Due to the exponential rate at which technology has developed in recent years, plentiful new businesses have established. The digital revolution is challenging many well situated, regulated and often conservative industries, such as the financial service industry. Several financial technology start-up companies, also known as Finance Technology Companies (FinTechs), thereby constitute as competitors to traditional retail banks by accessing technological innovations.
While the FinTech “eToro” is challenging the investment divisions, start-ups like “Transferwise” are putting pressure on the prices for payment and transfer services. The largest market volumes of so-called alternative finance models in the United Kingdom (UK) have peer-to-peer (P2P) lending businesses, such as ZOPA. P2P, or social lending allows individuals to borrow and lend money to each other directly, without intermediate financial institution, such as retail banks. Subsequently, the global trend of disintermediation also arose in the banking industry.
After reviewing relevant literature the market power of P2P lending as well as its impact on the financial services industry over the last ten years will be assessed. Furthermore, this essay will illustrate the current situation by evaluating the extent to which P2P FinTechs replace personal finance functions of retail banks in the UK. Finally, major aspects will be summarised and future aspects will be discussed.
Table of Contents
1. Introduction
2. Literature Review
3. Evolution of P2P lending and its influence over the past ten years
4. Standing of P2P platforms in the Financial Services industry
4.1. Future Outlook
5. Conclusion
Research Objectives and Key Themes
This paper aims to examine the market power and industry impact of Peer-to-Peer (P2P) lending platforms within the United Kingdom's financial sector over the last decade, specifically evaluating how these FinTech entities are replacing personal finance functions traditionally held by retail banks.
- Analysis of technological advancements and the rise of FinTech competitors.
- Evaluation of P2P lending growth rates and market volume compared to traditional banking.
- Assessment of regulatory and macroeconomic factors driving the popularity of P2P platforms.
- Investigation of strategic shifts and collaborations between retail banks and FinTech firms.
Excerpt from the Book
1. Introduction
Due to the exponential rate at which technology has developed in recent years, plentiful new businesses have established. The digital revolution is challenging many well situated, regulated and often conservative industries, such as the financial service industry. Several financial technology start-up companies, also known as Finance Technology Companies (FinTechs), thereby constitute as competitors to traditional retail banks by accessing technological innovations. While the FinTech “eToro” is challenging the investment divisions, start-ups like “Transferwise” are putting pressure on the prices for payment and transfer services (Hale, 2014; Kaminska, 2016; Milne, 2014). The largest market volumes of so-called alternative finance models in the United Kingdom (UK) have peer-to-peer (P2P) lending businesses, such as ZOPA (KPMG, 2015). P2P, or social lending allows individuals to borrow and lend money to each other directly, without intermediate financial institution, such as retail banks (Bachmann et al. 2011; Jones, 2014). Subsequently, the global trend of disintermediation also arose in the banking industry (Authers, 2014).
After reviewing relevant literature the market power of P2P lending as well as its impact on the financial services industry over the last ten years will be assessed. Furthermore, this essay will illustrate the current situation by evaluating the extent to which P2P FinTechs replace personal finance functions of retail banks in the UK. Finally, major aspects will be summarised and future aspects will be discussed.
Summary of Chapters
1. Introduction: This chapter provides an overview of the digital revolution in finance and sets the scope for assessing the competitive impact of P2P lending on UK retail banks.
2. Literature Review: This section reviews existing academic and consultancy perspectives, which generally characterize the financial impact of P2P platforms as modest but growing in strategic significance.
3. Evolution of P2P lending and its influence over the past ten years: This chapter analyzes how technological, macroeconomic, and regulatory changes have facilitated the rise of P2P platforms while pressuring traditional banks.
4. Standing of P2P platforms in the Financial Services industry: This chapter discusses how FinTechs specialize in specific business niches to challenge and provide alternatives to traditional retail bank functions.
4.1. Future Outlook: This section explores how ongoing government support and market trends suggest that FinTechs will continue to conquer specific banking divisions.
5. Conclusion: The final chapter summarizes that while individual FinTechs represent a limited financial threat, their collective specialization is forcing traditional banks to adapt their strategies.
Keywords
Peer-to-Peer Lending, P2P, FinTech, Financial Services, UK Banking, Disintermediation, Digital Revolution, Market Volume, Retail Banking, Regulatory Changes, Financial Crisis, Alternative Finance, Strategic Alliances, Sharing Economy, Technology Development
Frequently Asked Questions
What is the core focus of this research paper?
The paper focuses on analyzing the impact and market position of Peer-to-Peer (P2P) lending platforms within the United Kingdom's financial services industry over the past ten years.
What are the primary themes discussed in the work?
Key themes include the rise of FinTech as a competitor to traditional banks, the role of technological innovation in lowering market entry costs, regulatory impacts post-2008, and the strategic responses of established retail banks.
What is the primary research question or objective?
The objective is to assess the market power of P2P lending and evaluate the extent to which these FinTech entities are replacing the personal finance functions of traditional retail banks in the UK.
Which scientific methods or approaches are utilized?
The work employs a literature-based analytical approach, synthesizing existing academic research, industry reports, and quantitative estimations regarding loan volumes and market growth trends.
What topics are covered in the main body of the document?
The main body covers the historical evolution of P2P lending, an analysis of the regulatory and macroeconomic advantages held by FinTechs, and an assessment of current market standings, including a future outlook for the industry.
Which keywords best describe this study?
The study is best characterized by keywords such as P2P Lending, FinTech, Disintermediation, UK Banking, Financial Services, and Digital Innovation.
How did the 2008 financial crisis influence the rise of P2P platforms?
The crisis led to tightened regulations for retail banks and a significant loss of public trust, which created a gap that P2P platforms could fill by offering more attractive terms and leveraging the sharing economy.
Does the author believe a single FinTech will replace retail banks?
No, the research concludes that it is unlikely a single FinTech will replace all functions; rather, it is more probable that various specialized FinTechs will challenge specific banking divisions individually.
What role does the UK government play in the growth of these platforms?
The UK government supports the sector by recognizing the potential of FinTechs to drive economic growth, offering tax breaks for P2P investors, and reviewing regulations to facilitate institutional involvement.
- Quote paper
- Anonym (Author), 2016, Analysis of Peer-to-Peer Lending Platforms in the UK, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/364472
