Bryan Zhang: Insights from the Latest P2P Lending Research Keynote address by Bryan Zhang, of University of Cambridge, at LendIt Europe 2014. The title of this presentation is Insights from the Latest P2P Lending Research.

1. The Voice of the People: Insights from the
latest Peer-to-Peer Lending Research
LendIt Europe Conference Bryan Zhang 17 November 2014

2. The Rise and Rise of the Peer-to-Peer Lending in the UK
(Zhang, B.Z., Collins, L., Baeck, P., 2014)
Donation crowdfunding
Debt-based securities
Rewards crowdfunding
Pension-led funding
Community shares
Equity crowdfunding
Invoice trading
P2P consumer lending
P2P business lending
Breakdown of 2014 market by platform
in the UK
The information below contains highlights
from the 2014 UK Alternative Finance Industry
report produced by Nesta and the University
of Cambridge.
The results are based on analysis of transaction
data from alternative finance platforms, surveys
of their users and commissioned national
surveys of consumers and SMEs in the UK.
People who…
Are aware Have
Market size
Growth
AWARENESS
OF ALTERNATIVE
FINANCE
+150%
+161%
£1.74billion£267m
£666m
2012 20142013
£749m
£547m
£270m
£84m
34m
£25m
£26m
£4.4m
£2.0m
DONATION CROWDFUNDING
£6,102
Average amount raised
they would been unlikely to
get funds elsewhere
On average it takes 796 micro-
transactions from individual
lenders to fund one loan
63% of business saw a growth
in profit with 53% seeing an
increase in employment since
securing funding
83% of lenders were men
2013 2014 P2P Lending accounts for 90% of UK Alternative Finance Market

3. Research Partners and Primary Data Collection

4. Market Snapshot: Peer-to-Peer Business Lending
Cambridge University Primary Dataset:
£309m, 3,000 loans, 3.18m micro-transactions
P2P Business Loan
Average interest rate: 8.8%
Average loan size: £73,222
Average property loan: £662,425
Average number of micro-transactions per loan: 796
P2P Business Lender
Average lending portfolio: £8,137
Median number of loans invested in: 52
and trends of
native finance models
since 2013
r non–secured
to mostly SMEs.
WHAT IS P2P
BUSINESS LENDING?
o-
h
e
Market size
Average growth
+250%
£62m
£193m
£749m
2012 20142013
Q4
£250m
Predicted
Q3
£205m
Q2
£183m
Q1
£112m
3. Size, growth and trends of
different alternative finance models
P2P BUSINESS LENDING
The market has more than tripled in size since 2013
P2P business lending facilitates secured or non–secured
business loans between individual lenders to mostly SMEs.
Over the last two years P2P business lending has experienced
WHAT IS P2P
BUSINESS LENDING?
Debt–based transactions
between individuals and
P2P BUSINESS LENDING
£73,222
Average amount borrowed
33% of borrowers believed
they would been unlikely to
get funds elsewhere
On average it takes 796 micro-
transactions from individual
lenders to fund one loan
63% of business saw a growth
in profit with 53% seeing an
increase in employment since
securing funding
83% of lenders were men
Market size
Average growth
+250%
£62m
£193m
£749m
2012 20142013
Q4
£250m
Predicted
Q3
£205m
Q2
£183m
Q1
£112m

5. Market Snapshot: Peer-to-Peer Consumer Lending
Cambridge University Primary Dataset:
£577m, 105,464 loans, 20.5m micro-transactions
P2P Consumer Loan
Average loan size: £5,471
Average number of micro-transactions per loan: 201
Average transaction value: £27.10
Platform Acceptance Rate: 10%
Average weighted default rate: < 1%
Average age for borrowers: 42 (80% male)
Average lending portfolio: £5,606
Average age for lenders: 49 (77% male)
40 UNDERSTANDING ALTERNATIVE FINANCE The UK Alternative Finance industry Report 2014
P2P CONSUMER LENDING
P2P consumer lending market doubles in 2014
P2P consumer lending, whereby individuals can lend and borrow money to each other online, has
evolved to become an important force in the UK consumer credit and lending space. This sector
is expected to grow from £287 milion in 2013 to £547 milion by the end of 2014 with nearly 100
per cent year–on–year growth.
P2P CONSUMER LENDING
£5,471
Average amount borrowed
54% have lent more than
£5,000
Lenders primarily motivated
by interest rate available
More than half of borrowers
had been offered a loan
from the bank but went
with P2P Lending
46% used loan to purchase
a vehicle
Market size
Average growth
+108%
£127m
£287m
£547m
2012 20142013
Q4
£149m
Predicted
Q3
£154m
Q2
£128m
Q1
£116m
Finance industry Report 2014
014
can lend and borrow money to each other online, has
UK consumer credit and lending space. This sector
Market size
Average growth
+108%
£127m
£287m
£547m
2012 20142013
Q4
£149m
Predicted
Q3
£154m
Q2
£128m
Q1
£116m

6. Market Snapshot: Invoice Trading
Cambridge University Primary Dataset:
£206m, 3,679 invoices, 35,000 micro-transactions
Average traded invoice value: £56,075
Average invoice trading duration: 8 hours
Average number of micro-transactions per loan: 7
Average value of micro-transaction: £7,965.87
Average invoice terms: 47 days
UNDERSTANDING ALTERNATIVE FINANCE The UK Alternative Finance industry Report 2014 47
INVOICE TRADING
Invoice trading grew by 179 per cent in 2014
Invoice trading provides fundraising opportunities for small and medium enterprises to trade
their invoices or receivables at a discount in exchange for the speedy procurement of working
capital. In 2013 the sector grew by around 169 per cent and in 2014 it saw a further growth by 179
per cent. The average invoice auction duration is just eight hours with the average traded invoice
value being £56,075. In the majority of cases, a trade invoice only takes seven micro–transactions
INVOICE TRADING
£56,075
Average amount raised
33% of businesses said it was
unlikely that they would have
received finance could they not
have turned to
an invoice trading provider
The average invoice finance
auction only takes 8 hours
Three in four users would use
invoice trading in the future
even if banks were to offer
similar terms
Market size
Average growth
+174%
£36m
£97m
£270m
2012 20142013
INVOICE TRADING
Q4
£100m
Predicted
Q3
£67m
Q2
£56m
Q1
£47m
ve Finance industry Report 2014 47
4
unities for small and medium enterprises to trade
exchange for the speedy procurement of working
69 per cent and in 2014 it saw a further growth by 179
ot
Market size
Average growth
+174%
£36m
£97m
£270m
2012 20142013
Q4
£100m
Predicted
Q3
£67m
Q2
£56m
Q1
£47m

7. Listen to the voice of the people via latest research
The largest survey ever conducted on the peer-to-peer lending industry
Peer-to-Peer Consumer Lending: 6,392 borrowers & 4,259 lenders
Peer-to-Peer Business Lending: 1,771 lenders & 323 SME borrowers
National Consumer Poll: sample size 2,000
National SME Poll: sample size 506
110 Qualitative Interviews: 45 Lenders & 45 SME Borrowers

8. Peer-to-Peer Consumer Lending: First Time Borrowing
When did you first try to raise finance from a P2P consumer lending platform?

9. Peer-to-Peer Consumer Lending: Motivation for Borrowing

10. P2P Consumer Lending: Not the Lender of Last Resort

11. P2P Consumer Lending: Impact on Personal Finance
What has happened since you secured funding through P2P consumer lending?

12. Peer-to-Peer Consumer Lending: Becoming the First Choice
How likely are you to do the following?
96%
86%
95%

13. Peer-to-Peer Consumer Lending: First Lending Activity
When did you start lending through a P2P consumer lending platform?

14. P2P Consumer Lending: Lender Profile
Income Distribution of Lenders on P2P Consumer Lending Platforms

15. P2P Consumer Lending: Lender Profile
Age
Education

16. Peer-to-Peer Consumer Lending: Motivation for Lending

17. Peer-to-Peer Consumer Lending: Regulations and ISAs
Lenders’ view of FCA’s
regulations in p2p lending
Would a P2P Lending ISA
encourage you to lend more?

18. P2P Business Lending: Reasons for Borrowing

19. P2P Business Lending: Borrower Profile
Years of Trading Annual Turnover in 2013

20. P2P Business Lending: New Option for SME Financing
Did you try to fundraise from the following sources before approaching P2P business lending?

21. P2P Business Lending: Why SME Borrowers Chose P2P Lending

22. P2P Business Lending: Impact on Job Creation, Turnover and Profitability

23. P2P Business Lending: What else has happened since you secured finance?

24. P2P Business Lending: Have you attracted subsequent funding?

25. P2P Business Lending: Becoming the first choice?

26. P2P Business Lending: Lender Profile

27. P2P Business Lending: Lender Profile
Income Distribution of Lenders of P2P Business Lending

28. P2P Business Lending: Lender Profile
Age
Education

29. P2P Business Lending: Motivation for Lending

30. P2P Business Lending: Lending Behaviour & Signals of Quality

31. P2P Business Lending: Lenders are Diversifying
If known, how many business loans in total have you funded through this P2P business lending platform?

32. P2P Business Lending: Lender Confidence
How much do you plan to lend via the P2P business lending platform in the coming 12 months?

33. Peer-to-Peer Business Lending: Regulations and ISAs
Lenders’ view of FCA’s
regulations in P2P lending
Would a P2P Lending ISA
encourage you to lend more?

34. National Consumer Poll: Awareness is high but usage remains low

35. National Consumer Poll: Only 5-7% used P2P lending

36. National Consumer Poll: Why have you not used alternative finance so far?
Sample size: 680

37. National Consumer Poll: AltFin Platforms Vs. Traditional Providers

38. National SME Poll: Awareness is high but usage remains low

39. National SME Poll: P2P lending has the highest familiarity of AltFin models

40. National SME Poll: AltFin Platforms Vs. Traditional Providers

41. The Role of Cambridge in Alternative Finance Research
A: High-profile and high-impact industry research and policy output
The European Alternative Finance Benchmarking Research (PwC + associations in 10 countries)
British Business Bank’s State of Market Report -- on ‘Innovative Finance Platforms’
B: Academic output: journal articles, academic courses, workshops, symposium & conferences
C: Business output: collaborative research, education, outreach, consulting & training programs
An independent and interdisciplinary Cambridge Centre for Alternative Finance (CCAF) is in
active development and at the initial fundraising stage
Key people: Professor Raghu Rau, Bob Wardrop, Dr Mia Gray and Bryan Zhang
Email: zz251@cam.ac.uk Twitter: @BryanZhangZ LinkedIn