Baying for blood
- 02 Feb
The critics of the P2P sector are seated in the gallery, waiting, it seems, for that exquisite moment of high drama when the first major casualty hits the deck. The mainline media have done their bit to feed the audience’s sense of anticipation by shifting en masse from being widely supportive of Alternative Finance to becoming arch inquisitors, highlighting every blip and blemish. Even the Governor of the Bank of England, Mark Carney, has recently weighed in with a grim warning about the potential for financial instability posed by P2P crowdlending and crowdfunding.
Finally, enter stage left the industry regulator, the FCA, which is due to introduce a new rule book this summer having already outlined its main areas of concern – negative points gleefully seized upon by a press corps sensing blood. In the meantime, the FCA has held many of the major platforms in a queue waiting to be granted Full Authorisation to go about their lawful business. From hero to zero, P2P has suddenly been cast as the villain of the piece.
Enough already. The sector stands accused of nothing more damning than simply growing up and beyond the old rule book. Like any fast-developing new industry, there will be some good guys and bad guys, some successes and failures: it’s normal.
However, for the sake of some light relief, let us remind ourselves of the huge strides that have been made by the sector in just a few years – all achieved without any major damage being inflicted on either private or institutional investors. And all the money flowing in one side is going out the other to help creditworthy consumers and SMEs.
Zopa, for example, the founding father of P2P, recently announced that it had passed the £2bn lending milestone after almost 12 years of operation – a period, incidentally, that included a global banking meltdown and financial instability on a massive scale. Funding Circle and RateSetter are close behind at around £1.7bn, although both only opened their doors in 2010. The momentum that has been achieved in this relatively short time is nothing short of remarkable, particularly since the IFA community, with all its self-declared probity, has stood watching from the sidelines leaving only the headline writers of the press to dispense financial advice.
The success of the sector owes very little to anyone outside the community. Fortunately, consumers and hard-nosed institutions alike recognise a good thing when they see it and have used their own common sense to decided what constitutes a good balance of risk and reward. Given the interest rates on offer from traditional institutions, it is small wonder that appetite for yield remains unabated.
Some credit, too, should go to the marketers who, despite all the handicaps, have been successful in raising the awareness of borrowers, lenders and intermediaries alike to just what is available in the Alternative Finance market place.