Online Lending Market Declines in Switzerland

Explore the reasons behind the shrinking online lending market in Switzerland and its impact on borrowers and financial institutions.

In a rather unexpected turn of events, the landscape of credit granted through online platforms in Switzerland has witnessed a notable decline, plummeting by 11% to CHF 18.6 billion in 2023, as revealed by a comprehensive academic study. This downturn starkly contrasts with the mid-term trajectory that had seen a remarkable 240% increase in volumes over the preceding five years, a trend meticulously documented by researchers from the Lucerne University of Applied Sciences and Arts (HSLU) in collaboration with the Swiss Marketplace Lending Association (SMLA).

Delving deeper into the figures, it becomes apparent that online loans and credits extended to large corporations, small and medium-sized enterprises (SMEs), and public-sector entities constituted approximately 70% of the total volume last year, amounting to CHF 13.2 billion. However, this segment too experienced a contraction, with a 7% decline that raises eyebrows and questions alike. Notably, online loans have emerged as a significant financing pillar for public-sector entities, boasting an estimated market share of around 15%, as the report elucidates.

In a further twist, the online mortgage brokerage sector has not escaped unscathed, suffering a staggering 19% decline. This downturn is largely attributed to shifts in the interest rate environment and strategic recalibrations undertaken by various platforms. Some mortgage brokers have opted to exit the traditional retail market or have redefined their business models in response to these changes. Looking ahead to 2024, experts predict a period of stagnation or potentially a slight decline; however, the long-term outlook for this segment remains cautiously optimistic.

The crowdlending segment, too, has felt the weight of these economic fluctuations, experiencing a decline of 20%. The study highlights that this particular segment has endured a tumultuous few years, navigating the turbulent waters of the Covid-19 pandemic, followed by a wave of economic uncertainties and a swift rise in interest rates. Despite facing isolated credit losses, investors have managed to secure an average return of 3% over the past eight years, even after accounting for losses and associated costs.

While the current figures may paint a rather somber picture, the underlying complexities and potential for recovery in the Swiss online credit market warrant a closer examination and a dash of humor—after all, even in the world of finance, one mustn't forget to chuckle at the unpredictable nature of economic tides.