Funding Circle’s P2P exit: The industry reacts

Funding Circle has permanently closed down its retail peer-to-peer lending platform, almost 12 years since its launch.

Loans will no longer be available to buy and sell through the secondary market, and all remaining loans will be repaid or recovered.

Here the P2P sector reacts.

Read more: Funding Circle profits beat guidance before P2P exit

Read more: Zopa closure: P2P industry reacts

“P2P continues to evolve”

Mike Carter, head of lending and investment at Innovate Finance and head of platform lending at the 36H Group, said that Funding Circle was an early P2P pioneer, growing into one of the largest alternative lenders in the small- and medium-sized enterprises (SME) space.

“As P2P platforms reach scale, they have other options for accessing funding, which itself is a very clear validation of the quality of the loans that they originate,” he said.

“The ability to access other funding sources understandably leads platforms to review the cost benefit of maintaining a P2P operation, which has seen regulatory obligations increase and the permitted pool of investors reduce over time.

“At each stage of the regulatory journey in P2P we have seen platforms elect to pursue other business models rather than remain authorised as a P2P platform, and we hope that the current FCA and Treasury consultations on financial promotions won’t result in further attrition from the industry.

“P2P continues to evolve and just as the first wave of P2P was based on platform technology, we are now seeing a new wave of innovators based on data analysis and digital assets.

“Funding Circle has been one of the thought leaders in fintech strategy among Innovate Finance members and we look forward to their continued growth and contribution to fintech development in the UK.”

“Sad to see”

Stuart Law, chief executive of Assetz Capital, said the exit is “sad to see” and praised the platform for helping alternative finance disrupt traditional banking and for delivering a better outcome for businesses and investors alike.

“It is sad that Funding Circle are exiting the retail investment world, but it was something that has been developing and flagged by them for some time now,” he said.

“They have helped immensely in the mission of alternative finance disrupting traditional banking and delivering a better outcome for businesses and investors alike and we look forward to continuing to do the same ourselves, albeit now as having taken over the mantle as the largest retail investor platform.”

“It is disappointing”

Bruce Davis, co-founder of crowd bonds platform Abundance, said that it’s disappointing that Funding Circle has exited the sector, but this does not represent any reduction in the demand for such products, but instead in many ways shows their attractiveness given the flows of institutional capital.

“It is obviously disappointing that Funding Circle has taken this decision as P2P lending is the only way that individuals can profit from lending without the lion’s share of those profits of lending activity being taken up by shareholders as in the case of retail banks,” he said.

“Funding Circle’s exit is not a signifier of any reduction in the demand for such products and in many ways an endorsement of their attractiveness given the flows of institutional capital.”

“A natural evolution”

Rishi Zaveri, chief executive of Lendwise, said that the platform’s closure to retail is a natural evolution that reflects the source of their loan funding, but he noted that plenty of good P2P platforms remain.

“Funding Circle closing down their P2P is a natural evolution which reflects the source of their loan funding i.e. that most of it comes from non-retail sources,” he said.

“Their decision to step away from the P2P market doesn’t diminish the future of P2P lending.

“There are plenty of good P2P lenders committed to providing competitively priced loans to borrowers and delivering healthy returns to investors. For the right investor, P2P investing can make up a valid part of their portfolio, particularly in the current environment of low interest rates and rising inflation.”

“It’s not unexpected”

Lee Birkett, chief executive of JustUs, said the news is not surprising given the platform’s focus over the last two years.

“It’s not unexpected really after they had paused to retail for the last couple of years and we will look forward to the British Business Bank’s portfolio to include other P2P platforms,” he said.

“Driven by the increasing regulation”

Ben Shaw, chief executive of HNW Lending, said he suspects Funding Circle’s decision is down to increasing regulation in the sector.

“I suspect it may be driven by the increasing regulation the FCA is putting on P2P lenders who raise funds from retail investors, particularly the new round of regulations it is consulting on at the moment that effectively put P2P in the same risk bucket as cryptoassets,” he said.

“Indeed, on a roundtable with the FCA only yesterday I raised with the FCA the issue that if the FCA over-regulates, it will see participants leaving.”

“There are still platforms that remain committed to retail lending”

“Today Funding Circle announced it is officially closing to retail investors after two years of paused retail activity,” Folk2Folk said in a blog on its website.

“Funding Circle is the largest platform to withdraw from the retail investing market to date, leaving behind only a handful of platforms still open to retail investors.

“We feel it is important for retail investors to know there are still platforms that remain committed to providing you with this service.”

“Part of the vanguard”

“Funding Circle is a good business and was part of the vanguard at the emergence of P2P in the UK and globally,” said Robert Burgess Chairman, Invest&Fund.

“They helped start the disintermediation of the big banks, and whilst it is sad to see them convert to THE very being they looked to disintermediate, we hope they take some of their P2P DNA with them!

“Sector-wise they simply move aside for the next generation of P2P players, of which Invest & Fund are one of the fastest-growing, to take the sector even further forward.”

“An understandable decision”

Kuflink’s chief executive Narinder Khattoare said that he understood why Funding Circle made the decision to exit the P2P market.

“An understandable decision by Funding Circle, particularly as they now have other sources to fund their future operations,” he said.

“As far as Kuflink is concerned, we remain committed to the retail investor. This is a good space for retail investors to put money into platforms, like Kuflink’s, which has a very good track record. We expect to see this sector continue to prosper.”

“It is a shame”

Nicola Horlick, chief executive of Money&Co, said that although it is unsurprising, the news of Funding Circle’s P2P exit is still a shame.

“I am not surprised that Funding Circle has closed its P2P platform to new lenders, but I do think it is a shame,” she said.

“There is definitely an appetite amongst retail investors looking for yield in lending to private companies through a platform.”