After timid growth in 2020, marketplace lending in Switzerland witnessed a strong upturn last year, with total volume rising 20% between 2020 and 2021.
That uptick was driven mostly by improved crowdlending loan volumes, notably in real estate and small and medium-sized enterprise (SME) lending, and growth in the market for loans to public entities and mid-sized and large corporations, a new report by the Lucerne University of Applied Sciences and Arts and the Swiss Marketplace Lending Association shows.
The total volume of new debt capital issued on online platforms in 2021 reached CHF 18.1 billion, up from CHF 15.4 billion in 2020. In the sector, the crowdlending segment witnessed the strongest growth with total volume increasing by a solid 35.5% between 2020 and 2021 (from CHF 448 million to CHF 607 million) compared to the mere 7% growth observed between 2019 and 2020.
These figures show that crowdlending regained some of its strength in 2021 after the market experienced a slowdown in 2020. This downtrend is being attributed to the COVID-19 pandemic which saw the Swiss government launch a loan program that drew SMEs towards traditional banking institutions, subsequently putting a halt to market growth in SME marketplace lending, the report says.
Evidence of this is the 40% drop in SME loan volumes recorded in 2020, which decreased from CHF 159.7 million in 2019 to just CHF 95.9 million in 2020. In 2021, the market regained colors, with volumes rising 15% to CHF 110.4 million. Despite encouraging numbers, the figures still pale in comparison to pre-COVID-19 levels (CHF 159.7 million in 2019 and CHF 134.4 million in 2018).
Besides the rebound observed in SME lending, perhaps most notably is the surge seen in the real estate lending space. Between 2020 and 2021, total real estate loan volumes grew 41% to reach CHF 418 million. The figure represents a 18-fold increase from 2017’s CHF 23.1 million. Data show that real estate crowdlending started picking up steam in 2019 and has since maintained its momentum.
In addition to crowdlending, the segment of loans and bonds for mid-sized and large corporations as well as public entities also recorded notable growth, with volumes rising 28% between 2020 and 2021 (from CHF 9.4 billion to CHF 12 billion).
Mortgage loans through online brokerages saw a more timid growth, registering a shy 6.7% increase in total loan volume.
Moving forward, online mortgage brokers are expected to become increasingly important in Switzerland owing to their current relatively small market share.
Compared to other European countries, platforms make up just a small share of the Swiss mortgage lending market (about 5% of yearly sales), according to consultancy firm Deloitte. This suggests enormous growth potential. In comparison, the use of platforms makes up about 45% of yearly sales in Germany, a proportion that stands at around 65% in France and the Netherlands, and at a whopping 75% in the UK.
The study identifies 12 different marketplace lending platforms for mortgages in Switzerland. MoneyPark, which was launched in 2012 and offers both online mortgages and face-to-face advice in branches, is currently Switzerland’s most established mortgage brokerage firm, the report says. Other notable ones include the Atrium platform by UBS, Valuu by PostFinance, as well as independent players like HypoPlus and Hypotheke.
Another emerging trend to look out for is the rise of sustainability, the report says, an increasingly important consideration in the debt market.
In Switzerland, the first initiatives have already been launched. In the mortgage sector, UBS introduced its so-called “green mortgage” offering on Atrium last year, providing borrowers with an interest rate discount if they meet specified environmental criteria. In SME lending, some platforms have integrated sustainability into their risk models, the report notes.
Moving forward, new, innovative sustainable lending products are expected to continue emerging, it predicts, and platforms will continue to integrate sustainability risk into the risk assessment.
Environmental, social and governance (ESG) investing is a fast growing market in Switzerland as investors increasingly look for long term value and alignment with their values. In 2021, the volume of sustainable investments in Switzerland increased by almost a third, reaching an all-time high of CHF 1.98 trillion, according to a study by industry trade group Swiss Sustainable Finance (SSF).
