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industry itself, and was magnified by the media. “There’s a sense of mission and a sense of purpose like, ‘We’re trying to bring finance to parts of the economy the banks don’t reach’,” says Doyle. This meant that both borrowers and investors were keen to look at new options in the post-recession climate. “We did some YouGov research and found that certainly among investors the idea of experimenting was a driver,” she adds.


But could the peer-to-peer lending bubble be about to burst? Deloitte’s recent report Marketplace lending; A temporary phenomenon suggested the Lending Club scandal may only be the beginning of an unsettled period for MPLs. Doyle says one of the biggest tests of the market will be when interest rates return to normal. “One of the reasons we’re cautious about making long-term predictions about these guys taking over the world and displacing banks, which some people were predicting, is that we’re in a very unusual interest rate environment. Interest rates have not been this low for 300 years.”


Once interest rates recover and the banks are able to offer attractive savings options, the appetite for experimentation with MPLs may diminish, she explains. “One of the biggest challenges for MPLs will be attracting people when interest rates normalise.”


What’s more, as the sector matures and we enter a new economic cycle, there will be natural winners and losers. “There are some that have been around for 10 years, but a lot of these MPLs have not been around for that long. So any business institution will do better at some times in the cycle than others, and clearly in the low interest environment and current business environment we haven’t had a horrible recession for years now. If and when that happens that will clearly test business models,” says Doyle.


Adam Tavener, Chairman of Alternative Business Funding and Clifton Asset Management, believes that the business models of MPLs are fundamentally flawed. “Despite miles of press coverage and eye watering marketing budgets, the significant breakthrough to profitability still remains elusive. It is still a fact that for the majority of platforms of this sort the cost of acquiring a new piece of business


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is greater than the lifetime value of the deal, and that’s before you take overheads into account.”


Yet some of the bigger players have already taken steps to address the cost and speed of customer acquisition by partnering up with banks. “FinTech may have low marginal cost but for the business model to work they need scale and therefore they need customers and they need a brand. Who has scale, customers and a brand? The banks have all of those things,” comments Doyle.


While such partnerships are currently more commonly in the US, they are undoubtedly also becoming more popular in the UK, with Funding Circle having dipped a toe in the water with RBS and Santander, and Zopa joining forces with Metro Bank to offer personal loans to customers. “I’ve always thought that the idea of a financial supermarket was a bit overblown but I can completely relate to a financial supermarket where some best in class proprietors come together integrated not by ownership but by technology and using APIs. This way the customer has a lot more choice on what products they want to use and from whom,” says Janardana.


He argues that there is plenty of room for both traditional banks and alternative lending platforms like Zopa. “It’s about finding the right collaborators where we can combine the strengths of multiple models rather than saying one model will decimate the other one, or one model will become irrelevant. There is enough demand on both sides of the marketplace that we’ll continue to grow,” he says.


Certainly for now, growth shows no sign of abating. The Deloitte report highlights stellar growth of the market in 2014-2015, with UK MPLs loaning £2.7 billion in 2015 versus £1.5 billion the previous year. But Doyle agrees that for MPLs to continue on that growth trajectory, they will need to collaborate with more traditional financial institutions. “Banks and FinTechs are natural allies and collaborators rather than competitors. The natural thing for most FinTechs will be to be acquired by banks rather than to substitute them. You’ve heard the rhetoric that banks are dead but they’re not. The business model is not dead.”


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