P2P Money Blog

At the end of the first day of LendIt Europe there has been a huge amount of information to go through.  We have been actively covering it on Twitter. The conference is around 15% larger than last year with over 900 delegates.  Interestingly 10% of those attendees identify themselves as working for banks.

The headline speaker was Samir Desai, Co-Founder and CEO of Funding Circle, which announced it has a loan book worth $2.5billion from loans arranged within the UK, Europe and the USA.

Samir stated that we are now entering a golden age for peer-to-peer lending.  Funding Circle has performed stress tests and lenders could expect a 2% reduction in lending rates during a "stressed environment", taking the average from 7% to 5%.  Funding Circle are also part of a unique group of peer-to-peer companies that have originated more than $1billion in loans, and this includes Zopa and RateSetter from the UK.

The P2P Finance Association have commissioned a Oxera to perform an independent economic assessment of P2P lending in the UK which was discussed in detail.  Default rates have been consistent, or better than, expectations at time of loan origination for the majority of peer-to-peer companies.

Zopa has been the only peer-to-peer company to go through a credit cycle and the analysis of the data showed that default rates during a recession rose in line with expectations of other lenders.

Chris Woolard of the FCA addressed some of the concerns around the delays in platforms obtaining full authorisation.  The FCA was being diligent to ensure that there was not "an expectations gap between lenders and lending platforms".  It was stated that these authorisations should be addressed "soon".  The FCA was robust in stating that peer-to-peer lending platforms need to ensure that they had the correct permissions or that they would be breaking the law.

Christine Farnish, chair of the P2P Finance Association, stated that the only remaining gate to launch of Innovative Finance ISAs is platforms obtaining full authorisation from the FCA.  Several dates were suggested between January and March 2017.  It is also likely that platforms authorisation would be given in batches to prevent one platform gaining an unfair advantage over another.

There was several mentions of sources of funding and Christine Farnish stated that a mix of retail, institutional and government is a strength for the P2P lending industry.  RateSetter stated that their loans are 95% funded by retail lenders, for Zopa and Funding Circle this figure would be between 30% and 40%.  LendingWorks stated that around 50% of their loans are retail funded.

Nomenclature was also raised several times.  The FCA refers to peer-to-peer lending as "debt based crowd funding" whereas the industry believes this terminology is confusing.  Christine Farnish and Giles Andrews stated it should be "peer-to-peer lending" and whereas others believed it should be "online lending" or "marketplace lending".

Platform fraud was highlighted by Cormac Leech as one of the biggest risks, referring to TrustBuddy, and also stated that the industry has been affected by fallouts from issues in China and Lending Club in the USA.

There were several mentions of Brexit and the affect has had on peer-to-peer lending.  Some companies stated that they have reduced their maximum loan to value, but others have said that the reduction in the Bank of England base rate has increased retail lending funds.

There have been a few press released including Welendus which is a new short-term peer-to-peer company aiming to launch in December, competing with the well-known payday lenders. Borrowing rates of 113% APR would be a tenth of the competition and lending rates of up to 15% AER with bonuses and protected capital would be offered.  Watch this space for further details.

Continue to day 2 of LendIt Europe 2016.