By Ryan Weeks on Monday 8 October 2018
Shying away from commenting on contentious issues is a bad look for fintech.
You might think that fintech firms – as unabashed usurpers of financial services – wouldn’t shy away from a controversial comment or two. You’d be wrong.
On matters such as Brexit, regulation, politics and competition, talking to fintechs is about as illuminating as the now defunct event series P2P Heroes (not hypocritical, see?).
Nowhere is this more evident than in the frankly tepid response we’ve seen to our ‘Trust the Investor’ petition. The petition is an attempt to persuade the FCA to reconsider its proposed marketing restrictions for peer-to-peer lenders, which if passed would limit ordinary investors to allocating a mere 10 per cent of their net investible portfolio to P2P loans. Or, in other words, which would seriously restrict access to the asset class and damage the very ethos of peer-to-peer.
The petition currently has a pathetic 137 signatures. It needs 10,000 to elicit a response from government and 100,000 to be considered for debate in parliament.
There are far, far more than 100,000 investors in peer-to-peer loans in the UK. The world’s original P2P platform Zopa had more than 50,000 active investors on its platform as long ago as the summer of 2014 – and the industry has grown substantially since then. I’m not saying that every single one of the UK’s P2P investors will care about these rule changes, but I’m quite certain there’s enough interest out there for our petition to get considerably more traction than it currently has.
So why hasn’t it? Timidity.
Peer-to-peer lenders (and other fintechs) have become overly timorous in their old age. A few have tweeted the petition or softly shared it in newsletters. But few platforms have thrown their full weight behind the initiative. Their excuses range from not yet having submitted a formal response to the consultation, to ‘compliance-says-no’, to straight-up radio silence. My guess is their reluctance in truth stems from not wishing to upset the regulatory apple cart.
RateSetter has, to be fair, slightly bucked this trend. The platform sent a blog post out to its investors a week after the consultation landed, laying out its views in explicit detail. The company's CEO Rhydian Lewis wrote that he and his company 'fundamentally disagree' with the proposed marketing restrictions. The industry needs more of that.
I ought to say at this point that AltFi has no axe to grind here. It’s not us that will suffer if the petition fizzles out; it’s peer-to-peer platforms and their investors. As I’ve written before, the most likely outcome of the proposals is that the peer-to-peer industry will become increasingly reliant on institutional capital and less and less bothered by the hassle of retail money.
There are some bad eggs in P2P and they should be cracked down on individually. The industry as a whole should not be. The industry’s biggest and best platforms have established strong track records over the course of five years or more, as our friends at AltFi Data will tell you.
It’s utter, utter absurdity that ordinary investors should be mostly barred from accessing these reputable sources of return while they remain free to splurge as much as they want on crypto-investing, gambling, the lottery or whatever other means of money-chucking that takes their fancy.
Peer-to-peer founders, however, won’t quite say this.
Our petition is far from the only thing fintech firms are zip-lipped about. Brexit, Bloody Brexit, is another.
I recently wrote a piece for WIRED about a curious trend in fintech: UK-headquartered firms setting up engineering hubs in Europe or elsewhere. Many companies have done this as a perfectly sensible means of mitigating the double whammy of tightening immigration rules in the UK and the simple fact that the UK is becoming a less attractive place for Europeans to relocate to. A high percentage of engineering talent in UK fintech comes from overseas. Ergo, companies are setting up engineering hubs overseas in order to continue to attract top tech talent. We know this is happening because online lenders, digital banks and the like are happy to tell you it’s happening. But try to get them to link their overseas operations to Brexit? Dead end.
There are exceptions of course. LendInvest’s Christian Faes was pretty forthcoming about the whole issue, as were representatives of Tandem Bank and Lending Works. Banking challenger Revolut is always good for a frank conversation. But generally speaking, firms are reluctant to talk on the record about Brexit, often blaming uncertainty around what the final deal will look like.
This has been the case as far back as the referendum itself. I distinctly recall how refreshing it was to hear Angus Dent, co-founder and CEO of peer-to-peer lender ArchOver, call the result of the vote ‘a disaster for this country’. Conversely, the message from his peers was all about balance – but it all came off a little hollow-sounding given what was said off-the-record.
Shouldn’t fintech firms – punchy disruption in their blood – feel free to speak boldly and openly about what they want from politics, how they’re handling change, and about the regulations that govern them?
Perhaps I’m being naïve and they’re better off keeping their heads down. Having said that, naivety isn’t so very far away from idealism, and there was a time when fintechs were bracingly naïve too.