With the deadline for full authorisation looming, over a quarter of peer-to-peer lending applications have been withdrawn.
Specialist consultancy firm Bovill reports that 26% of P2P firms seeking FCA authorisation have chosen to pull the plug on their efforts. We learnt in August that the FCA has fielded 114 peer-to-peer lending applications since taking over the regulation of the consumer credit space from the Office of Fair Trading (OFT) in April 2014. Of the 30 applications that have since been withdrawn, Bovill has indicated that 23 represent “partial withdrawals” – wherein applicants have opted to withdraw peer-to-peer activities from a broader application.
Bovill believes that the data (accurate as of July 2015) raises concerns about the ability of new firms to meet with new regulatory requirements. These requirements include the segregation of client funds, new reserve capital requirements, and stricter rules pertaining to the transferral of outstanding loans in the event of a platform failure.
“The high number of withdrawals suggests that the FCA is setting the bar high when it comes to full authorisation for P2P lenders – the process appears to be much tougher and more costly than many firms first anticipated.”
Yesterday came the sobering news that Trustbuddy has been ordered by the Swedish FSA to suspend services, in light of evidence of “serious misconduct” in the platform’s past dealings. This revelation has the potential to significantly hinder consumer confidence, especially on a local level. The established UK players will no doubt be thankful that the FCA is setting a high bar, but doubtless there will also be those who wish to see it raised further.
“P2P lenders have enjoyed a relatively light touch approach from the regulator for some time. A rigorous authorisation process will have come as a shock to the system, particularly for smaller and less profitable lenders.”
“The FCA is now leaving no stone unturned – looking carefully at how firms meet strict consumer protection requirements. They are particularly focused on conduct risk and on ensuring P2P lenders have the right level of experience in their management teams. The regulator is likely to put pressure on those they feel are not up to scratch to withdraw their application at an early stage.”
Now in its sixth year, the AltFi London Summit returns on 18th March 2019 to 155 Bishopsgate. Last year proved to be a crucial turning point for the key players building the future of finance. Leading platforms launched oversubscribed IPOs, digital banks proliferated and mainstream financial institutions started their own disruptive propositions. With 2019 certain to be another landmark year, more questions will be asked by regulators with investor interest in disruption also poised for more rapid growth.