,[72] and public opinion regarding these platforms is positive.
[78] By means of the Resolution 4656/2018, the Central Bank of Brazil created a new type of institution called SEP (personal lending society) that aims to provide a platform for direct negotiation of loans between individuals and companies.
[80] Currently, the most active investors in Latvia's peer-to-peer lending platforms are residents of Germany, Great Britain, and Estonia.
New P2P lending companies launched in Korea during this period include 8 Percent, Terafunding, Lendit, Honest Fund and Funda.
[96] According to the Korea P2P Finance Association, cumulative loan lent by its member P2P companies stands at c. KRW 2.3 TRN as of March 2018.
In Germany, P2P lending is growing fast in recent years and is regulated under Federal Financial Supervisory Authority.
Crowd sourcing arrangements in which people are asked to contribute money in exchange for potential profits based on the work of others are considered to be securities.
Such activity is interpreted as a sale of securities, and a broker-dealer license and the registration of the person-to-person investment contract is required for the process to be legal.
[10] For investors interested in socially conscious investing, peer-to-peer lending offers the possibility of supporting the attempts of individuals to break free from high-rate debt, assist persons engaged in occupations or activities that are deemed moral and positive to the community, and avoid investment in persons employed in industries deemed immoral or detrimental to community.
[103][104] Peer-to-peer lending also attracts borrowers who, because of their credit status or the lack thereof, are unqualified for traditional bank loans.
Because past behavior is frequently indicative of future performance and low credit scores correlate with high likelihood of default, peer-to-peer intermediaries have started to decline a large number of applicants and charge higher interest rates to riskier borrowers that are approved.
[33] The UK peer-to-peer lenders quote the ratio of bad loans at 0.84% for Zopa of the £200m during its first seven years of lending history.
This is comparable to the 3–5% ratio of mainstream banks and the result of modern credit models and efficient risk management technologies used by P2P companies.
[17] At the other end of the range are places such as Bondora that do lending to less credit-worthy customers, with default rates varying up to as high as 70+% for loans made to Slovak borrowers on that platform, well above those of its original Estonian market.