Transparency has been the watchword for the peer-to-peer industry of late. A week ago today, at the AltFi Europe Summit 2015, AltFi Data unveiled the UK’s first returns index. The Liberum AltFi Returns Index (LARI) not only provides a powerful story in terms of the stability of peer-to-peer returns over the past decade, it also requires that its constituents make their full loan books available for public perusal. Funding Circle had already ticked that box, with consumer specialists RateSetter and Zopa now having followed suit.
Earlier-stage outfits are, generally speaking, much more guarded about releasing lending data. Many will only broadcast a cumulative lending value – and some appear reticent even to go that far (instead choosing to disseminate relatively unhelpful information, such as “loan requests”).
Landbay is looking to buck that trend. The platform has joined the industry’s big guns in publishing its full loan book online – but has also gone a step further by making accessible a uniquely broad range of data. Landbay’s statistical offerings – made on a loan-by-loan basis – include: type of property being lent against, loan-to-value ratio, rental coverage, location of property (first four digits of postcode), number of missed repayments, interest rate paid to the lender and, crucially, the interest rate paid by the borrower.
John Goodall, Co-Founder and CEO of Landbay, explained the significance of the move:
“Every lender on every P2P platform is taking some risk – that is why they are getting better returns than ‘risk-free’ cash savings. We believe that every lender should be compensated for the risk that they are taking. We will therefore publish the borrower and lender rates for every loan so that lenders can see that they are being properly rewarded for the risk they are taking.”
“Ideally, all peer-to-peer lenders will adopt this new standard of openness as a great way to show everyone that this exciting new sector has nothing to hide and is very different from the financial old guard with its smoke, mirrors and nasty hidden surprises.”
Mr. Goodall confirmed, in a conversation with AltFi, that he deems borrowing rate to be the best overall indicator of risk. The Landbay boss therefore believes that publishing data on borrowing rates represents an important development in assuring private lenders that they are getting a fair deal.
Such disclosures are all the more important given the oft-cited danger of an increased risk appetite within the peer-to-peer industry. A climbing of the risk curve is seen by some as an inevitable consequence of increased capital flows into the space from tax wrappers and institutions. If such a shift does indeed occur, transparency of the kind now being provided by Landbay becomes all the more important.
Mr. Goodall also outlined the significance of having provided loan-to-value ratios and levels of rent for every property lent against, alongside details of the type of property and its location. Such data should serve as evidence that the platform is amply diversified and that appropriate safety margins are in place.
This is a shrewd move from the Landbay team and one that positions the platform ahead of the curve in terms of transparency. We’ll now wait to see whether any other early-stage lenders will choose to follow suit. If an increasing number of these early-stage platforms join the industry’s most established players aboard the transparency bandwagon, questions will soon begin to hover over any platforms that resist the movement.
Sam Griffiths, Managing Director of AltFi Data, had the final say:
“AltFi Data believes that transparency is vital to the long term success of this industry. Giving investors the full picture is the only way to ensure that enlightened investment decisions can be made. In making this level of detail available, Landbay have propelled themselves to the forefront of the industry.”
