Last week I sat on a panel convened by Peer to Peer Finance News to discuss the state of play with peer to peer platforms in their quest to comply with the new P2P regulations that will apply to them from 9 December.
The panel also featured compliance consultants Frank Brown of Bovill and Gilbert van Roon of Fintech Compliance, with an audience made up of platform CEOs, compliance officers and operational staff.
It was clear that P2P professionals are working hard to make the deadline to implement the FCA’s new rules – just six months from their announcement.
It was also clear that the FCA’s somewhat dismissive estimate of the time and money required to implement the new requirements is obviously inadequate.
New P2P regulations come at a cost
Responses to the consultation paper from P2P firms put the real cost at three to five times the FCA calculation of up to £24,485 per platform. And the view from the panel was that other effects, particularly those resulting from the cap on investments from non-advised retail investors to 10% of their investable assets and limitations on marketing to them, will be measured in platforms going out of business.
There was a strong suspicion that one of the FCA’s main drivers has been the high profile failures of Lendy and FundingSecure, with the former bringing significant criticism to the FCA’s oversight of the market. Called by some, ‘the embarrassment factor’, there was strong speculation that many platforms will have visits from the FCA in the coming months, ‘kicking the tyres’ as the regulator demonstrates an improved, proactive approach to its responsibilities in P2P. Weeding out any players it considers to be sub-standard definitely appears to be on the agenda.
There is positivity
But there was also positivity, with the 10% rule identified by some as a ‘speedbump’ to funding since, after two P2P investments, an investor can re-classify as sophisticated and invest more money.
Platform representatives also acknowledged the opportunities that the new rules bring by putting in place a more mainstream regulatory framework. While there is no expectation of a surge in adviser interest on December 10, we know that advisers like the direction of travel of the new P2P regulations; Intelligent Partnership surveyed 50 advisers after the changes were announced and 77% agreed with the FCA that alternative finance products like P2P should only be available to high net worth individuals, sophisticated investors, advised or restricted clients.
We know from experience that there is a core of advisers who get involved with P2P and feel their numbers and importance to P2P are now likely to grow, although there is still work to be done to educate them on the benefits of well-managed P2P lending.
Whatever the future for UK P2P lending, the next few weeks promise a flurry of activity behind the scenes as platforms embed new processes and procedures. While some complain that they will make this innovative industry more cumbersome for investors, the FCA’s attitude has not been unexpected and, for now at least, the parameters have been set.