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P2P LENDING Winners and losers


Hannah Prevett looks at what lies ahead for the P2P lending sector post-Lending Club scandal and examines the arguments for and against P2P platforms being truly disruptive


in what became the largest technology IPO of 2014 in the US, it was viewed as a pioneer both in the peer-to- peer lending sector and in the FinTech industry more widely. But its halcyon days came to an abrupt end earlier this year when a scandal over some of the firm’s loans erupted, resulting in a nosedive in Lending Club’s share price and the resignation of Renaud Laplanche, the company’s Chief Executive.


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While it’s too early to judge what the long-term impact of the scandal will be, industry experts predict regulators will be taking a long, hard look at the sector, which has thus far escaped the onerous legislation imposed on other sections of the financial services community.


“We’re having a slight hiccup in the industry,” admits Jaidev Janardana, Chief Executive of Zopa, which was the world’s first peer-to-peer lender when it was founded by Giles Andrews in 2005. “What happened at Lending Club was unfortunate for the company and the industry as a whole.”


Zopa hasn’t been directly impacted, he adds. “Our supply of lending capital hasn’t declined, if anything we have added more lenders to the platform, both individuals and institutions.”


However, Janardana feels the industry will need to offer reassurances to customers and policymakers in


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hen Lending Club raised $1 billion


the future. “There is some work we will need to do as an industry to make sure that we regain whatever trust we lost with our lenders and our regulators. I expect we will see more more regulatory scrutiny and more scrutiny by our customers, and that’s a good thing because we’ve always felt that as an industry we have to set the benchmark on trust. If this shines a light more sharply on the industry that’s a good thing.”


Margaret Doyle, the partner leading the financial services insights team at audit firm Deloitte, says there’s good reason for the relatively light touch environment amongst marketplace lenders (MPLs). “While they’re called MPLs, they don’t themselves lend so they are technically speaking more like brokers. Really what they do is they match people who want to borrow with people who want to save or invest. Therefore, they don’t suffer the onerous regulations that you have on credit institutions,” she explains.


Doyle says Zopa isn’t the only MPL to welcome regulation. “The reason is that they want that badge of approval; they want to be able to say they’re FCA regulated, for example.” Though this is likely to benefit more established players, she admits. “It’s always the more established you are the more regulations can benefit you than they would a new disruptor.”


In many ways, they are all disruptors. The marketplace lending sector was only invented 11 years ago by Zopa,


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