Breaking: Funding Circle withdraws public loanbook amidst IPO rumours

By Ryan Weeks on 7th June 2018

P2P/Marketplace Lending

The leading peer-to-peer lender is transitioning to quarterly reporting just days after updates to the P2PFA's operating principles.

Breaking: Funding Circle withdraws public loanbook amidst IPO rumours

P2P business lender Funding Circle will no longer allow retail investors to download its loanbook.

The company, which is said to be planning a landmark IPO for later this year, will switch to quarterly reporting through the launch of a ‘new and improved’ statistics page.

This revamped statistics page will feature information on lending volumes, returns and the businesses funded by the platform.

Investors will now see projected annualised returns as a range. They are told, for example, to expect approximately 6-8 per cent returns for loans originated in 2018. But as time passes, and returns crystallise, that range will narrow to reflect the actual return for the cohort.

The new page will include: a loans under management metric, newly-fashioned returns and lifetime default rate by cohort tabs, and a business tab which gives a breakdown of the platform’s borrowers by sector and geography.

Funding Circle has also stressed that individual investors are still able to see a loan-by-loan breakdown of their own portfolios by logging into their account pages – they simply won't be able to access loan-level information on loans they're not exposed to. 

AltFi Data (AltFi’s sister company) has partnered with Funding Circle to verify its data reporting on a quarterly basis, ensuring that it is both ‘accurate and up to date’.

A Funding Circle spokesperson said that AltFi Data will carry out ‘spot-checks’ and would withdraw its endorsement were it to find anomalies in the statistics. That same spokesperson made the point that Funding Circle has not opened itself up to third-party verification before, arguing that this enhances the level of transparency offered to investors. 

Funding Circle says in a blog post that it decided to withdraw its loanbook after seeing the number of downloads fall ‘significantly’. It references the fact that roughly 0.3 per cent of its investors downloaded the loanbook in May. The firm's spokesperson also told AltFi that the loanbook was an unwiedly means of keeping tabs on performance. 

But one might infer ulterior motives. If the rumours are true, and Funding Circle is indeed poised to go public in the coming months, it would be difficult for the firm to continue publishing information on its loanbook on a daily basis.

Transparency has often been pitched as the cure-all in peer-to-peer lending. Peer-to-peer platforms do not risk their own capital on the loans they originate, introducing a potential conflict of interest. Historically, many platforms have gotten around this problem through the publication of loanbooks and key metrics, giving investors an insight into their performance.

The major P2P firms have allowed investors to download a version of their loanbooks for years. In fact, members of the Peer-to-Peer Finance Association (P2PFA) have been required to do so since 2015.

But no longer.

On Monday, the P2PFA issued a revision to its Operating Principle 3.5. This revision states that members may now choose either to publish their entire loanbook, or to “provide a detailed breakdown of loans in their overall loan book to enable a consumer to be informed about the nature and number of loans of different descriptions presently originated through the platform according to standards to be approved by the P2PFA Board”.

Funding Circle and Zopa, the two oldest and largest peer-to-peer lenders in the SME and consumer lending sectors respectively, together founded the P2PFA in 2011.

Commenting on today’s changes, James Meekings, co-founder and UK managing director of Funding Circle, offered the following statement: “We have launched a new and improved statistics page as part of our ongoing commitment to providing investors with accessible and digestible loan performance information. As part of these new changes we have also withdrawn the publicly downloadable loanbook, which has become less popular with only 0.3 per cent of investors accessing it in the last month. Investors will continue to be able to see how businesses they have lent to are performing, and we will be providing independent and respected third parties with regular access to our internal data so its accuracy can continue to be verified.

 

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