Fashionable Revolutions

Revolutions often involve a degree of fashion. One minute they capture the imagination and are all the rage, the next they old-hat and face apathy or even outright derision. It feels a bit like that with the P2P sector which, having been once the darling of the financial market place, is now viewed with grave suspicion – especially by the massed ranks of the media, which helped to put the whole alternative finance movement on a pedestal in the first place. ‘Hero to zero’ is an understatement.

There are other examples, of course, as in the New Towns which came into being after World War Two by way of the New Towns Act 1946. The first wave saw towns like Stevenage, Crawley and Basildon spring up; the second saw Telford, Redditch and Runcorn; and the third, fifty years ago, ushered in Milton Keynes, Peterborough and Northampton.

While it is undeniable that some of these towns have been on the receiving end of a joke or two over the years, few can argue with the fact that, in many respects, they have been a success. They have been so because they filled a gap in the national fabric that existed because of the circumstances of the time; i.e. much of the UK had been flattened and there was a desperate shortage of housing.

And so it has been with P2P. The sector exists because there was a gaping hole in the financial marketplace left by the banks, which were, and still are, abandoning small businesses in order to rebuild their balance sheets. That the process remains ongoing can be seen from the latest round of bank results out this week.

SMEs are turning to P2P in increasing numbers because that is where they are more likely to be treated as customers. And the same can be said for people with money who are considering P2P loans because that is the only way they are going to secure a reasonable return on their cash, albeit with an element of risk.

Fashions come and go and sometimes they even come back into favour. New Towns are currently back on the agenda and for the same reason they were created at the outset – they fulfil the requirement of providing more and better housing for all. Maybe it will be the same for P2P when commentators, politicians and regulators finally accept that this is what the public wants. My only hope is that it won’t take half a century for the hands on the clock to turn full circle.


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