If you invest on Income Marketplace, you already participate in lending money to borrowers outside the traditional banking system. Most investors know this as P2P lending. But P2P lending is one part of a much larger market, and knowing where it sits helps explain where your returns come from and how the risks are structured.
This is the first post in a new series on how P2P lending fits into the wider world of credit: how it compares with other ways of lending, who borrows, and how investor protections work. In this post, we zoom out. We look at how lending works today, which part of it happens outside banks, and where P2P lending fits in that picture.
The short version
Banks have not been the only major source of credit for a long time. Non-bank lenders currently hold just over half of the world’s financial assets, and one of the fastest-growing parts of that world is private credit: loans negotiated directly between lenders and borrowers, outside banks and public bond markets. P2P lending, a form of private credit, is the part of that market traditionally dominated by large institutions that is built for individual investors.
Lending no longer runs only through banks
For most of the last century, borrowing meant going to a bank. That is still true for many large loans: banks hold about 81% of all loan assets worldwide, according to the Financial Stability Board’s 2025 monitoring report. This includes large corporate loans and mortgages.
But the wider financial system has shifted. At the end of 2024, non-bank financial institutions (pension funds, insurers, investment funds, finance companies and others) held 51.0% of total global financial assets, around $257 trillion. Their assets grew 9.4% in 2024, about twice the pace of banks.
Two forces drove this. After the 2008 financial crisis, stricter capital rules made some types of lending less attractive for banks to keep on their books. At the same time, investors looking for income beyond savings accounts and government bonds were unable to step into that gap. Specialist lenders emerged to connect the two.
Private credit: the umbrella category
Private credit is lending by non-bank lenders where the terms are negotiated directly with the borrower, rather than through a bank or a publicly traded bond. Because these loans are not traded on an exchange, there is no single official figure for the market’s size. Estimates for 2026 range from about $1.7 trillion to $3.5 trillion, depending on what is counted, and on any measure, the market has roughly tripled since the mid-2010s. Several forecasts see it approaching $4 trillion by around 2030.
The main investors are institutions: pension funds, insurers, sovereign wealth funds and university endowments. They are drawn by a yield premium over public bonds, which they earn in exchange for accepting that their money is less liquid. Some of the world’s largest asset managers now run private credit books worth hundreds of billions of dollars.
Private credit is not one market but a family of related strategies:
Segment | What it finances |
|---|---|
Direct lending | Senior loans to mid-sized companies |
Mezzanine and junior debt | Higher-risk loans that rank behind senior lenders, for higher returns |
Real estate and infrastructure debt | Physical assets such as buildings, energy and transport |
Asset-based finance | Lending secured against receivables, equipment or other collateral |
Distressed and special situations | Companies in financial difficulty or going through restructuring |
Private credit in Europe
Europe’s private credit market is smaller than the US market, but it is one of the fastest-growing in the world. European private credit reached about €450 billion in assets under management by the end of 2025. In the first nine months of 2025 alone, European private credit funds raised a record $65 billion, around 35% of all private debt raised globally in that period. Industry projections suggest the market could exceed €800 billion by the end of the decade.
The main reason Europe has room to grow is that European companies still borrow mostly from banks:
Europe | United States | |
|---|---|---|
Bank share of corporate credit | about 70–76% | about 21–25% |
Non-bank lending share | about 12% | about 75% |
The same forces that built the US market are now at work in Europe. Banks have pulled back from some types of lending because of stricter capital rules, and specialist lenders are filling the gap. Public investment in infrastructure and defence is creating new borrowing needs, and a growing number of US asset managers and pension funds are building European private credit portfolios.
Access for individual investors is also changing. Under the EU’s revised European Long-Term Investment Fund rules (ELTIF 2.0), which apply from 10 January 2024, retail investors no longer face the previous €10,000 minimum investment or the cap of 10% of their portfolio. The direction of policy is clear: private credit in Europe is gradually opening up beyond institutions.
Where P2P lending fits
P2P lending shares the defining features of private credit. The loans are made outside banks; they are not traded on public markets, and investors earn interest in return for taking on credit risk and accepting that their money is committed for a set period.
Within the family above, P2P lending sits closest to asset-based finance. When you invest on Income Marketplace, you fund loans issued by Loan Originators: specialist lenders that provide consumer and business loans in their own markets. Your return comes from the repayments on those loans.
The real difference lies in access and packaging:
Institutional private credit | P2P lending | |
|---|---|---|
Typical investor | Pension funds, insurers, endowments | Individual investors |
How you invest | Commitment to a fund, often with high minimums | Directly in individual loans, from small amounts |
What you can see | Periodic fund reports | Each loan you hold, its originator and its terms |
Who chooses the loans | The fund manager | You, or Auto Invest based on your settings |
The mechanics of how risk is shared are also familiar. Institutional lenders often require the originating lender to keep a stake in the loans it sells, so that both sides lose if the loans perform badly. On Income Marketplace, this is the Junior Share: the part of each loan the Loan Originator keeps, which ranks behind investors’ claims. We will look at this and our other protections in detail later in this series.
What this means for you
Seeing P2P lending as part of private credit helps explain how your investment behaves.
- Where returns come from: you are paid for investing money that is committed for a period and cannot be sold instantly on an exchange. That illiquidity is a large part of why private credit, including P2P lending, pays more than savings accounts or government bonds.
- What drives risk: the main risk is credit risk, meaning that borrowers or a Loan Originator may not repay as agreed. This is why the quality of each Loan Originator, and the protections attached to its loans, matter more than the headline interest rate.
- Why diversification matters: institutions spread their private credit holdings across many borrowers, sectors and countries. The same principle applies to a P2P portfolio of any size.
It is also worth being clear about the limits. Private credit has grown rapidly during a period of relatively low defaults, and at its current size it has not yet been tested through a severe, prolonged downturn. Higher yields reflect higher risk, and no structure removes that risk entirely.
What comes next
In our next post, we compare P2P lending with private credit funds side by side: what is the same, and where the two genuinely differ.
If you have questions about anything in this post, write to us at hello@getincome.com.
Happy investing!
Sources
- Financial Stability Board, Global Monitoring Report on Nonbank Financial Intermediation 2025 (16 December 2025): non-bank share of global financial assets, banks’ share of loan assets, private credit definition
- Universal Asset Owners, How Big Is the Private Credit Market? (16 June 2026): market size estimates, growth, segments, investor base, limits
- Latham & Watkins, UK Trends and Developments, Chambers Private Credit 2026: European market size, fundraising, bank vs non-bank lending shares, growth drivers
- McCann FitzGerald, ELTIF 2.0: A Revitalised Framework for Retail Investors (29 May 2023): ELTIF 2.0 retail access changes
