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Peer-to-Peer Lending: UK

November 2016 | 300 pages | ID: P8920652863EN
Ian Youngman

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Peer2Peer lending in the UK provides an up to date and independent analysis of the launch, growth and potential of peer-to-peer lending in the UK. It examines how this once anti-bank offering is linking with banks to fund and sell on loans.

REPORT SUMMARY

Peer2peer lending is an increasingly popular way of financing projects, business ideas, and personal loans through small contributions from a large number of individuals, and the financial market.

This report looks at the history, background, potential, problems, and complex regulation, as well as profiles of over 50 UK peer-to-peer lending platforms. Peer2peer lending is still new and often misunderstood. Regulators are looking a lot closer at the industry and individual platforms, with most platforms still not fully authorised. Peer to peer lending will stimulate change and make business and personal lending quicker, simpler and more transparent.

Peer-to- peer platforms offer a range of models in how they work, whom they lend to and whom they get money from. It is highly unlikely that all those platforms now operating on interim authorisation will become fully authorised. So is it a great new boom industry with amazing prospects, or an annoying pest that the banks will destroy as soon as they can?

There is a real opportunity for collaboration between them and banks where they are not in competition with one another. A top peer2peer lender is planning to launch a peer2peerbank. Banks could buy lenders. A social lending platform is being launched.

KEY FINDINGS

By 2018 peer-to-peer lending in the UK could be worth over £5 billion, up from less than half a billion in 2013.

Not everything is as rosy as the industry cheerleaders may suggest, with several platforms closing, never opening or clearly designed to make quick money for owners. Over 50 platforms have closed or failed to launch in the UK. Over 50 platforms are active or preparing for launch, but only one in four are fully authorised by the FCA.

Over the next decade the peer-to-peer industry will grow rapidly and is part of the alternative finance movement that is forcing banks to change some of their ways. But make no mistake, banks are finding ways to make money from peer to peer platforms, such as buying up loan books or providing finance or entering into partnerships.

By 2020 it will be common for businesses and individual to connect with lenders via peer-to-peer websites and market wide platforms. It allows for the lending of money while bypassing traditional banks. Returns are financial, but investors also have the benefit of having contributed to the success of an idea they believe in.

Peer to peer lending is a new form of technology driven by a social model. Some platforms are well thought out, others are by techie dreamers with no understanding of regulation, law or banking.

The UK is the European leader in peer-to-peer lending, and on-going regulation has seen a weeding out of platforms. Some have gone broke, others closed, some taken over, and many just faded away.

Most peer2peer platforms are not a bank or other establishment business, so how do they work and how to they make money? Some could not exist without their links to banks and government, so can no longer claim to be alternative or anti-establishment.

FCA is struggling to keep up with regulation, and there is even a Bitcoin peer-topeer lender over which FCA has no control, as it does not regulate alternative currencies.

REASONS TO BUY

The banking ecosystem is undergoing transformation and innovation like never before, and what we have seen is only the beginning. Peer to peer lending is part of a Fintech revolution that banks ignore at their peril.

Any organisation considering partnering with a peer2peer lender needs to understand the industry and what they may gain or risk.
1. BACKGROUND

Introduction
Alternative finance
Alternative finance and peer to peer
Sharing economy
Social media
Reputation economy
Crowd funding
Crowd funded banks
App based banks
Peer to peer banks
Peer to peer insurance
Peer to peer foreign exchange
Peer to peer lending
How peer to peer lending works
Peer to peer property rental
Peer to peer car sharing
New payment models
Alternative payment systems
Bitcoin
Bitcoin and peer-to-peer lending
Technology
Blockchain
Blockchain and lending
Role of Governments and NGOs
Fintech companies
History
Key trends
UK and Fintech
Fastest growing UK technology businesses

2. REGULATORS

Treasury
Bank of England
Financial Policy Committee
Prudential Regulation Authority
Financial Services Act 2012
FCA purpose
Controlling the FCA
National Audit Office
FCA and competition
Regulators code for FCA and PRA
FCA and product intervention
FCA and warning notices
FCA and misleading financial promotions and adverts
FCA and consumer credit
FCA international strategy
Innovation Hub
FCA sandbox
FCA and non- regulated platforms
FCA and House of Commons
Advertising Standards Authority
Competition and Markets Authority
Competition and Markets Authority report on retail banking
Competition and Markets Authority report on unfair contract terms
Financial Ombudsman Service
Financial Ombudsman case studies
Financial Services Compensation Scheme
Office of Fair Trading
European Commission
EC Capital Markets Union Action Plan 2016 update
EC Fintech task force
UK platforms overseas
Brexit and peer-to-peer lending
Consumer Protection from Unfair Trading Regulations 2008
Consumer Rights Act 2015
Guernsey
Jersey
Isle of Man

3. REGULATORS AND PEER-TO-PEER LENDING

FCA, the Treasury and the PRA
FCA and alternative currencies
Financial Policy Committee and buy to let lending
FCA and crowd funding
FCA regulation of peer-to-peer lending platforms
Progress on regulating peer -to- peer platforms
FCA delays in authorising peer -to- peer platforms
Project Innovate and peer -to- peer platforms
Fully regulated and authorised peer-to-peer platforms
P to P and IFISAs
IFISAs and platforms
IFISA waiting list
Green IFISAs
IFISAs and crowd bonds
HMRC and IFISAs
PtoP and Junior ISAs
PtoP and Lifetime ISAs
FCA and promotions
FCA and SIPPs
FCA and ring fenced accounts
FCA and peer- to- peer advisors
FCA and the Consumer Credit Act
FCA review of peer-to-peer lending
FCA and the Cambridge Centre for Alternative Finance
FCA site visits
FCA concerns
FCA and performance data
Future FCA regulation of peer-to-peer lenders
New FCA boss serious sector concerns
October 2016 speech by Chris Woolard of the FCA
FCA review of FSCS

4. TRADE BODIES

European Crowdfunding Network
Peer-to-Peer Finance Association
Peer-to-Peer Finance Association lending rules
Peer-to-Peer Finance Association research
UK Crowdfunding Association
UKCFA code of practice
UKCFA membership

5. OTHER ORGANISATIONS

ActionCOACH
Airbnb
Alternative Business Funding
Babergh and Mid Suffolk Councils
British Business Bank
British Business Bank Investments
Cambridge Centre for Alternative Finance
Cambridge Centre for Alternative Finance FCA review
Cambridge Centre for Alternative Finance blockchain study
Campaign for Fair Finance
Centre for Business and Economics Research
Coface
Confederation of British Industry
European Investment Bank
FairMoney
Federation of Small Businesses
Forum of Private Businesses
GapCap
Glasgow Chamber of Commerce
Katipult
Lancashire County Council
Madiston
Money Advice Service
MyAzimia
NurtureMoney
OFF3R
Orca Money
Pariti
Peer-to-Peer Global Investments
PwC
Sage
Scottish Enterprise
SyndicateRoom
University of Huddersfield
Unshackled
Victory Park Capital
Zoopla

6. MARKET SIZE

Introduction
UK peer to peer lending figures
Future figures
Institutional funding
UK consumer lending figures
UK business lending figures
Property lending
P2PFA data
P2PFA data latest table
Number of active platforms
Profit or loss
When it all goes horribly wrong
Family and friend lending
Bank lending to SMEs
Business population estimates for the UK in 2015

7. BANK AND PLATFORMS

Banks, professional investors and lenders
Bank branch closures
Banks investing in loans
Banks and lending
Banks as loan originators
Banks referral scheme
Banks setting up platforms
Community banks
European banks
Institutional lending
Lenders pretending to be peer-to-peer lenders
Offering banking licences
Partnerships with peer-to-peer lenders on funding
Payday loan companies
Platforms as sellers of services to small banks
Secondary loan markets
Securitisation
Securitisation deals- bad calls
Specialist hedge funds
Threat to banks and other lenders
Venture capital
White label
Why bank lending has fallen off

8. PEER-TO-PEER LENDERS DEALS WITH BANKS

Metro Bank
NatWest
RBS
Santander

9. PEER-TO-PEER LENDING OVERVIEW

Peer to peer lending
How peer-to-peer lending works-overview
Automation
Basic principles
Benefits
Borrower insurance
Charges to lenders
Consumer lending
Costs
Defaults and late payments
Distribution
Family and friend lending
Getting a loan
How loans are set up
How platforms make money
Lenders
Litigation
Loans to company employees
Micro financing
Need for peer-to-peer lending
Protection funds
Risks to lenders
Social media
Target market
Tax
Why peer to peer lending is better than a bank loan
Why peer-to-peer lending is a risk
World’s largest loan

10. PEER-TO-PEER TYPES OF LOAN

Asset
Bridging
Business
Buy to let
Cars
Commercial property
Commuter
Development
Development exit
Education
Energy
Entrepreneurs in developing countries
Family and friends
Farmers
Franchise
Graduate
Green
Guaranteed personal
High net worth
High net worth property
Hunting
Individual Savings Accounts (ISAs)
Livestock
Micro
Mining
Mortgages
Non-standard borrowers
Pawnbroking
Pension funds
Personal
Post- graduate students
Professionals
Property
Property developers
Scottish businesses
Shariah
Social lending
Solar
South West England
Students
Tracker
Wedding
Westminster businesses
Women business owners in Africa
Young doctor

11. FUTURE

12. PLATFORMS - CLOSED, NEVER OPENED OR CHANGED NAME

13. PROFILE OF PEER-TO-PEER LENDING BROKER PLATFORM

InvestUP

14. PROFILES OF PEER-TO-PEER LENDING PLATFORMS

ArchOver
Assetz Capital
Bricks Finance
BridgeCrowd
British Pearl
BTCPOP
CapitalStackers
Collateral
Credit Peers
Crowd2Fund
Crowdestates
Crowd for Angels
CrowdProperty
Crowdstacker
Downing Crowd
eMoneyUnion
Emerging Crowd
Flender
Folk2Folk
Funding Circle
Funding Empire
Funding Knight
FundingSecure
Funding-Tree
Growth Street
Go2
Hargreaves Lansdown
HNW Lending
House Crowd
Initiative Ireland
InvestDen
Invest and Fund
Kuflink
LandBay
LandlordInvest
LendingCrowd
Lending Works
LendInvest
Money and Co
Money Circles
Money Platform
Octopus Choice
Orchard Lending Club
Peer Funding
Prodigy Finance
Proplend
QuidCycle
RateSetter
Rebuildingsociety
Relendex
Saving Stream
Stratosphere
ThinCats
Unbolted
Welendus
Wellesley and Co
Zopa


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