It seems like it won't be long before we will all have to stop referring to peer-to-peer (P2P) loans as a form of 'alternative' finance. Once a radical idea advocated by idealistic entrepreneurs, the funding source is increasingly seen as a mainstream way to borrow cash and to save – so much so that even the Government is backing it with the launch of a new 'Innovative Finance ISA' last year.
Today Zopa, the firm that pioneered P2P lending, announced that a total of £1bn has now been lent through its platform, making it the first such company to reach that milestone. It helps that Zopa had a head start on most of its rivals, having launched in 2005, but the firm has been growing rapidly since the financial crisis as disillusioned punters have sought out an alternative to the banks. Zopa said it has already matched more loans so far this year than in the whole of 2014 and plans to reach £550m in 2015 alone.
'We’re delighted to have lent over £1 billion and will continue to deliver the best service across consumer finance as we aim to lend our next £1 billion in 2016,' said CEO and co-founder Giles Andrews. 'I’m proud that over the past 10 years Zopa has established itself as a trusted and mainstream service for UK consumers.'
That trust is partly due to the success of Zopa's operations, but it is also the result of achieving recognition from the establishment. In 2012 it landed £12m from the Government's Business Finance Partnership and last year the Financial Conduct Authority created a whole new set of regulations for the P2P lending industry. In May Zopa announced a partnership with Metro Bank.
Today's news comes shortly after several funding rounds for other alternative finance companies. Yesterday invoice finance provider MarketInvoice said it had landed £6m from existing investors and back in March Ratesetter, one of Zopa's competitors, raised £20m. Seedrs and Crowdcube, both crowdfunding websites that let investors buy equity in small companies, last month raised £10m and £6m respectively.
Of course the big banks still remain the dominant providers of business funding and consumer financial services, and will continue to be so for the foreseeable future. But innovative alternatives are on the march and look like they are here to stay.