Brokering loans to corporations, private individuals, municipalities and cities on the internet continues to be on the rise. A study by the Lucerne University of Applied Sciences and Arts shows that market lending platforms brokered loans worth CHF 21.4bn in 2022, or four times the volume of 2017.
Online platforms popular with public entities
However, the volumes and growth rates of the different segments of marketplace lending (see box for definitions) vary significantly. At CHF 13.7bn, loans and bonds for mid-sized corporations, large corporations and public entities make up nearly 65 per cent of all debt financing through online platforms.
“For public entities such as municipalities, cities or, for instance, hospitals and transport companies, marketplace lending has become an important source of funding,”
says Prof Dr Andreas Dietrich, one of the study’s co-authors. He and his and his fellow authors estimate the sector’s share of debt financing via online platforms to be at around 15 per cent.
“Many have now realised that that this funding option can be particularly attractive from a cost perspective,” Dietrich continues.
Slower growth in online mortgages
Intermediaries of mortgage loans achieved a volume of CHF 6.2bn in 2022. The study’s authors estimate this to be equivalent of a 3.5 per cent market share. However, the growth dynamic of online intermediaries has been steadily slowing over the past three years. According to the study’s authors, the reasons for this are manifold and include rising interest rates, the demise of Credit Suisse and entrenched customer behaviour. That is why certain mortgage intermediaries have adjusted their business model too, focusing less on the platform’s business with direct end-customer contact (B2C area). That is why the study’s authors expect no further growth in the B2C online mortgage market in the next two years.
Institutional investors and fintechs important for the Swiss financial market
With the exception of crowdlending, marketplace lending is open to institutional investors only. However, in crowdlending, about half of the capital invested comes from institutional investors as well. Pension funds and external asset managers in particular actively invest via crowdlending platforms or indirectly via the corresponding fund solutions.
“The involvement of institutional investors is absolutely essential for the development of the market in Switzerland, as the demand for loans can be met quickly given the high investment volume,”
says a co-author of the study, Dr Simon Amrein.
- Crowdlending loans:
Private individuals and professional investors grant loans to other private individuals (consumer credits, mortgage-backed loans) or SMEs (corporate loans, mortgage-backed loans). - Mortgage loans through online brokerage platforms:
Professional investors fund mortgage loans for residential or investment properties. In contrast to crowdfunding platforms, the investor base is professional-only (e.g., asset managers, family offices and pension funds). - Online loans and bonds for mid-sized corporations, large corporations, and public entities:
This segment includes loans to public entities (municipalities, cities, cantons, state-affiliated businesses) as well as mid-sized and large corporations. There are professional investors only in both sub-segments
Source: Lucerne University of Applied Sciences and Arts, Oct 5, 2023