P2P platforms reaffirm commitment to retail investors
A swathe of peer-to-peer lending platforms have reaffirmed their commitment to retail investors, following the recent departure of two major players from the space.
Assetz Capital, which was the biggest P2P platform, announced its plans to wind down its retail loan book in December, blaming rising bank savings rates for making its product uncompetitive.
ArchOver exited the P2P market last month, citing costs, regulation and economic volatility as the factors behind its decision.
But there are plenty of platforms who are still cheerleading the role that retail investors can play in P2P.
Louis Schwartz, chief executive of Loanpad, said that his platform “is fully focused on retail investors, and we do not have any plans to change that.”
His comments were echoed by Mike Bristow, chief executive of CrowdProperty, who said that his platform is “absolutely committed” to retail investors, and George Huntley of The Money Platform who said “experienced retail investors are an important part of our investor mix”.
“There is still a market for retail investors; while some banks have started to offer higher deposit rates of around four per cent plus, some are fixed for one year and others you have to have a minimum amount invested,” said Narinder Khattoare, chief executive of Kuflink.
Read more: P2P most popular among mid-income investors
“P2P offers a higher rate (without FSCS coverage) but there is a degree of flexibility for the retail investor and options available unlike the banks – you can also pick and choose where your money goes. I think there is definitely space for retail in P2P and the key things are for investors to do due diligence on the businesses that are performing well and have a good record with great reviews.
“Everyone wants inflation-beating returns which aren’t achievable – if you’re savvy you can make your money go further for you if you make the time to compare what is available.”
Meanwhile, Brian Bartaby, chief executive of Proplend, highlights the fact that retail investors have been at the core of P2P since the sector’s fruition.
“The P2P concept was born to enable a loan to be split into multiple tokens and then funded by multiple individual lenders in return for regular monthly interest, and nothing has changed,” he said.
“Proplend has a loyal contingent of individual lenders who trust us with their hard-earned money. They continue to fund loans as they come to the platform and we are highly cognisant that it’s their money and not ours.
“As we have previously mentioned to our lenders, we will continue to welcome and support individual lenders but that is not to say at some point we may onboard institutional money, as long as it doesn’t conflict with our individual lenders.”
A Sourced Capital spokesperson similarly said his firm remains “totally committed to providing opportunities for retail investors”, who remain their primary source of loan funding.
“The move by other lenders to purely institutional funding has created opportunities for those operators remaining in the P2P sector that are correctly positioned to be able to thrive in the world where increasing base rates have become a fact and increasing regulation is a certainty,” the spokesperson added.
Read more: Loanpad targets £100m of new lending in 2023
“We remain confident that P2P can form an important element of an informed investor’s diversified portfolio. This view would appear to be supported by the regulator and the authorities.”
The role of the retail investor in P2P has been thrown into the limelight in recent months due to new regulations.
The Financial Conduct Authority (FCA) unveiled its stricter rules on the marketing of high-risk products to consumers – which includes P2P lending under its definition – in August last year.
Platforms had to put stronger risk warnings on their websites, telling consumers that P2P is a high-risk investment and they should not invest unless they are prepared to lose money.
Other rules, including banning investor incentives and introducing stronger appropriateness tests, come into force at the start of this month.
While some platforms have been relatively sanguine about the new rules, other industry stakeholders believe they have gone too far and will unfairly deter new, everyday investors from accessing lucrative returns in the space.
“The FCA have made it clear with their new FCA regulatory risk wording disclaimers that they believe the asset class should not be promoted to retail investors who have little or no appetite for risk,” said Lee Birkett, chief executive of JustUs.
“We will continue to serve retail investors but these will be predominantly be high-net-worth investors with £250,000 of liquid assets or more.”
Read more: Most Brits invest without seeking regulated advice
