With 2018 hiccups gone, P2P companies look at 2019 with high hopes

2018 was a landmark year for the peer-to-peer (P2P) industry. As many as 11 P2P players received the RBI licence to operate as an NBFC-P2P company. There were over 30 P2P platforms in India in 2016 but only a handful of them succeeded in obtaining the RBI licence so far. Faircent was the first P2P company to receive the RBI licence.

OMLP2P, Cashkumar, Monexo, i2i Funding, Finzy, Peerlend, LenDenClub, Paisadukaan, LiquiLoans and AnyTimeLoan.in were the other 10 platforms that got their P2P licences this year.

2018 also saw some of the old (unregistered) P2P players vanishing into oblivion despite huge funding. The newer players took their place as they could meet the RBI criteria to obtain the licence. RBI in its master directions has defined NBFC-P2P as a non-banking institution which carries on the business of a peer-to-peer lending platform.

An NBFC P2P company shall not raise deposits, nor lend on its own, and shall not facilitate or permit any secured lending linked to its platform, said the RBI.

As per the directions, "an NBFC-P2P shall act as an intermediary providing an online marketplace or platform to the participants involved in peer-to-peer lending."

The RBI started giving out the licences in May, paving way for the P2P industry’s growth that witnessed a surge in loan disbursements in the second half of the year.

“There was steady growth seen in 2018 especially in the last six months. From a meagre Rs 5-6 crore in January, the loan disbursements swelled to Rs 18-20 crore in December alone,” says Dhiren Makhija, Co-Founder, Cashkumar.

Things that changed the game for P2P
Makhija says the risk appetite of P2P companies increased after they were licenced. He notes three important changes that took place in the industry:

1. Ability to report borrower delinquencies to CIBIL.
2. Access data from CIBIL which helped in credit evaluation and analytics.
3. Psychological barrier broken, especially among investors.

“Starting this year, we also noticed that visibility for P2P lending has enhanced reaching its target audience especially with a lot of other asset classes not performing to their best,” says Abhinandan Sangam, Co-founder & CTO, Finzy.

Besides the metros, P2P lending spread its arms to Tier 2 and 3 cities as well. Faircent says the loan disbursements tripled in Tier 3 cities while they nearly doubled in Tier 2 cities during the year.

“In 2018, disbursements through Faircent.com have grown by 5X, currently 74 percent of all loans disbursed through the platform i.e. around 600 loans every month are to borrowers from Tier-3 and Tier-2 cities,” says Rajat Gandhi, Founder & CEO, Faircent.

Even as most P2P companies focus on salaried class for digital lending, there are many players that have started looking at small and medium enterprises (SMEs) as a flourishing segment.

“GST has been a game-changer in SME lending. Though, we are majorly focussed on Bangalore and Hyderabad. We look at Tier 2 as a great opportunity. We will announce our initiatives in the next 4-6 months,” says Makhija of Cashkumar.

Some concerns remain
The Rs 10 lakh cap on P2P lending was one of the important concerns for most P2P players looking at large investments. Representatives from the association of NBFC P2P players had met with the RBI this year, and are hopeful of a positive change.

“Investors are sitting on the fences. We are hopeful on RBI regarding the Rs 10 lakh cap on P2P lending. The association has presented its concerns to the RBI,” adds Makhija.

“We also anticipate the possibilities of RBI relook at the Rs 10 lakh limit for an investor. 2019 will be a better year for the P2P industry and we hope to see the industry play a significant role in the country's economy,” adds Sangam of Finzy.

Read here: How the Rs 10 lakh cap will affect small businesses?

Consolidation on the cards?
Even as Faircent, that holds 40 percent market share, was able to raise capital from some of the marquee investors like Muthooth Fincorp, Incofin IM, Starharbor Asia Pte Ltd, JM Financial, etc., It remains to be seen if other P2P companies are able to sustain the challenge in the coming year.

Talking about mergers, Gandhi says, “The market is too small for consolidation amongst platforms. The serious players will continue to invest in innovative technology and resources that help create simple financial offerings for consumers and ensure value for all stakeholders in the lending chain.”

Raghavendra Pratap Singh, Co-Founder, i2ifunding echoes the same view. “As of now, nothing of this sort is going to happen. The P2P market is good enough to sustain 10-12 players.”

However, he is wary of investments in 2019. “The HNIs and Chinese investors are not very excited. Big ticket investments will take place only when there is a clear winner, 2019 will define the leader in the P2P industry.”

Outlook for 2019
“Lenders today look at P2P as a legit investment option. 2018 was a foundation building year, I think 2019 should be way more exciting. We expect exponential growth and see more awareness in the next 7-8 months. The P2P industry is estimated to disburse Rs 1,000-1,500 cr loans in 2019,” says Makhija of Cashkumar.

The Indian P2P lending sector saw some unique offerings like the 9.99% loan offer for prime borrowers, SIP for lenders, etc. in 2018. “Removal of regulatory uncertainty led to increased traction for the sector, unlocking of credit supply putting downward pressure on lending rates,” feels Gandhi.

The banks and NBFCs today cater to 3-4 percent of the population for their credit requirements. With increasing proliferation of digital transactions, fintech innovations, and demand for affordable credit, the P2P sector has emerged as an alternate investment and lending platform. The current size of Indian P2P market is around Rs 200 crore, and it is projected to be $4-5 billion by 2023.