If you’ve been following the P2P and A2P market for some time now, you’ll know it has faced a fair bit of challenges. In spite of that, many businesses in these sectors have thrived while others are struggling to keep their heads above water. We spoke with industry leaders and reviewed several research reports to bring to you an insider’s look into the current state of affairs in P2P and A2P ventures. Here’s what we found: With so many players coming into the market, companies in both spaces are finding it difficult to compete with each other in terms of pricing and innovation. While this is good news for consumers who stand to benefit from lower prices and better products as a result of increased competition, players on either side of this battle are struggling.
P2P Companies are Struggling to Survive
Peer-to-peer lending platforms suffered one of the most significant blows to their business in 2017 when China’s central bank issued an order to shut down all P2P lending operations in the country. P2P lending startups in China had grown immensely in the past decade and had become the world’s largest P2P market by volume. The platforms were growing at a rapid pace due to lower interest rates from the banks, favorable regulations in the sector, and easy access to loans for SMEs. However, it was also during this time that Chinese regulators began to notice the high prevalence of Ponzi schemes within the P2P lending sector. It was estimated that as many as 90% of the P2P lending platforms were involved in some sort of illegal activity. As a result, in September 2017, the People’s Bank of China issued a ban on all P2P lending operations in the country. This had a huge impact on the P2P sector as a whole, both in China and around the world. Although P2P operations in many other countries were not affected by the Chinese crackdown, companies in the sector were severely affected by the sudden drop in demand for their services.
A2P Companies are Facing Losses
In recent years, A2P startups have struggled to make a profit due to the fierce competition in the industry. This was one of the reasons why Amazon acquired the delivery firm FedEx in 2018 to expand its logistics network. A 2018 report by the Bain & Company found that just 15% of the global logistics market is dominated by pure-play A2P players, while the remaining 85% is controlled by P2P companies. In the Asia-Pacific region, the A2P market is even smaller compared to the rest of the world due to the rapid growth in P2P operations. This is because companies like Amazon and Alibaba have entered the space and have begun to turn the tables in their favor. The companies have also been able to reduce their costs by using their own logistics network instead of third-party delivery firms. The sheer number of players in the market, along with the high level of competition, has led to price wars that have caused significant losses for many A2P startups.
Why Are P2P and A2P Startups Facing Problems?
In the past decade or so, there has been a significant increase in the number of P2P and A2P startups. This has meant fierce competition between players in both spaces that has pushed the companies towards losses and significant changes in their business models. P2P companies, for instance, are having to deal with the problem of profitability. Companies operating in this space such as Car2Go, Lyft, and Uber have expanded their services on a large scale, leading to increased marketing costs. Moreover, in order to stay competitive, these companies are now offering car-rental services at lower prices, which is leading them to incur losses and put their business models at risk. A2P startups are facing their own problems and are struggling to stay afloat in the fiercely competitive industry. Some of the issues they are facing are the result of the fierce competition, while others are the result of changes in consumer behaviour. A2P firms are facing significant losses due to the fierce competition in the industry, which has led to price wars and has made it difficult for firms to stay profitable. There are also changes in consumer behaviour that have negatively affected A2P startups. One of them is the rise of eco-friendly behaviour that has caused customers to be more careful about the amount of waste their generate. This has impacted the growth of the junk-removal sector.
P2P Platforms Are Struggling to Stay Afloat
Most P2P lending platforms have been built on the premise of offering customers high-interest rates in exchange for higher risk. With the introduction of new regulations in the interest rate sector, more and more P2P companies are being forced to lower their interest rates in order to survive. However, this has created an environment in which it has become difficult for P2P platforms to service their customers. In other words, it has become difficult for P2P platforms to repay the loans they have disbursed to their customers. This has resulted in a drop in trust from investors looking to fund P2P projects. A number of P2P lending platforms have even shut down due to the loss of customers’ trust.
A2P Firm are Finding it Tough to Turn a Profit
The A2P industry is one of the most capital-intensive industries in the world and it is difficult for the startups in this sector to break even. A2P startups are having a hard time turning a profit as they are having to grapple with high costs associated with logistics and the need to invest in expensive technologies. Moreover, in spite of the growth of the eCommerce industry, there is a significant increase in the cost of deliveries that is putting a lot of pressure on A2P firms. After all, the growth of the eCommerce industry has driven up demand for deliveries, leading to an increase in the number of deliveries per day. This, in turn, has led to an increase in the number of vehicles on the roads, which has led to significant traffic congestion. Click here
The P2P and A2P industries have grown significantly in the past decade or so. While P2P companies have struggled to stay afloat due to customer trust issues, A2P firms have had to grapple with high costs associated with logistics and investment in expensive technologies. More than ever, the P2P and A2P industries need to find ways to work together. They will be better off when both sectors collaborate and come up with strategies to counter the current issues they face.