Cambridge To 'Help FCA Understand' P2P Crowdfunding


JudgeBiz

Cambridge academic Brian Zhang is to play a leading role in what we at Money&Co. see as the re-positioning of peer-to-peer (P2P) lending as a mainstream asset class.

The Financial Times, perhaps a little, unkindly, reports that the Financial Conduct Authority (FCA) has hired Cambridge Judge's alternative-data department to " help it understand" P2P and crowdfunding in general.

Bryan is extremely knowledgeable, and a good friend of Money&Co. He spoke at the first crowdfunding conference we sponsored in 2015 - with a presentation of over 50 slides in 20 minutes! See the video of the conference here.

Here's an extended excerpt from the FT piece.

FTLogo

"The Financial Conduct Authority will work with researchers from the Cambridge Centre for Alternative Finance as it looks at whether to force tougher regulation onto the burgeoning sector, which includes peer-to-peer lenders and equity crowdfunders.

"Bryan Zheng Zhang, director at Cambridge CAF, said the centre will collect and analyse data from investor and fundraiser surveys as well as crunching the numbers on lending and deal volumes. The research will also look more broadly at how peer-to-peer lending and crowdfunding fit into the financial services landscape.

"The UK's Crowdfunding Association, an industry body representing equity crowdfunders, said it welcomed the involvement of the university in the consultation. 'The FCA wants to go to an expert source,' said Bruce Davis, of the UKCFA. 'It's good that they're getting the evidence base and broadening it.'

"Cambridge university said it would not be responsible for drafting any policy or regulations.

"The peer-to-peer and crowdfunding sector has expanded rapidly in recent years, growing from its roots as a way for ordinary savers to borrow and lend into a £3.2bn market. A report from Cambridge in February found that banks account for a quarter of peer-to-peer lending."

"However, the sector has hit roadbumps as it tries to move into the mainstream. Plans by the major peer-to-peer lenders to launch the new Innovative Finance Isa, designed to hold peer-to-peer loan investments, in April were scuppered when the regulator failed to grant the companies full regulatory permission in time to launch the products.

"In April the FCA reiterated that the length of time it would take to grant regulatory approval depended on 'the complexity of the business'.

"Both peer-to-peer lenders and crowdfunders have suffered controversy. In July Andrew Tyrie, chairman of the Treasury select committee, wrote to the FCA to warn that 'poorly informed investors may be left with a false sense of security about the balance of risks versus returns'...

"According to the FCA, £2.7bn was invested on regulated peer-to-peer and crowdfunding platforms last year, up from £500m in 2013. Crowdfunding - where many small investors lend to or invest in a start-up project - has provided finance to organisations as diverse as Blaze, the company that makes the lights for London's so-called Boris bikes, and CrowdJustice, a group aiming to test the legality of Britain's Brexit vote."

M&CLogo

See our own explanation of the P2P essentials here.

A short, simple explanatory video is on this page.



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