Innovate Finance’s Janine Hirt: We’re in a “new chapter” for P2P lending

Innovate Finance chief Janine Hirt talks to Marc Shoffman about the “huge opportunity” for UK fintechs in a post-Covid world

Janine Hirt is approaching almost a year in the hot seat as chief executive of Innovate Finance.

It has been anything but a quiet year though, with the economy and society attempting to move on from the pandemic and the prospect of tougher regulation coming to the fore.

She has brought plenty of experience to the role, having already been chief operating officer, ecosystems director and head of community at the fintech trade body since 2015.

Hirt reveals her 2022 highlights, the work that still needs to be done and the role that fintech and peer-to-peer lending can play in supporting consumers and demonstrating the UK’s strengths at home and abroad.

Marc Shoffman (MS): How did it feel to step into the chief executive role?

Janine Hirt (JH): The previous chief executives Charlotte Crosswell and Lawrence Wintermeyer were great leaders to learn from.

I have been with Innovate Finance since its initial days of launch. It has been incredible to see how the organisation has matured and the entire ecosystem. I love the people we work with.

MS: What are your highlights of the past year?

JH: Definitely the people. We had a really great session where we went to Number 10 Downing Street with our founders to look at how to implement changes around the listings regime.

It was also great to work on our recent open letter to mark the anniversary of the Kalifa Review with more than 75 signatures calling for the positive momentum to be maintained.

MS: What further action needs to be taken on the Kalifa review?

JH: We shouldn’t rest on our laurels and must build on the positive momentum. It is critical that we as an industry continue to work with government and regulators to have an environment that is conducive to innovation and protects consumers at the same time.

With the future regulatory framework, the Financial Conduct Authority has a new secondary objective around international competitiveness so it would be good to see more focus on that.

It is also important to have a strategy around new and emerging technologies such as cryptoassets.

Read more: Innovate Finance launches crypto policy group

MS: Is fintech being taken seriously by government now?

JH: The feeling towards fintech feels very positive. The Kalifa review was commissioned by the chancellor and reflects interest in supporting the sector and we see progress has been made. But we are fintechs so there is always more that we could do.

Wider adoption of fintech has also helped the mood towards the sector. We have one of the world’s highest levels of adoption, it was 71 per cent before Covid and is now 76 per cent. People are using these new technologies and that has shifted the mindset.

There has also been a move away from fintechs eating the banks’ lunch to fintechs transforming financial services more broadly with partnerships and collaborations. That can be start-ups partnering with each other or teaming up with institutions.

MS: Has the pandemic been good for fintech?

JH: The pandemic was a horrible experience for society. In terms of sectors, we probably were luckier than many others as it shone a light on how important technology is to every aspect of our lives but particularly when it comes to financial services.

A lot of the incumbents maybe struggled to get services online, so fintechs stepped into the gaps by either providing services directly or supported established players.

There are tangible examples such as Funding Circle funding more than 12 per cent of coronavirus business interruption loans.

MS: What role can peer-to-peer lending play in the fintech space?

JH: In many ways P2P lending was essentially one of the original fintech sectors and blazed the trail for others. The idea of matching lenders and borrowers was unique and reflected the ethos of putting the consumer at the centre and to create a more attractive proposition. We have seen some great successes.

Right now, it feels like we are in an environment where it is a new chapter for P2P lending. There are areas where we are seeing a shift or pivot. Now we are seeing a trend that it is about the data.

The concept of matching borrowers and lenders maybe isn’t as fresh as when P2P first started out. What is fresh now is how we are utilising more personal data such as open banking and risk assessment.

I think we have seen a change in regulatory landscape. We want to make sure we have a framework where P2P lending can continue to do business in terms of benefiting the end consumer.

The cost of regulation has become somewhat more burdensome over the years as well. For some platforms it has reached a tipping point. Zopa is very open about that.

It is interesting that we are seeing success for example in the property space, it’s an evolution and a bit of a shift.

MS: Is further P2P lending regulation needed?

JH: We need to find the balance between protecting the consumer and enabling innovation to thrive in the market while also benefiting the consumer.

It’s important to emphasise that these new innovations are about benefiting the end person on the street.

MS: Are Innovate Finance and the 36H Group still planning to collate and publish P2P industry data?

JH: We as an industry have a responsibility to talk about the impact of the sector.

Our research estimates that the loss rate from P2P lending over 10 years is about five per cent while the average platform returns as a whole have been very positive at roughly six to seven per cent. Some platforms have had zero losses. We are still considering whether to put out a full report detailing this.

Read more: UK P2P volumes increased by 120pc last year

MS: What are Innovate Finance’s priorities for 2022?

JH: Regulation is key. We have some of the most proactive regulators in the world and tools such as the regulatory sandbox. That mindset needs to continue. Regulators need to have the culture and capability that protects consumers and doesn’t stifle innovation.

We are very focused on ensuring the wider UK government recognises the fact that fintech is a key pillar for the UK’s soft and hard power globally.

Post Brexit and Covid, the UK is a global leader in fintech. There is a huge opportunity to support the sector. Fintech can be a force for good and promote financial inclusion and wellness, while it also has a role to play in creating a sustainable future. We are moving in a positive direction and just need to keep that momentum going.