Christine Farnish is chair of the Peer-to-Peer Finance Association, says Yes.
Alternative finance is growing and the current regulatory and consumer environment in the UK means it is set to grow even further. Last week, the Peer-to-Peer (P2P) Finance Association put out figures showing that, in 2014, our members had lent more than £1.2bn in the UK – more than double the previous year. P2P lending offers a valuable new choice for consumers who have some money to spare and which they want a return on, and for other credit-worthy consumers and small businesses who need a loan. It offers a halfway house between bank accounts – low risk and low return – and equity investments, which are higher risk. It is now regulated by the Financial Conduct Authority and the government is taking steps to include P2P lending within an Isa wrapper. Not only is it democratising how people can get the most from their money, it is offering excellent service to customers, and is very much here to stay.
David Heard is a partner at Ashfords, says No.
It’s obviously difficult to speculate on how this development in UK lending will fare into the future – who would have predicted its meteoric growth over recent years? Nevertheless, if one looks into one’s crystal ball: interest rates are at an all-time low, so as they pick up, we must expect the margin between P2P investing and secure deposits to narrow. Similarly, P2P borrowers are attracted because traditional financial services lenders have tightened their lending criteria in the wake of the recession. As P2P lenders start to consume the market share of traditional sources of finance, they will become increasingly exposed to being bought by those same traditional sources of finance. And we must expect the latter to react, if P2P continues to develop and becomes a threat. If traditional finance providers don’t buy into it, they will likely build competitive operations that are more user-friendly and adaptable to regulation – and/or targeted at specific niches.