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LIFE OUTSIDE LONDON
Scotland to become fintech hotspot P2P UNCOVERED
Our annual industry and investor survey
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Crowdstacker’s Karteek Patel reveals his ambitious plans for growth >> 28
ISSUE 24 | SEPTEMBER 2018
Proposed investor restrictions threaten P2P sector’s growth THE PEER-TO-PEER lending industry has blasted the City watchdog’s proposed investor restrictions as unfair, costly and damaging to the sector’s future. P2P platforms have been busy digesting the Financial Conduct Authority’s (FCA’s) long-awaited postimplementation review of the sector – released over the summer – and while most are happy with plans for heightened transparency and loanbook disclosure, there are concerns over proposed marketing restrictions and appropriateness tests for investors. These proposals would make P2P lending platforms become the preserve of sophisticated, high-net-worth or ‘restricted’ investors, akin to crowd bond providers like Abundance and alternative investment firms such as Goji. By cutting out the average retail investor, the industry fears that these changes could drastically reduce the
number of P2P investors and subsequently lessen the amount of finance available for borrowers. “It will definitely limit growth of the sector in terms of access to investing,” Stuart Law, chief executive of business P2P lender Assetz Capital, told Peer2Peer Finance News. “There will be fewer retail investors as a result of these changes, we think that’s a bad thing as it is an alternative form of income. Everybody knows this isn’t a bank account, it’s an investment and a sensible choice for those wanting a balanced portfolio with investment
at risk, the warnings are already available.” If implemented, the rule changes would mean that P2P investors would have to confirm their status as sophisticated, high-networth or ‘restricted’ – the latter meaning that they are limited to investing a maximum of 10 per cent of their net investible portfolio in P2P. Investors would then have to complete and pass an appropriateness test that assesses their attitude to risk and loss. Law warned that borrowers would also suffer from such a move, as fewer investors would
mean an increase in rates due to less supply. “If you can’t raise all the money from retail you will start to raise it through other routes, such as institutional, which creates another layer of fees,” he said. “That then takes democratisation of finance back a step and isn’t providing an alternative to the bank.” Amer Bhatti, chief compliance officer at P2P short-term loans provider Welendus, agreed that these changes would make P2P less open to everyone. “Access to P2P should be open and inclusive,” Bhatti told P2PFN. “With transparent information, individuals should be able to make decisions without rules imposed by the regulator. “You don’t want to have only the high net worth taking advantage of P2P returns as this leaves others going to bank.” These concerns have been echoed by other platforms such as RateSetter, which warned such restrictions >> 4 pose questions