Crowdfunding and P2P: what’s the difference?

February 07, 2017 • By Emily Mackay

Crowd finance continues to be dominated by both crowdfunding and peer-to-peer lending. But what's the difference between them? Why do commentators distinguish between these 2 forms of finance?

Crowdfunding and peer-to-peer (P2P) lending, like competitive siblings, are at once part of the same marketplace finance movement and yet distinct.

In essence, P2P is a term reserved for debt marketplaces such as Zopa, Ratesetter and Creditshelf. It was coined by the earliest loans platforms that served individuals, reflecting the idea that you borrowed and loaned to your peers.

The online marketplace concept eventually extended to lending to businesses, however the P2P label stuck. In recognition of this change the term is sometimes modified to P2B, however it is increasingly being eclipsed in favour of "marketplace lending". This latter term has gained considerable traction, illustrated by the 2016 decision to name the new US industry body the Marketplace Lending Association.

Crowdfunding, in contrast, has been more of a catch-all term, reflecting the different kinds of funding which a platform may use to raise finance from a group of contributors. Crowdfunding spans equity, rewards, donations and other niche types, and is often specifically delineated as such, e.g. "equity crowdfunding".

What P2P and crowdfunding have in common

Both crowdfunding and P2P are parts of what we call crowd finance, a technology-driven sector that presents the public with opportunities to fund and to be funded. Those in the industry range from seeing P2P platforms as entirely distinct, through to some who feel a sense of unity in the financia and technological disruption.

At Crowdsurfer, we refer to all the above forms collectively as 'crowd finance', to encapsulate the range of funding formats applying marketplace technology. In fact, trying to bucket the industry into two terms is a bit fraught and we always try to be specific about which subset we mean.

Depending on who we're speaking to, "crowdfunding" can have very different meaning. To an angel investor, it invariably means equity; to Americans, it often means rewards; Europeans have an even broader definition of the term.

For more on the terminology and crowd finance vs crowdfunding see our recent blog


If you're new to crowd finance and worried about getting up to speed, fear not, you can delve into the very best data at CrowdSurfer Pro. It's free to sign up.

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