P2P Platforms Explore the ISA Opportunity

By AltFi on 29th October 2014

P2P/Marketplace Lending

One of the world’s leading consumer lending platforms has unveiled some telling research about the potential impact of the P2P ISA.

P2P Platforms Explore the ISA Opportunity

A RateSetter-commissioned survey of 2,000 people, enacted by Populus, has revealed that 61% of Brits are struggling to turn a decent rate of interest on their savings. Perhaps more telling is that 39% of respondents cited ISAs as their favourite method of saving. 64% of those surveyed said that they would be keen to invest more money into an ISA if the rate of interest on offer was higher. You can probably tell where this is leading.

The extension of ISA eligibility to include peer-to-peer investments took a major step forward recently when the government announced a month long consultation in order to determine how best to structure the P2P ISA. And now the major UK platforms are naturally beginning to apply some numbers to the opportunity.

According to RateSetter’s survey, 44% of respondents believe that ISA reform will allow them to save more. 39% think that the inclusion of P2P investments will reinvigorate the ISA market. However, as corroborated by a recent Proplend study, the P2P ISA opportunity is still flying very much under the radar. 65% of those surveyed were not aware that peer-to-peer investments will soon be permitted within the tax-wrapper.

RateSetter Founder and CEO Rhydian Lewis said:

“This consultation is the most significant development since ISAs were first introduced in 1999. It will finally offer savers more choice in a market of stagnant rates: an option between low yield cash and high risk stocks and shares.

“Statistics from HMRC show that the number of adult ISAs subscribed to has fallen in line with returns, from 14.6 million in 2012/13 to 13.5 million in 2013/14. This is a concern given that ISAs are something of a nation’s favourite.

“We believe that P2P inclusion will breathe new life into ISAs, and were keen to explore how consumers felt about this. Whilst there is work to be done to increase awareness of the industry, it is encouraging to see a growing appetite for P2P ISAs.”

With regard to the structuring of the P2P ISA – which is amongst the key concerns of the current consultation – RateSetter has been pushing for a third, stand-alone P2P type of ISA for some time. According to the new research, 64% of those that invested via cash ISAs did so purely because they found stocks and shares ISAs overly complex.

A newly crafted P2P ISA has been touted by RateSetter as a fertile middle ground – offering better returns than cash ISAs and less risk than the stocks and shares equivalent. RateSetter’s respondents seem to agree. 55% of ISA holders believe that a P2P ISA provides more choice, and the same percentage again say that it would be more convenient. 54% believe it would provide a higher return than a cash ISA and 34% think that it would represent a less risky investment than a stocks and shares ISA.

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