Most common online lending marketplace models in Europe

Alternative finance and online lending has become modern investing terms. The phrase represents the democratization of lending and borrowing without the need for traditional financial institutions.

However, some are surprised to learn that within alternative finance there are various models. Here we offer a breakdown of some of the popular models including our own.

Direct Online Lending

Direct lending is probably the closest equivalent to the term peer-to-peer lending. Bondora is a direct lender/P2P lender. Essentially this means we connect borrowers with lenders directly. In fact, ignoring banks is part of the appeal for most investors. Direct lending grew from the rubble of the global financial crisis. This model helps drive down costs by leveraging technology, reducing overhead and relying on superior credit analysis programs.

Marketplace Lending

Here investors can choose to invest in loans designed to serve business in various sectors. The loan originators involved might issue automotive loans, mortgages, business loans, personal loans and even agriculture loans. In marketplace lending model, multiple institutional loan originators offer a more scaled up market for investors. The downside of having multiple loan originators on one platform is that the loans might be issued by different standards, scoring models etc which keeps the decision-making less transparent for investors.

Marketplace lending can also work in conjunction with traditional brick-and-mortar banks. The capital reserves of a conventional bank offer stability for online lending businesses. Meanwhile, banks benefit from the growth, scalability and technological innovation of marketplace lenders. Online lending marketplaces have become so attractive for institutional or big corporate investors, that vast majority of total funds invested are provided by them.


With crowdfunding model investors are committing cash to a singular project or venture with a clearly defined cause or end goal. Today this market is worth billions. Here, there are two main types. The first offers a pre-sold service or good to the investor. The second offers shares of a company for the capital committed. The latter of the two represents an investment in the truest sense. You’re making an upfront commitment in the hopes that your equity shares have value in the long-term. Given that the project has a completion date these ventures are not perpetual as some of the other models are. Essentially, the investor either makes some money or no money. Risks are high and a return can take years, but in case of success the returns can later pay big dividends.

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