This month has seen a slew of authorisations granted by the Financial Conduct Authority (FCA), meaning that some of the bigger peer to peer (P2P) platforms, previously operating with only interim permissions have now become fully authorised. The newly authorised platforms include Funding Circle, ArchOver, and Linked Finance.
The approvals follow an arduous 18-month process and much criticism has come from industry executives about the length of the process and the lack of safeguards it ultimately delivers for investors. Some industry insiders have also slammed the fact that many of the smaller, newer platforms have been granted licences much quicker, creating concerns that the process is has allowed competitive disadvantage to creep into the sector. In response, the regulator steadfastly refused to bow to pressure to speed up its processes in order to maintain a level playing field and said it assessed all firms on an equal case-by-case basis.
Now that the bigger platforms now have full permissions some say it is a pivotal moment for the P2P sector, which has been in a holding pattern while the larger players become fully regulated, and will now move into the mainstream financial services industry. P2P investing is becoming very popular and it makes sense for the FCA to ensure it is appropriately regulated. The regulator’s stamp of approval is expected to boost the sector’s legitimacy to investors and financial advisers.
Getting full approval also paves the way for platforms to launch their Innovative Finance ISA (IFISA). The FCA had voiced concerns that a flood of less experienced, less knowledgeable investors would pile into the asset class, blindly trusting the ISA brand, meaning only authorised firms could roll out the product. However, one platform executive believes that the FCA authorisation would not be a huge game changer for its business growth, especially seeing as the ISA season has just ended.