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The first company that offered peer-to-peer loans in the world was Zopa, founded in the UK in 2005. The US soon followed with the launch of Prosper in 2006, followed by LendingClub and others.

Many people turned to peer-to-peer lending in the West as a result of the financial crisis of in late 2000s. Banks were very reluctact to offer new loans and offered interest rates which were virtually 0% to savers. Because of this, borrowers had to look for alternative sources of loans and savers actively looked for higher yielding investments.

In China, peer-to-peer lending has existed as an offline practice for centuries. As e-commerce took off in the country, many P2P lenders sprung into existence and rapidly grew. China as a whole may eclipse the rest of the world in the value of loans originated in the P2P lending market.

Market Size

According to Morgan Stanley, Peer-to-peer lending is in a period of high growth. It reached USD 25 billion in 2014, and may reach USD 290 billion by 2020. With new countries joining the trend and the product becoming more mainstream, the forecast may prove accurate.

While there are still reservations about the product in general, in the US the product is gaining acceptance. Institutions have already started to enter the space to fund in whole loans and are starting to represent a large chunk of the loan originations.