In Focus Collections Britain’s scaling P2P industry
The growth and development of the P2P lending sector looks set to continue, despite the UK’s decision on Brexit
Tarlochan Garcha Chief executive officer, Kuflink
t.garcha@
kuflink.co.uk
In the immediate aftermath of the 2007- 2008 recession, consumers and investors found themselves confronted by a banking system ill-equipped to meet the needs of a dynamic and evolving market. As a response to this, a wave of innovative
alternative forms of finance emerged to challenge traditional financial structures, led by the rise of the peer-to-peer (P2P) lending. Since 2010, the P2P sector has been
celebrated for its success in democratising access to finance, ensuring that consumers are able to access capital in a fast and effective manner without the unnecessary burden of stringent lending measures and time-consuming bureaucratic processes.
No sign of cooling Since their inception in 2007, P2P finance providers have written about £10.6bn worth of loans to businesses, consumers, and investors. This is an extraordinary number, given the sector has only been in existence for under 15 years. Moreover, Business Insider Intelligence
forecasts that UK P2P lending will experience a 45% five-year compound annual growth rate, resulting in the sector reaching an impressive £16bn by 2020. Few industries have ever been able to maintain such a significantly high rate of scalability, and, based on these figures, the P2P market shows no signs of cooling down. One of the reasons why P2P lending has
continued to expand is due to the willingness and openness of the government to understand the industry, and implement policy reforms that are collectively bringing P2P lending into the mainstream. For instance, the Financial Conduct
Authority (FCA) has created a separate set of June 2017
www.CCRMagazine.co.uk
regulations to govern P2P lending, and has been authorising P2P platforms following strict due-diligence checks. This so-called ‘stamp of approval’ from
the FCA is an important step forward for the industry, demonstrating to investors, businesses, and financial advisers that P2P lending is an effective and transparent source of finance. This has been complemented by the
launch of the Innovate Finance ISA, which allows taxpayers to use their annual ISA investment allowance to lend funds through the P2P lending market.
Into the mainstream As P2P lending shifts into the mainstream arena, high-street banks have been forced to react to this rising industry. The head of the British Business Bank announced in April that P2P lending is starting to impact the SME-finance market. In response, banks are now reviewing and
updating their service to ensure that they can compete with alternative lenders. For entrepreneurs, this heightened competition is a win-win situation. In Britain, alternative finance is
This so-called ‘stamp of approval’ from the FCA is an important step forward for the industry
spearheading a financial revolution, supported by disruptive innovations that embrace new technological practices to enhance traditional financial services. Reflecting our country’s entrepreneurial spirit, the UK’s thriving community of fintech scale-ups has resulted in the nation being crowned the global fintech capital. It is estimated the UK fintech sector
generated over £6.6bn in revenue in 2015 and attracted around £524m of investment.
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