Maitland/AMO hosts P2P event as sector enters mainstream

by Neil Bennett | 1st January 2015

Maitland/AMO this week hosted its first event on the subject of the fast-growing peer-to-peer market. This coincided with the second successful round of fund-raising by Maitland/AMO client P2P Global Investments plc, which listed in London last year.

The sector, which began with online platforms matching individual lenders to individual borrowers is maturing rapidly, attracting more institutional investment and acting as a disruptive force in financial services. In a sign of the extent of investor appetite, P2P GI’s second round of fundraising was significantly oversubscribed. This follows the $5 billion floatation of US platform Lending Club in December.
The ‘institutionalisation’ of the industry made for a rich discussion, with much interest in whether peer-to-peer is really here to stay; how to match increasing investment demand with demand from borrowers; risks and rewards for investors; and, the disruptive effect on the banking industry.
Speakers included Simon Champ, CEO of Eaglewood Europe, which manages P2P GI, David de Koning, Head of Communications at Funding Circle, the UK’s largest peer-to-peer business lending platform, and Rupert Taylor and David Stevenson of AltFi, the leading provider of data for the alternative finance sector.
Attendees learnt it is wrong to look on peer-to-peer platforms as a homogenous group and that, as the industry grows further, there is likely to be a greater divergence of approaches to both borrowers and lenders.
Retail and institutional investors will be able to invest through peer-to-peer platforms alongside each other, just as they do in the equity markets, and retail investors are likely to benefit from the increasing professional approach that institutional investors will.
Even though there is an increasing amount of money to be deployed, levels of return for investors have been sustained. Also, despite exponential growth in the industry (Altfi data shows the sector grew by almost 140% in the last 12 months¹), there is still a vast spectrum of untapped borrowers out there – those who pay double-digit interest rates on credit card debt and SME borrowers who are turned down by banks, simply for not fulfilling rigid criteria.
Trust and security are key issues for the industry, just as they are for the wider financial services sector. Peer-to-peer platforms themselves carry out significant levels of due diligence on borrowers and recommend that investors spread their funds across loans to gain the benefit of diversification. P2P GI then undertakes a further round of due diligence on any loans referred to them by platforms to give investors an attractive income investment at a time when there is a search for yield.
It is clear that the peer-to-peer industry is going to continue to develop and grow, competing and collaborating with existing financial institutions; a conclusion no better illustrated by the news later in the week that Goldman Sachs is planning to enter the sector.

Article written by Laura Conaghan and Andy Donald.

About the Author

Neil Bennett

nbennett@maitland.co.uk

Eighteen years as an editor, columnist, broadcaster and journalist, including seven as the award-winning City Editor of the Sunday Telegraph

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