Evangelists proclaim that peer-to-peer lenders are re-writing the rulebook for the financial world. They claim that finance will never look the same again and in five years’ time people will no longer need a bank.
That is a wholly fanciful view. Finance is changing for the better, particularly for consumers, but not in the ways many would have you believe. Banks don't fear peer-to-peer lenders, insurance companies don't run a mile, and investment platforms aren't (all) trying to rip us off.
It hasn’t all been plain sailing. Traditional counterparts have taken time to truly learn and trust what we do. But the speed at which they are realising our potential and seeking ways to collaborate is accelerating.
It was 2012 when I first met with a Lloyd's of London insurance broker and the grey-suited gentleman sitting opposite me asked "peer-to-what?" – A familiar response to any introduction to peer-to-peer at the time. The equally customary "Oh, like Wonga" response followed my explanation. But in less than two months, the same gentleman had sent us pricing for a major, multi-billion market cap international insurer to provide us with insurance against personal loan default risk. The insurance world was warming to the Lending Works goal: to become the world’s first peer-to-peer lender that has insurance to protect lenders’ money against borrower default risk.
In the same year, I had my first mêlée with a corporate bank manager at the biggest bank in the world who deliberated over our start-up business account application for a month before denouncing our business as a major money laundering risk. Within three months we had offers from the second and third largest UK banks who took a more rational view to our start-up intentions. Today, our bank manager intersperses our banking requests with that of his portfolio of FTSE 250 clients.
I could list another twenty ways in which traditional financial services support peer-to-peer lending platforms and have found ways to partner with our businesses to deliver the best products to consumers.
We are not overhauling the financial landscape, so what is changing? Rather than being a war between good and evil or a battle between socialism and capitalism, we are rapidly moving towards a much more productive solution that works for both sides of the equation. Funding Circle is already receiving introductions from at least two high street banks. LendInvest hopes to be the first quoted peer-to-peer lending platform on the London Stock Exchange, and our business, Lending Works, will soon receive referrals indirectly from a high street bank.
My experience has shown that alternative finance is not about to replace the incumbents. The divide will grow less stark with the boundaries of new and old blurring faster than ever. Peer-to-peer lenders can partner with anyone if it means improving the customer experience – from credit card companies, banks, insurers to pension funds, investment platforms and even large corporate brands. We will see the same sort of liquidity as seen in the major equity markets, safe and trusted lending products that are easy to use and that provide a refreshing amount of control to our customers. We see the new world bringing customer-focused technology and the old guard bringing the oomph. At Lending Works, we celebrate news from peers who agree tie-ups. Provided that firm's customers benefit, we should give them a cheer.