Over the last decade, peer-to-peer lending (P2P) has seen an impressive rise as a fintech disrupter to traditional financial and banking services after the 2008 global economic crash. As time marches on, new things emerge that impact the way P2P lending operates and strives to remain sustainable.
In this post, we’ll review global and European perspectives that impact the P2P lending industry as people’s personal finances are impacted by climate change and other socio-political changes.
The Current Status Quo from a Global and European Point of View
Indications seem to suggest that the global move towards less regulated and flexible financial services is set to continue. Traditional banking options are going to have to redesign the way they operate or face serious sustainability challenges.
According to TechBullion, a WEF Global Shapers survey found that only 45 percent of respondents actually trusted traditional banks. This dropped to only 28 percent when younger respondents we separated. In general, younger investors are going to be more open to flexible tech-savvy solutions.
P2P Lending in Europe
It is believed that P2P lending in Europe will continue to do well as it outperforms any traditional bank in terms of return on investment and there is far less regulation. According to Jean Galea, this is further supported by the fact that U.S. and UK P2P lending platforms also prohibit Europeans from participating.
European platforms have been shown to deliver higher returns than that of the U.S. and even Asian P2P lending platforms. European P2P lending is still growing and is poised to reach almost $900 billion USD in market size by 2024. Brexit doesn’t seem to affect it, although this still needs to be seen.
How Could Climate Change Impact Personal Finances in Europe?
Your retirement fund needs to invest in more sustainable initiatives. Be it a traditional wealth fund or a P2P lender, there is a growing trend worldwide to do business responsibly.
Companies now need to proceed with caution on how they conduct business that creates a balance between current business requirements but with an aim to respond to future climate change concerns.
This also puts some of the responsibility on people and requires each person to ask the right questions and not just invest as a complacent participant. We now have to do some research and upskill on alternatives like P2P lending that operate with more socially-relevant practices.
General Utilities are Impacted
Worldwide environmental changes have altered the way we rely on suppliers for fresh produce, manufactured items, or even electricity. ResearchGate reported that markets in Europe are more sensitive to weather conditions as renewables and changing climates become more prevalent.
We will also see more cooperation between countries to import and export things like electricity as weather patterns impact certain areas. This definitely impacts the consumer, so P2P lenders in Europe need to be aware of it.
Homeowners Need Financing for Off-Grid Home Installations
Getting your home off-grid or at least semi off-grid is costly and takes time to receive a “break-even” point where you start receiving more than what you initially invested. Traditional banks may offer financing for this, but there is a lot of red tape.
P2P lending in some of its models is an excellent solution here as it offers more flexible and reasonable financing solutions that make sense to all parties and is a great response to global warming impediments.
European Union Legislation
CO2 gas emissions targets set to car manufacturers in Europe were well reported over the last three years in the wake of the Volkswagen emissions scandal. Here, legislative targets put pressure on manufacturers to invest heavily in research and development to meet these regulations.
In addition to that, there are also taxes that are levied to cars. Electrical cars receive subsidies to help boost adoption as well. Either way, this all ends up getting passed to the consumer, and this will undoubtedly impact the way people budget for personal transport.
3D Printing and Aquaculture Replacing the Need to Manufacture Centrally and Transport Globally
Here P2P lending, at least in some of the formats this lending model operates, could play a vital role as it can act as an enabling function to promote more locally-based production that can be supported by initiatives like 3D printing-based manufacturing and aquaculture.
Simply put, basic items that would normally be manufactured far away and transported using fossil fuels can now be made with 3D printing technologies on request within a local proximity. The same can be said about food production with the rise of aquaculture for basic foods that can be grown close to cities.
Pandemics and Travel Restrictions
By now, everyone has had to adapt one way another to the global outbreak of the coronavirus. One of the major lessons learned was that of trade between countries. According to an article from the World Economic Forum, this pandemic has disrupted global value chains.
This led to a lot of “panic buying” and in some places of the world, supermarkets ran out of many items like toilet paper as rumors surfaced that paper-based resources were going to be channeled towards the making of masks and not toilet paper.
P2P lenders can learn from this as it is always prudent to diversify your exposure. On the other hand, there is much opportunity to invest in technologies or startups that enable people to work remotely with the use of technology. Even investing in hygiene solutions is also a good way to participate.
Whatever this pandemic will bring, it is clear already that the world will never be the same again, and most likely it will have a significant impact not only on personal finance but on many finance companies and the way they operate their businesses.