P2P Bubble?

I'll be interested to see the others comment, as I'm obviously biased.

Two initial thoughts though, rapid growth of the P2P "niche" doesn't indicate a bubble as the underlying value of an asset hasn't been inflated disproportionately. Simply more business is being done and in different areas of traditional finance. Secondly, and linked, there are a lot of P2P platforms that have launched in the last year or so - perhaps this is the "bubble". I'm unreliably informed there are approximately 65 P2P platforms currently. Almost certainly some of these will not operate post regulation or when they simply run out of cash or ambition (I've got my money on a specific two, perhaps three). I just hope the closures are orderly, such as RateSetter took over the portfolio of GraduRates, such as NationWide took over several building societies in the crunch.

So the real risk isn't bubble, but platform risk. Do your diligence and be careful.

Anyone at the London lenders drinks Wednesday night will be bought a drink and such matters can be discussed.

@westonkevRS

If there is a bubble it could be in the equity side of the business, but I doubt it.  I suspect that for retail lenders the market will continue to have large portals (and growing) and a bunch of smaller specialist portals.  Institutions are destorting the market heavily but it will get worse.

I launched a thread about the recent Economist article on the subject under "General P2X"

So carry on lending

Back in Q1 2000 if a company announced an intention to invest in internet startups it would be valued at several times its cash balance. This was ridiculous - it required that the company be able to acquire assets at a fraction of their true value at time when valuations were clearly inflated. The example given of a Chinese company announcing its intention to change its business to P2P lending (and registering the domain www.p2p.com, which is claimed to be worth $100,000,000 [1, 2]) is unpleasantly reminiscent of that.

Inflated equity prices for P2P companies are not a direct problem for lenders. The indirect problems are twofold. Firstly the risk of platforms lowering credit standards in the pursuit of growth and equity price appreciation. (Two additional factors here are overconfidence fed by inflated equity prices, and an oversupply of cash from institutions.) Secondly the risk of a proliferation of platforms with sketchy business plans, which proceed to fail.

1. I could get as far as confirming the www.p2p.com was registered in China, but no further; someone who reads Chinese might do better
2. www.p2p.co.uk, www.p2b.co.uk and www.p2l.co.uk are for sale, with minimum prices of £199 each.