The alternative finance revolution promised real change, with democratising finance at the heart of the project. Peer to peer lending for instance has always meant to embody the idea that the old financial order was fundamentally not fit for purpose and needed renewal, by improving investor engagement. If for instance the banks didn’t pass on interest rate rises to savers, online lenders would. And they have.
But we at AltFi believe that the recent proposed changes contained with the FCAs consultation on the sector attack this very democratic ideal. The regulator consultation paper proposes that obstacles be placed in the way of investor involvement, unless that is the said investor can prove they are sophisticated, a HNW or a professional. In essence we maintain that the consultation also suggests that online based peer to peer lending is almost as risky as equity-based crowdfunding. The evidence supports a very different conclusion.
We propose that the FCA rethinks its approach and trusts the investor to make the right decision about what they do with their investments. Better regulation of peer to peer lending is required and is to be welcomed but narrowing down choice – and not trusting investors to make an informed decision about risk – isn’t the right way to go. It’s not late for a rethink and we hope the FCA listens to this plea for trusting the investor and keeping peer to peer lending properly democratic – and not in effect limiting it to just an elite.