Tag: p2p lending

ARCHOVER GRANTED FULL FCA AUTHORISATION

Author
Ashlee Dutton
Date

London, UK – 24 May 2017 – ArchOver, the peer-to-peer (P2P) business lending platform, has secured full authorisation from the Financial Conduct Authority (FCA) to operate as a P2P lending platform (Article 36H). Since launching in September 2014, ArchOver has facilitated over £35 million of investment over its platform, operating under interim permissions granted by the FCA. Full authorisation will support ArchOver in attracting new lenders to the platform and allow it to continue working with businesses to make access to funding as easy and simple as possible.

“There is great satisfaction in gaining a stamp of approval. Our industry leading policies and procedures will allow us to take alternative forms of lending to the next level,” commented Angus Dent, CEO at ArchOver. “At a time when investors are experiencing low interest rates and banks are tightening the purse-strings, P2P lending offers a unique and much needed service. Incorporating the most successful elements of P2P lending into the regulations and strategy of the FCA is critical to raising awareness and protecting the long-term success of the industry.”

As a fully authorised P2P lending platform, ArchOver can operate on a level regulatory playing field and focus on expanding its community of investors to achieve its ambition of facilitating £500 million of lending within the next five years. With no borrower defaults, late payments or losses in nearly three years of operations, ArchOver delivers an above-industry-average return of 7.24% to investors.

Backed by the Hampden Group, ArchOver has developed two asset-based lending services allowing UK SME’s to borrow against Accounts Receivable and/or recurring contracted revenue. Its experienced management and credit team carefully vet borrowers and monitor the performance of businesses and assets every month. ArchOver also partners with Coface, the world-leading provider of credit insurance and debt recovery services, to offer additional security.

“From the first day of operations, we’ve placed lender security at the heart of our business model to exceed any potential compliance requirements,” commented Ian Anderson, Chief Operating Officer at ArchOver, who has been closely involved in the authorisation process with the FCA. “This attitude meant we have not had to change our primary working practices in order to comply with regulation. While we have waited a long time to gain this recognition, we always believed that it was in the best interests of ArchOver, and the sector in general, that the FCA take the necessary time to ensure the process was thorough and fair.”

“The P2P Sector Is Growing Up”

Author
Angus Dent
Date

There was always going to come a time when the Alternative Finance revolution would falter – maybe we have already reached that point. P2P lending and equity crowdfunding are no longer quite so new and, as the latest missive from the FCA makes clear, this particular side of the Altfi sector has outgrown the rule book. There are also early signs that the novelty is starting to wear off, certainly with the media. So, perhaps now is an ideal opportunity to take a step back and reflect.

Looking ahead into 2017, it is difficult to see how the benign conditions that have helped P2P platforms to create such a significant presence so rapidly – e.g. recovering economy, low interest rates, banks on the back foot – can continue indefinitely. Sooner or later interest rates will start to climb back up and there will be a downturn in the economic cycle. And, with so few platform operators making a profit, there are bound to be casualties.

Some platform backers may grow impatient with the expensive pursuit of acquiring market share at any cost and insist on seeing a return on their investment. Other platforms may simply ‘time out’ because their proposition is not sufficiently different or they have insufficient mass or financial backing to continue.

This could lead to business failures or, more likely, mergers/take-overs of platforms. Consolidation would be a perfectly normal phase for an emerging sector that has a myriad of players all vying for customers and profitability. The High Street banks, too, will recover their poise and may decide to dip their collective toe in the water by making a P2P acquisition or two of their own – if they do, they will almost certainly take aim at the biggest, the most established or those best placed to be scaled. All this is not so much to be pessimistic, rather it is to be realistic. Consolidation is inevitable.

The important thing is to make sure that P2P lenders do not suffer financially. If a platform fails, it does not follow that the loans in which the lenders are invested go bad. All P2P operators should have run-off plans in place to cover that eventuality – something that the FCA, quite rightly, insists upon. If private investors start to lose money, the press and other critics will have a field day.

What is also important is that the P2P sector does not allow itself to be divided into a number of component parts, either into the large and small platforms, or those with different business models. The sector should operate as one for its own protection and for the common good.

The P2P sector is growing up – it can either be in charge of that process or be at the mercy of others.

growth

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.

Are Commerzbank about to blaze the P2P Lending trail?

Author
Angus Dent
Date

In the Twittersphere, the word “Fintech” tends to provoke a lot of hot air. Speculation leads to everything from wild estimations and massive valuations to doomsday predictions and floccinaucinihilipilification. You aren’t going to get that word into 140 characters easily, but the exaggerated fervorous lexicon endemic to “#FinTech” dictates that you should try to if you want to fit in. And it isn’t just Twitter; print media and digital news services regularly produce supercharged opinion articles that try so hard to “think the unthinkable” that the “thinkable” (and usually the reasonable) is of seemingly negligible importance. As I’ve said before, that is what happens when you create a portmanteau that attempts to define such far-reaching businesses and sectors. Readers will start to think that Bitcoin price fluctuations become, all of a sudden, of tantamount importance to a Peer to Peer lending platform.

In light of this, Crowdfund Insider’s headline “Germany’s Second Largest Bank, Commerzbank, said to Launch P2P Platform this Year” seems to suggest a familiar speculatory path is being trodden, particularly as it comes from “informed sources” whispering in the ear of the P2P-Banking.com blog. The article claims that German behemoth Commerzbank plans to launch its own P2P Lending marketplace, “Main Funders”, in 2016. Yet what is particularly interesting here is that this would be the first sign of a bank directly implementing an in-house peer-to-peer lending operation. Why is this interesting? Because it makes a lot of sense, and it could herald a huge change in the way people see peer to peer lending. Plenty of banks, both big and small, are showing an increased appetite for lending across platforms in both the UK, US and Europe. Under German law, only banks can fund loans; to bypass this all existing P2P lending companies in Germany partner with a transaction bank which originates the loan and then sells the proceeds (repayments and interest) to the investors: a complex procedure that is hardly widespread. By building its own platform, Commerzbank would circumvent some of the legal hurdles and provide the tailored, modern and agile solution to SME borrowing that the banks in the UK can’t (or won’t) provide, whilst also offering investors and savers an increase on the miserable rates they are all too used to.

Commerzbank has Main Incubator as their fintech accelerator offering venture capital to start ups, so it is an area that they should know well and more importantly have a vested interest in. This may sound like bad news for smaller peer to peer lending platforms who may fear being muscled out. However, it is more likely a case of “imitation is the sincerest form of flattery”: established banks bring the wealth, history and stature that could help Peer to Peer Lending escape from the bubble of hot air that is “Fintech”. However, is this really P2P lending? We have a bank, a highly regulated entity, entering a market that isn’t so highly regulated, certainly in terms of capital requirements. One of the things that has driven the banks away from SME lending is the large amounts of capital they have to put aside for these loans. This is behind the drive towards Invoice Discounting, which requires less capital to be put aside. Commerzbank’s solution could be that their P2P requires less capital than ordinary SME lending. There’s also the question as to whether Commerzbank, and other German banks, have made sufficient provision for the bad lending of the past. Is this a case of smoke and mirrors in the form of moving things around the balance sheet?

What is certain is that banks’ enthusiasm for P2P lending would produce solid, mutually beneficial relationships that can help SMEs and savers alike. Yes, there will inevitably be teething problems as the banks adapt to the fleet-footed world of P2P lending and the P2P lenders adapt their models to fit the strict regulatory processes of the banks. But Commerzbank’s embryonic P2P marketplace could be the trailblazer that sets the way for future banking… if it exists at all.