Call it platform lending, marketplace lending or peer-to-peer (P2P) lending, the loans facilitated in our sector are a new asset class. The novelty of platform lending has contributed to a classic case of the syndrome known as fear of the unknown.
There have been some high-profile failures in the sector. The lesson we’ve learned from from this is the need to vet platforms carefully. Are they conservative in their risk analysis of the companies seeking to borrow? Does the platform take a charge on the borrowers’ assets to safeguard lenders’ interests? What is each platform’s platform’s default rate for failed loans? We’ve written about this extensively.
The advent of the Innovative Finance Individual Savings Account (IFISA) which can contain platform lending has been a modest boost for the asset class. Our best intelligence is that that running total of IFISAs is under £5 billion. This is a relatively small proportion of the Individual Savings Account market (see below).
Time will prove the quality and value of carefully managed lending platforms and their products. History may have lessons for the market here: Thirty years ago private equity was scarcely acknowledged as an asset class until the actuarial profession began to recognise that well-managed private equity was a good asset class for pension funds. We’re confident that history is on our side…