LENDERS MOVE TOWARDS NICHE ASSETS
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High risk but high returns BLURRED LINES
Are banks and P2P firms too close for comfort?
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Modulr boss Myles Stephenson on new payments technology >> 11
ISSUE 9 | JUNE 2017
P2P platforms facing hybrid dilemma THE PEER-TO-PEER finance industry could be on its way to becoming a polarised market, where the biggest firms stick to their core P2P lending activities and the rest are forced to evolve into hybrid models. A wide range of industry onlookers have told Peer2Peer Finance News that it will be impossible for smaller firms to achieve profitability without either expanding into balance sheet lending, merging with direct lenders or morphing into a business model closer to that of a collective investment scheme. "It's incredibly difficult to build a straightforward P2P business to the size where it becomes profitable," said Andy Davis, author of a report
that pointed to hybrid models as an inevitable evolution in the sector. "It's intrinsically more profitable to arrange and lend rather than only arrange. We're going to start seeing hybrid loans emerge." P2P is ultimately just a subset of direct non-bank lending, he argued, but with different technology in place and different market access. When a direct lender sets up a P2P platform, its return on capital goes up exponentially and it can immediately recycle those returns to originate more lending. "Hybrid lending from some providers will increasingly be the chosen solution. This is not an issue or a problem for
investors in and of itself, " added 4th Way analyst Neil Faulkner. While the early adopters "had huge enthusiasm and were emotionally invested in the idea of P2P," the notion of matching
investors and borrowers is no longer a key selling point, according to Conrad Ford, founder and chief executive of business finance aggregator Funding Options. “The borrowers >> 4
Tax guidance unclear on secondary market trades SECONDARY markets where peer-to-peer loans can be sold at a premium or discount are at risk of falling into the taxman’s definition of a trading
activity, rather than an investment. On the whole, the practice is compliant with current regulations and can be a good way of boosting
liquidity in a less-thanliquid market. However, from HMRC’s perspective, the tax paid on a profitable trade would be different to the tax paid
on the earnings from an investment. There could be a big difference between a capital gains tax bill or an income tax bill. The industry differs >> 4