Andrew Hagger of Moneycomms looks at the latest P2P lending figures following today’s publication of the largest study of the alternative finance market from Nesta and the University of Cambridge
Yesterday the CMA announced a full review of the UK banking market claiming it’s not working for consumers and business customers.
However one day later and in complete contrast it’s reported that the peer to peer alternative market is doubling year on year, arranging over £1.7 billion of finance (consumer & business) in 2014 alone.
While the mainstream banks and their ‘computer says no’ approach is rejecting profitable new businesses, the alternative finance industry with its 21st century cutting edge technology and credit assessment models continues to reap the benefit and is growing rapidly.
The comprehensive alternative finance study reveals that by the end of the year it is expected that the UK alternative finance market will have provided more than £1bn in business finance to over 7,000 small and medium enterprises in the UK, the equivalent to 2.4 per cent of all bank lending to SMEs.
In the last quarter, bank lending to small and medium-sized enterprises was down by £400m, according to the Bank of England’s latest Trends in Lending report.
The Nesta research reports that the alternative finance market has more than doubled in size year on year from £267 million in 2012 and £666 million in 2013, to £1.74bn in 2014 and is predicted to hit £4.4bn in 2015.
Whilst credit worthy borrowers, both personal and business, now have an alternative source of finance available to them, lenders (aka savers) also have a wider opportunity to earn far greater returns than the pittance paid by traditional bank and building society savings accounts.
However it’s imperative that they understand how each individual P2P provider goes about protecting their money in the absence of an FSCS guarantee.
Richard Watts founder of Nurture Money the crowdfunding comparison service said: “It’s great to see the market flourishing and increasingly being recognised as a credible ‘go to’ source of affordable finance”
He added: “as far as potential investors are concerned, a true understanding of the growing number options and the way funds are protected is vital “
Rhydian Lewis, Founder and Chief Executive, RateSetter commented: “Peer-to-peer appeals to those seeking a higher income from their money. For this reason there is simply no place for costly FSCS coverage within the sector, and to seek it would be to disregard the industry’s mission to deliver a decent return for lenders. We are instead offering effective and bespoke risk mitigation systems which work in the best interests of consumers.”
Hagger warned: “Respect for the banking sector is in decline and this is playing into the hands of the alternative finance industry, however it needs to ensure that protection of lenders funds remains a number one priority and they don’t take their eye off the ball as the level of new business accelerates.”