P2P Guide

17 P2P BUSINESS MODELS P2P Business Models There are several different business models in the P2P sector. We have split the different components of P2P platforms into Underlying Loans, Investment Options and Risk Mitigation. There are different ways of structuring each of these components, and platforms combine these components in different ways to create their operating model Exceptions The following two are strictly speaking NOT P2P lending sectors in our view, but are often confused with P2P lending. • DEBT BASED SECURITIES (DBS) : A related sector. DBS are issued by some platforms to raise money for specific projects such as renewable energy installations. • EQUITY CROWDFUNDING: A related sector where investors can invest in the equity of unquoted companies via an online platform. This is a much riskier activity than P2P lending and the two should not be confused! (It’s worth noting, though, that the FCA refers to P2P lending as loan-based crowdfunding.) Development of P2P Lending Regulations 2018 Scheduled publication of FCA changes further to its review of crowdfunding rules OCTOBER 2013 FCA published consultation paper 13/3 which outlined the FCA’s proposals to regulate loan-based and equity- based crowndfunding. 1 APRIL 2014 FCA took over regulation of consumer credit from the OFT and implemented new rules for crowdfunding based on policy statement 14/4. 1 OCTOBER 2014 FCA started considering applications for full authorisation from firms with interim permissions. 1 APRIL 2016 Full FCA consumer credit regime came into effect, replacing the interim permission regime. MARCH 2016 Policy statement PS16/18 published setting final rules re. the segregation of client money on loan-based crowdfunding platforms, the innovative finance ISA, and the regulated activity of advising on peer-to-peer agreements. FEBRUARY 2015 FCA published a review of the regulatory regime for crowdfunding and the promotion of non-readily realisable securities. It decided no further rule changes required but it would continue to monitor the growing market. 8 JULY 2016 FCA called for input to the scheduled post-implementation review of the FCA’s crowdfunding rules by 8 September 2016. DECEMBER 2016 FCA published interim statement re. feedback to the call for input, highlighting concerns and stating that in Q1 2017 there would be a consultation on new rules to address them. 1 APRIL 2017 Minimum capital adequacy requirement for firms running loan- based crowdfunding platforms increased from £20,000 to £50,000. Consultation Paper 13/3: https://www.fca.org.uk/publication/consultation/cp13-13.pdf Policy Statement 14/4: https://www.fca.org.uk/publication/policy/ps14-04.pdf A review of the regulatory regime for crowdfunding and the promotion of non-readily realisable securities by other media: https://www.fca.org.uk/publication/thematic-reviews/ crowdfunding-review.pdf Policy Statement 16/8: https://www.fca.org.uk/publication/policy/ps16-08.pdf Call for input to the post-implementation review of the FCA’s crowdfunding rules: https://www.fca.org.uk/publication/call-for-input/call-input- crowdfunding-rules.pdf FCA publishes interim feedback following a call for input to the post-implementation review of the rules for crowdfunding: https://www.fca.org.uk/publication/feedback/fs16-13.pdf SOURCE: BRITISH BUSINESS BANK, SMALL BUSINESS FINANCE MARKETS REPORT 2017/18 VALUE OF PEER TO PEER BUSINESS LENDING +51% 2016 2017 P2P Underlying Loans P2P Lending Peer to peer lending, lending money to consumers or businesses via an online platform P2P Consumer Lending Peer to consumer lending, lending to consumers only P2P Business Lending Peer to business lending, lending to businesses only P2P Property Lending Secured lending backed by bricks and mortar