The peer-to-peer industry (P2P), long touted as the biggest challenge to the high street banks is still suffering growing pains.
The long-standing supply and demand problem that platforms have experienced shows no sign of abating with many of the leading players are still failing to attract enough borrowers. Zopa, the oldest P2P lender, has been closed to new customers since December, and as The Times reports is a bar unlikely to be dropped until at least next year.
Ratesetter, the UK’s second biggest platform, recently admitted that it had made tens of millions in duff loans to businesses and it has also tried its hand at wholesale lending, lending out its customers’ money to other lenders who could then lend it on their behalf, a practice the Financial Conduct Authority has now banned P2P platforms from undertaking.
Some industry analysts say that if P2P is to survive platforms need a diversification of funding sources and the best models will have a mixture of the classic P2P marketplace with some more permanent money. Zopa is a case in point. It is applying for a banking license that would allow it to take ordinary deposits. While Zopa will continue to operate a P2P platform, its future looks to be becoming a more general online financial services’ provider.
Jaidev Janardana, chief executive of Zopa, has a vision that P2P funds will be just one among a suite of products it sells. Ratesetter, on the other hand, reiterates that it has “absolutely no interest” in getting a banking license.
While some commentators believe the success of P2P platforms seems to be dependent on them evolving into businesses that look more and more like the mainstream banks they originally dreamed of supplanting, other say the most likely outlook for P2P is that it will remain a niche product.