Tag: ArchOver

24th Hour Failure (To finish first, first you have to finish)

Author
Angus Dent
Date

This weekend saw a huge disappointment in the ’24 Hours of Le Mans’ race, leaving the Toyota team questioning what happened, to watch success slip away in the last 3 minutes of this gruelling challenge, was heart-breaking for those involved and the most fascinating viewing for the interested spectator and commentator. 

Ultimately, it appears that one vital element led to the subsequent defeat, and handed the victory to the consistently tried and tested model of their competitors in the Porsche team. On what was the most important day in the calendar with glory a single lap away the failure of one part of the package turned the whole effort into embarrassment and widespread press coverage for all the wrong reasons.

Great story – but what does this have to do with the P2P space…..? A lot of common themes and messages can be taken from this story 

Let’s look at the top teams on the starting grid in the race……they all had roughly the same size team behind them, with what at face value appeared to be the same skill set and knowledge. All of the cars looked pretty identical from the outside, bar the different splashes of colours identifying their team allegiance so why would one fail so spectacularly at the critical moment?

The answer lies under the bonnet – look at all the components, the chassis, the aero package, the engines etc.  perhaps at a glance they look the same but they are not. It’s the whole package that must be fit for purpose, if 1% isn’t then abject failure will result. That elusive, in the case of Toyota, 1%, became the difference between success and failure, being lorded in the press or blasted for a simple error of judgement and engineering.

24 hour le mans

The alternative finance sector is seen by most on the outside as one identical group of organisations, all competing under their own branded team colours for the same purpose and all on the starting grid in identical vehicles. Lift the bonnet however and you’ll see huge differences that will optimise an organisation to success, or cause them to crash out of the sector in a blaze of (non) glory.


 Unlike the image of the homogenised group of lenders, grouped together in the media and by less informed bystanders under the title ‘P2P’ there are actually numerous variations of platform, offering, expert teams and niche areas all operating in this field. Each has their own reason to believe they should be first across the line, many will stumble at the first hurdle due to lack of due diligence and not robust enough offerings or platforms. Some will look like they are in it for the win, only to fall foul to that elusive 1% of information, security or expertise and simply roll across the finish line in failure place (there’s no second or third) – to the delight of the watching crowd – who want to be entertained by stories of failure.

 

Please visit www.archover.com to find out more about our winning proposition.

 

Media and finance industry need to work together to show that P2P comes in more than one flavour

Author
Angus Dent
Date

Once again, we find mainstream media treating the diverse alternative finance sector as one homogenous group and misleading or alarming investors in the process.

This time, we have Ruth Lythe of the Daily Mail launching with a headline on 7 June, “MPs attack risky online firms offering 7% returns from lending savers’ cash to strangers to buy cars and even phones”.

The article refers to Zopa’s recent announcement of its point-of-sale partnership with Unshackled.com.

In essence, the article can be summarised in one of the lines within it: ‘P2P loans are risky’.  This is written without providing any context for the reader, which is both naïve and does a great disservice to existing and potential investors.

  • A comment on the losses experienced to date by peer-to-peer investors would have been good (they are below what the banks accept as ‘normal’ and are published by the largest platforms in the smallest detail for all to see, which is something the banks never do).
  • A comment on the variety of models available in P2P would have been helpful too, rather than bracket everything under one, doom-laden label.

Of course a judgement has to be made when investing in peer-to-peer. Judgement is required in most forms of investment, but what really matters and needs explaining when making sweeping assessments of this nature is how the likelihood of loss is mitigated and managed, which differs from platform to platform.

In the case of Archover, all business loans have to pass the scrutiny of not only our own lending specialists, but also those of leading credit insurers, who provide cover on the underlying asset that we use as security. If we were even tempted to lower our standards we would not be allowed to do so. I know of no bank that can provide that same level of comfort.

Daily Mail Old

In other parts of the market, RateSetter and others have provision funds which cover all losses. This means that, to date, nobody has ever lost money lending over their platforms. The banks rely on the good old UK tax payer for such a guarantee.

I think I speak for the entire industry here when I say the FCA is doing an excellent job in making sure investors are as informed as possible about the nature of their investments.

Andrew Tyrie’s letter to the FCA on behalf of the Treasury Select Committee is perfectly reasonable and I have no doubt the Regulator will provide a full and well considered response in good time. This will no doubt include some of the facts, such as net returns for investors after default being in the range of 5%-7% since the inception of the industry, the never before seen level of transparency in financial services and the resilience of the sector to economic shocks – even against the most stringent scenario laid out by the Prudential Regulation Authority (PRA).

The Regulator will certainly have our full backing if even more improvements can be made to help investors.

As an industry, we do not criticise the Daily Mail or the media at large for advising caution, but we do implore it to examine the facts and make a more rounded assessment on behalf of its readers.

PWC’s report on Marketplace Lending is a reminder of the sector’s Virtues for Investors

Author
Angus Dent
Date

The buffeting that the alternative finance sector received from Adair Turner on the BBC earlier this year has been proceeded by a relatively quiet three months for the industry, in the press at least. In a sense, the furor surrounding a potential Brexit that will reach a peak in the next month or so has come at a good time – it has allowed peer-to-peer lending platforms to knuckle down and continue the sustainable growth of 2015 into 1H16. The unwelcome comments of the uninitiated are otherwise caught up clamouring “in” or “out”. However the sector has been affected by the unsettling of potential lenders who are nervously waiting to see what will happen before deploying more capital or their first capital in the sector.

Uncertainty is always bad for business at any rate, so the excellent “Roadmap for Marketplace Lenders” report published by PWC recently reminds us. The Roadmap should be seen as a welcome reminder to existing lenders who are starting to let their doubts creep in that the foundations in the sector are solid. The report can be found here– it gives a detailed guide as to how marketplace lending platforms have evolved, and the future for new entrants into the space. PWC attribute the success of any marketplace lender to four main pillars:

  • Build the foundation
  • Refine the core lending business
  • Expand and innovate
  • Look beyond core lending

The report is specifically aimed at aspiring smaller marketplace lenders, however it contains industry insight that serves to highlight the benefits to anyone looking to start investing or lending over marketplace platforms as well. The key to the innovation in modern finance as a result of marketplace lending has been the ability of platforms to identify very specific niches as a focus, rather than act as what PWC calls a “single homogenous force” aiming to disrupt anything and everything. It is crucial that investors and lenders buy into the ethos that working with and alongside traditional forms of finance in a democratic fashion is exactly what “Fintech” is all about- the PWC report aptly emphasises this at length. It isn’t, as Turner would have you believe, a razzle-dazzle load of unregulated cowboys looking to make a quick buck by gazzundering the banks and taking advantage of naïve retail investors by lending to un-creditworthy borrowers.

A lot has changed since the early days of simple “peer-to-peer lending” that was pioneered by Zopa ten years ago. The name is still the moniker that platforms such as ArchOver are happy enough to abide by, alongside many others of course. Regretfully the terminology and nomenclature in the alternative finance industry can be confusing and worse still completely misleading. Partnering with institutional investors, and indeed the banks, on the same terms as the rest of the crowd is the true innovation. It has allowed everyday savers to avoid the complicated and risky world of stocks, shares and expensive wealth managers and give them the chance to take control of their savings and lend money alongside savvy funds, corporate and institutional investors at competitive interest rates. The PWC report may seem like it is stating the obvious, and to a certain extent so does this blog post- but in times of uncertainty it is the simple facts that need to be accentuated to reassure lenders and investors that alternative finance remains an attractive propositions.

ArchOver’s ‘secured and insured’ proposition represents industry best practice

Author
Alex Taylor
Date

A study produced by independent research house Equity Development has concluded that ArchOver’s ‘secured and insured’ business model represents best practice in the P2P crowdlending sector and “perhaps even represents the future of corporate lending to SMEs worldwide.”

 

Commenting on the safety of the sector as a whole, analyst Paul Hill says that “credit vetting procedures are at least on par with the high street banks” and predicts that “going forward, across the economic cycle, a diversified portfolio of P2P loans should be able to generate ‘relatively predictable’ returns of circa 5% per annum (net of costs and defaults).”

 

Mr Hill also rejects Lord Adair Turner’s recently expressed negative outlook for the P2P sector, predicting instead that “We still think it is possible for risk tolerant investors to generate healthy returns from holding a basket of non-correlated, fixed income P2P loans in today’s low interest rate environment.”

 

The report records that ArchOver has arranged 81 loans collectively worth £15.2m without so far incurring any late payments. It places ArchOver’s loan portfolio in the band between S&P’s lower investment grade (BBB) and upper high yield (BB-) ratings.

 

The study concludes that “The P2P sector appears to have an attractive future ahead of it, involving plenty of years (if not decades) of strong growth. ArchOver’s unique ‘secured and insured’ proposition represents industry best practice and, in our opinion, is a powerful differentiator to attract lenders and creditworthy borrowers alike.”

 

Responding to Equity Development’s findings, ArchOver’s CEO Angus Dent said: “It’s always gratifying when an independent source says positive things not just about your organisation, but also about the sector in which it operates. There are a lot of players in the P2P sector and, in the fullness of time, we will all have to face more difficult times which will result in casualties and some inevitable industry consolidation. However, in the meantime, creditworthy SMEs are gaining access to the funding they require and lenders are earning a decent return on their money.”