Last week the Peer-to-Peer Finance Association (P2PFA) put out figures showing our members lent more than £2.2bn last year – more than double the volumes lent in 2014.
Anyone who follows the sector will understand the remarkable progress we have made in a relatively short period of time: after all, p2p lending only started in 2005.
However, in light of this progress, we are often forced to defend our record – most recently from Lord Turner, former chair of the Financial Services Authority. This morning Turner told the BBC the "losses which will emerge from peer-to-peer lending over the next [few] years will make the worst bankers look like lending geniuses".
All members of the P2PFA operate to high standards of transparency and business conduct. For example, we have introduced a standardised methodology for calculating loan default rates and data on defaults is publicly available on all member platforms. All expected investor returns are quoted net of defaults and net of any fees and charges. We feel it is very important customers who log on to our members' websites understand exactly what they are getting into before they lend, including the risks and likely returns.
Additionally, since January, all our member platforms make their entire loan books available for scrutiny by customers, making them among the most transparent financial services businesses in the world.
When one considers the ongoing debate around complex, opaque products, hidden fees and complicated language in the investment fund, pensions and banking industries, I challenge anyone to find this level of transparency in any other part of the financial services market.
However, not everyone follows the industry so closely. So when we are asked to respond to comments from people suggesting trouble in the industry or a bubble on the horizon, it is important that we respond and try to explain exactly how the new p2p lending sector does – and doesn't – work, so people can be more informed. After all, we are new kids on the block and don't have the long standing levels of public awareness that come after many decades in the market.
For example there was a lot of media interest in a failed Swedish lender, TrustBuddy, late last year. It is worth recapping that TrustBuddy was an unregulated Swedish platform. It was not a member of P2PFA and its failure was down to apparent serious internal misconduct combined with the lack of effective regulation. Examples such as this are not the norm and unrepresentative of the UK industry. But they do, of course, make good news copy.
Over the last 11 years average default rates on loans have been low, measuring between two and three per cent per annum. We only lend to creditworthy consumers and small firms. Strict credit underwriting rules apply to all our members and we pride ourselves on managing credit risk as well as, if not better than the banks. P2p lending should not be confused with higher risk forms of equity crowdfunding or lending to sub-prime customers.
The Financial Conduct Authority (FCA) is currently completing its full platform authorisation process – meaning unsustainable or irresponsible business models won't be permitted to operate in the UK market.
While regulation may sometimes appear slow and cumbersome, it is important consumers can be reassured that the regulator is rigorous and working to protect consumer interests. This will be particularly important when p2p lending becomes included within ISAs from this April.
Our growth is built on strong foundations and we are determined to keep it that way. Consumers and small businesses can only benefit as we continue to bring much-needed competition and innovation to the retail financial services market.