After hinting at involvement in the P2P space in October last year, RBS has now formally confirmed a new referrals arrangement with two peer-to-business lenders.
The major high street bank will now refer businesses to the Funding Circle and Assetz Capital platforms. This marks the second time that Funding Circle has entered into such a relationship, having formerly tied up with Santander. This development somewhat pre-empts the impending mandatory referrals scheme – whereby the government will force the banks to direct the businesses that they cannot fund onto alternative finance providers.
The scheme will reportedly kick off in the South West of England and in Scotland, before a national rollout within the next three months. RBS will not be paid any kind of referral fee for its services.
The potential impact of this development cannot be overstated. RBS accounts for a third of the small business lending market – and without doubt becomes the largest lender to refer its clients to the peer-to-peer sector. RBS and Funding Circle have for some months been sitting in on a working group held by the Treasury, exploring how best to achieve a greater level of collaboration between the high street banks and alternative finance providers.
Alison Rose, Commercial and Private Banking CEO, weighed in:
“We are committed to doing the right thing for our customers by helping them access finance where we cannot help them within our current risk appetite. I am delighted to see RBS partnering up with both Funding Circle and Assetz Capital. We are dedicated to supporting SMEs, whether they are an existing customer of RBS or not.”
2015 has kicked off in breathless fashion, with major deals popping up all over the alternative finance space. Assetz has been the beneficiary of an impressive number of those deals. Since late December the secured lending platform has struck up three potentially game-changing arrangements. A joint venture with The Interface Financial Group brought an invoice finance aspect to the platform, yesterday’s £150 million deal with Victory Park Capital provides a vast pool of liquidity, and today’s news should provide the vital ingredient: more borrowers.
For Funding Circle, which has to date provided just shy of half a billion pounds to UK businesses, RBS becomes the latest and largest addition to a long line of strategic partners. The platform is tied up with high street banks, local councils, government vehicles, accountancy firms like PwC and major institutional investors. The first-mover in the peer-to-business space has become a pivotal cog in the small business funding ecosystem.
Chancellor of the Exchequer George Osborne, who has been regularly involved in the referrals dialogue, offered his thoughts:
“A key part of our long term economic plan is to ensure that British businesses are able to access the finance they need to grow and succeed. And it's only through harnessing innovations in finance, alongside our existing world class knowledge and skills in financial services, that we'll ensure Britain's financial sector continues to meet the diverse needs of businesses here.
“That is why I announced a further package of measures to support peer-to-peer platforms at last month’s Autumn Statement, including a new bad debt relief to create a level-playing field for the industry. It is great to see companies like Funding Circle forging a new partnership with RBS to ensure that small British companies have the best access to funding.”
“This partnership recognises our role as the largest marketplace for unsecured and secured small business lending. Partnering with the UK’s biggest small business high street lender is a huge vote of confidence in our model, and we look forward to working together to create thousands more opportunities for small businesses to access finance and grow.”
“With the arrival this week of a £150m commitment from our first institutional funder, and many more funding lines of a similar type coming shortly we are on track to fund hundreds or millions of small business loans over the next couple of years and much more after that. Peer to Peer, or marketplace lending as it is also known, is becoming a major force in business funding in the UK economy.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.