Peer-to-peer lending and financial innovation in the United Kingdom

(with David Bholat), Bank of England Staff Working Paper No. 598

Published

2016-04-27

ACCESS THE PAPER HERE, and the expanded version available as a book chapter in: Law and Finance After the Financial Crisis: The Untold Stories of the UK Financial Market. Ed. Abdul Karim Aldohni. Routledge.

Abstract

Peer-to-peer (P2P) lending – direct lending between lenders and borrowers online outside traditional financial intermediaries like banks – first emerged in the United Kingdom and the world with the launch of Zopa in 2005. Our paper provides a quantitative analysis of nearly 14 million loan agreements. We lay bare the history of P2P lending from its beginning, showing the regional geography of P2P lending in the United Kingdom. We suggest that the history of P2P lending can shed light on financial innovation in general. We base our conclusions on four semi-structured interviews with the founders of the three most significant UK P2P platforms (Zopa, RateSetter, and Funding Circle).

Useful things

More content

  • The Financial Times featured the study on its printed front page: Digital finance lending set to hit £1bn
  • The study was released on a micro-page titled Show me the Money (no longer maintained), including an interactive visualization with a cartogram. Below is the growth of lending over the years 2010-2013.

A gif of a map of the UK with increasing number of lenders.

A gif of a map of the UK with increasing number of recipients.