Price comparison sites drive a significant portion of P2P lending volumes, as well as generating some of the industry’s highest quality loans.
Approximately half of Zopa loans are sourced via price comparison sites. Zopa has lent around £2.6bn to date, including close to £700m in 2017 alone, according to AltFi Data. That roughly £350m of that year-to-date total comes from sites like MoneySuperMarket and Confused is a clear sign that P2P lenders are going toe-to-toe with banks – and often winning.
“The price comparison sites attract people who are looking for better deals, and we’re looking for borrowers who could borrow from their bank, but demand better,” said Lawson.
RateSetter, a peer-to-peer lender which caters to consumers, businesses and property developers, sees many of its highest quality consumer borrowers arrive via price comparison sites.
“Put simply, the best quality borrowers are price sensitive and shop around for credit,” explained Mario Lupori, managing director for consumer finance at RateSetter. “So by working with price comparison websites, we’re able to attract excellent borrowers, and of course the borrowers themselves benefit from the competition that these sites foster.”
Like Lawson, Lupori believes that P2P platforms are natural allies to price comparison websites, because they do not rely on “cross-selling or customer inertia” in the way that banks do.
The fact that both price comparison sites and P2P platforms are rooted in technology only sweetens the synergy. Lawson said that Zopa works closely with comparison sites to deliver as “slick and seamless” a customer experience as possible – which he says low-risk borrowers rightly demand.
“For example, we offer real time assessment of whether you would be pre-approved, and use soft searches to offer personalised quotes that don’t leave a mark on credit files,” he explained.
It is not only the largest P2P firms that are benefiting. Brendan Ashe, performance marketing manager at Lending Works, said that price comparison sites have so far accounted for 40 per cent of the platform’s loans in 2017, up from 25 per cent in 2016.
There is a common misconception that P2P lenders cater exclusively to borrowers that the banks wouldn’t touch. What is becoming increasingly clear is that the two groups are, in fact, often in direct competition for customers.
P2P business lenders offer a useful case-in-point. The Treasury recently published the first set of metrics for its nascent bank referral scheme, which involves redirecting loan applicants that have been rejected by banks to alternative business lenders. These numbers showed that 8,100 SMEs had been referred under the scheme to date, with less than 3 per cent ultimately finding funds via alternative sources. In other words, banks and alternative business lenders seem to agree on the creditworthiness of most small businesses.
The importance of price comparison sites as an origination channel in P2P consumer lending is another indicative sign. As Lawson puts it: “At Zopa we offer loans to low-risk UK customers, who are looking for better value and experiences than they will get from their mainstream traditional bank.”
Those customers could deal with a bank if they wanted to.