P2P Money Blog

With the Scottish referendum several weeks away, we look at how independence could affect peer-to-peer lending between Scotland and the rest of the United Kingdom.

The vast majority of UK peer-to-peer companies are based in England, with one company - Funding Empire - based in Wales.  As yet there is no major peer-to-peer lending organisation based in Scotland.  Today Scottish borrowers can use peer-to-peer lending sites such as Zopa, RateSetter and Funding Circle to both lend and borrow.  If Scotland were to separate from the rest of the UK, would this situation continue?  Existing Scottish borrowers would still be required to repay their current loans in Sterling, and existing lenders would receive interest and capital in Sterling.  However, would peer-to-peer companies allow Scottish individuals to continue to use peer-to-peer services based in the remaining UK?  Would UK lenders continue to fund loans for individuals that are now outside the UK?

Bondora currently facilitate loans between UK lenders (as well as other European lenders) and European borrowers, so cross border lending does exist, but the lender assumes the currency exchange rate risk.  An independent Scotland is unlikely to be able to formally use the Pound, but any Scottish currency is likely to be pegged to Sterling, so any currency exchange risk is likely to be small but probably not zero.  If UK-Scottish peer-to-peer lending were to continue the costs for Scottish borrowers are likely to be higher.

Given the regulatory requirements, would UK peer-to-peer companies also want to adhere to a Scottish FCA equivalent as well as the current UK FCA?  As Scotland is significantly smaller, by population, than the UK it is likely not all peer-to-peer companies would adopt Scottish regulations given the incremental costs.

It is likely we won't know exactly what will happen, but it is our belief that peer-to-peer lending in Scotland would be reduced by independence, which would be a setback to everyone in England, Wales, Scotland and Northern Ireland.