London-based investment bank Liberum reckons the UK economy could receive a £32 billion injection from peer-to-peer lending platforms over the next decade. Furthermore, Liberum believes that the peer-to-peer lending model is ten times as efficient as banking. Cormac Leech, financial analyst at Liberum, asserted his belief that peer-to-peer lending can offer better returns to savers and lower charges to borrowers than the traditional banking system:
“The banking industry is no more efficient today than it was in the early 1900s.
“You would have thought it would be easier to move money around today than it was a hundred years ago.”
Mr. Leech said peer-to-peer lending and associated automation would make the millions of people currently working in the highly inefficient financial services industry available to work elsewhere in more socially useful professions like teaching and healthcare:
“It would redeploy resources equivalent to £32bn into the wider economy. People would have more disposable cash. Everyone would have £10 to spend on other stuff.”
The biggest problem for peer-to-peer lending is awareness and in a new consumer research document from Liberum it has been shown that 65 per cent of UK adults are still unaware of the model, with only two per cent actively invested to date.
Mr. Leech explained that one of the main challenges facing the sector is the older generation, as they are “slow to adapt to new opportunities”. He explained:
“Regulation by the Financial Conduct Authority partly solves this problem but it would be helpful for the platforms to also be risking a small amount of their own capital side by side with lenders– say one per cent - to align incentives.”