Latest figures released by the Peer-to-Peer Finance Association have revealed that cumulative lending facilitated by P2PFA platforms reached over £10bn during the third quarter of 2018, representing a significant contribution to the UK’s economy.
This upward trend will no doubt continue as platforms continue to develop their online user experience and surpass the paltry depositor interest rates available elsewhere.
Interestingly, one can draw an analogy with the football Premier League where a small number of top clubs essentially form their own mini – league. In P2P, Funding Circle have had a successful IPO and are looking to expand overseas, Zopa has obtained its banking licence with plans to become a major force in retail banking whilst Ratesetter is also likely to consider an IPO.
Amongst the smaller platforms I think there will be continued innovation in the types of loans on offer, which will vary between ‘vanilla’ loans to small businesses, property development projects and less speculative buy to let investments. There will also be a continued focus on staying true to the democratic roots of P2P, factoring in the concerns of the FCA about whether retail investors are sufficiently sophisticated to appreciate the various risks of P2P investments.
Innovative Finance ISA (IFISA) – The option for investors to place funds into the sector via the Innovative Finance ISA has proven to be a valuable tool for platforms as this market area has exponentially grown. I believe that more platforms will be launching this ‘tax wrapper’ with HMRC approval to offer a wider range of investment opportunities.
Brexit – Whilst many in the sector consider that it will be ‘Brexit – proof’ the consequences will prolong the uncertainty in both commercial and retail markets. It is likely to speed up the changes in the business cycle and the sector may find itself tested by economic fluctuations much sooner than expected. What will this mean? A necessity to dedicate more resources to transparency of information for investors, improving the quality of credit underwriting and the increased adoption of practical Wind Down Plans reflecting commercial pressures. The FCA has recognised that Insolvency Practitioners have a useful role to play to developing these plans and I foresee that our services will be in more demand by platforms in 2019, giving strategic risk management advice on the one hand and customised restructuring services on the other.
