Peer-to-peer (P2P) lending — also called marketplace lending — connects individual lenders directly with borrowers, bypassing traditional banks. In Australia, P2P lending grew rapidly from around 2012 but has contracted significantly since. This article outlines how P2P lending works, what remains available in Australia, and the key risks investors should understand.
How Peer-to-Peer Lending Works
In a P2P lending arrangement:
- Borrowers apply for personal loans, small business loans, or car loans through an online platform
- The platform assesses creditworthiness and assigns an interest rate
- Individual investors fund loans (in full or fractionally across many loans)
- Borrowers repay principal and interest over the loan term
- The platform deducts fees and passes remaining interest and principal to investors
The appeal: investors earn interest rates typically higher than bank savings accounts or term deposits, while borrowers access competitive loan rates without a traditional bank.
The State of P2P Lending in Australia (2026)
The Australian P2P market has contracted substantially:
RateSetter Australia: Once the largest P2P platform in Australia — RateSetter was acquired by Metro Finance in 2021 and subsequently ceased P2P retail lending. It now operates as a commercial vehicle finance business.
SocietyOne: One of the early Australian P2P platforms — focusing on personal loans. SocietyOne has shifted focus toward institutional funding rather than retail investor funding. As of 2026, retail investor participation is limited or unavailable depending on current platform status.
Plenti (formerly RateSetter): After the brand transition, Plenti has focused on vehicle, solar, and personal loans — primarily funded by institutional investors. Retail investor access is limited.
What remains: The Australian P2P landscape for retail investors is considerably thinner than markets like the UK (where Funding Circle and others remain active) or the US. Investors should verify current availability of any platform before investing — the market continues to evolve.
Why Did the Australian P2P Market Contract?
Several factors contributed to the contraction:
- COVID-19 credit risk: Fear of mass loan defaults in 2020 caused many platforms to pause retail investor participation
- Institutional competition: Banks and institutional lenders began funding marketplace loans directly, reducing the need for retail lender capital
- Regulatory pressure: ASIC increased scrutiny of product disclosure obligations and risk warnings
- Rate competition: As interest rates rose significantly in 2022–2024, term deposits and savings accounts became more attractive alternatives, reducing the rate advantage P2P offered
Risks of P2P Lending
Credit risk: Borrowers may default — meaning you lose some or all of the capital lent to that borrower. Unlike bank deposits, P2P loans are not risk-free.
Platform risk: If the P2P platform itself fails (business closure, insolvency), recovering your invested funds may be complex. Platform failure has occurred in other markets.
No government guarantee: Bank deposits up to $250,000 per institution are protected by the Australian Government’s Financial Claims Scheme (FCS) guarantee. P2P investments have no equivalent protection.
Liquidity risk: P2P loans have fixed terms (1–5 years typically). While some platforms offer secondary markets to sell loan interests early, liquidity is not guaranteed.
Concentration risk: If insufficiently diversified across many loans, a small number of defaults can significantly affect returns.
P2P Returns vs Term Deposits
P2P lending was historically positioned as offering better returns than term deposits — with correspondingly higher risk. As at 2025–2026:
- Term deposits: Major banks offering 4.5–5.5% per annum (varies by term and institution)
- High-interest savings accounts: Up to 5.5%+ at select banks
- P2P gross yield (historically): 5–9% before defaults and fees — but net returns after defaults could be materially lower
With term deposits and savings accounts offering competitive rates with government backing, the risk/return case for P2P has weakened for conservative investors.
ASIC Regulation
P2P platforms operating in Australia must hold an Australian Financial Services Licence (AFSL) covering credit activities, and comply with:
- Product Disclosure Statement (PDS) requirements
- Retail investor suitability assessments
- Anti-Money Laundering obligations (AUSTRAC registration)
- Design and Distribution Obligations (DDO) — ensuring products reach appropriate investors
ASIC publishes guidance on marketplace lending on moneysmart.gov.au.
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Frequently Asked Questions
Is peer-to-peer lending available to retail investors in Australia? As of 2026, the retail P2P lending market in Australia has contracted significantly. Platforms that once offered retail investor access — RateSetter, SocietyOne — have shifted to institutional funding models or exited the market. Verify the current status of any specific platform before committing funds.
Is P2P lending safe in Australia? P2P lending carries meaningful risks that bank deposits do not — credit risk (borrower defaults), platform risk (business failure), and liquidity risk (inability to exit early). There is no government guarantee on P2P investments. These risks were highlighted in the COVID-19 period when several platforms paused operations.
Are P2P returns better than term deposits in Australia? Historically, P2P offered higher gross yields than term deposits — but higher risk. With cash rates rising since 2022, term deposits and savings accounts now offer competitive rates with government-backed security (up to $250,000 via the FCS). The risk-adjusted advantage of P2P is less clear in the current environment.
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser through the ASIC financial advisers register or MoneySmart.