Peer2Peer Finance News December 2019 by Alternative Credit Investor

>> 10

BILLION-POUND MARKET

What’s next for the IFISA? REGULATION DEADLINE BREAKFAST BRIEFING

>> 16

Coverage of P2PFN’s event last month

Breaking the brick ceiling

FutureBricks’ Arya Taware on filling the funding gap >> 30

Platform failures enhance City investor focus on profitability ISSUE 39 | DECEMBER 2019

HIGH-PROFILE failures of peer-to-peer lending platforms have brought the question of profitability into greater focus for institutional investors, Peer2Peer Finance News has learnt. Lendy and FundingSecure fell into administration this year, with critics highlighting poor underwriting practices at both platforms. Speculation of mounting defaults surrounded the platforms in the months leading up to their demise. Many platforms in the P2P sector have typically defended the fact they are loss-making as a normal stage in business growth, rather than a path to insolvency, as they are focusing on increasing revenues and customer acquisition over profitability. But institutional investors have told Peer2Peer Finance News that they do indeed assess profitability – or future profitability –

when considering which P2P platforms to back, particularly in light of recent platform collapses. “For comfort across all investors, not just the opportunistic ones seeking high yield, it’s about showing sustainability,” said Marilena Ioannidou, director of investments at British Business Investments – the commercial arm of the state development lender British Business Bank.

“If platforms are not profitable, we need to consider how much equity backing they have. “The question is, will they be there in six months?” British Business Investments lends to small businesses through a number of P2P platforms including ThinCats and Funding Circle. Another institutional investor, who chose to remain anonymous, noted that the new Financial Conduct Authority (FCA)

regulations for the sector, which come into effect this month, mandate more disclosure about winddown plans. The investor said that when platforms are lossmaking you need to take more care to question their living wills and whether they have a backup servicer in place. John Cronin, analyst at stockbroker Goodbody, also noted that profitability is becoming increasingly important. “In the past, profitability was less relevant,” he said. “But platform failures in the sector have raised a few eyebrows. It makes sense to do due diligence before deciding who to invest through. “As the industry matures, those investing will be concerned about whether models will be sustainable. “It’s too early to say that profitability is a decisive factor but it will increase in importance in the >> 4 decision-making

For even more peer-to-peer finance news, go to our website at www.p2pfinancenews.co.uk. With real-time news and exclusive insights, www.p2pfinancenews.co.uk is your indispensable portal into the world of peer-to-peer lending. Go online to sign up to our e-newsletters, for a comprehensive digest of the latest peer-to-peer finance news sent straight to your inbox. You can choose our weekday e-newsletter, which comes out by 7am Monday to Friday, or sign up for our once-a-week version that is sent out at noon on Wednesdays. www.linkedin.com/company/peer2peerfinancenews/ @p2pfinancenews

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EDITOR’S LETTER

Published by Royal Crescent Publishing

WeWork, 2 Eastbourne Terrace, Paddington, London, W2 6LG info@royalcrescentpublishing.co.uk EDITORIAL Suzie Neuwirth Editor-in-Chief suzie@p2pfinancenews.co.uk +44 (0) 7966 180299 Kathryn Gaw Contributing Editor kathryn@p2pfinancenews.co.uk Marc Shoffman Senior Reporter marc@p2pfinancenews.co.uk Andrew Saunders Features Writer Emily Perryman Features Writer PRODUCTION Tim Parker Art Director COMMERCIAL Alamgir Ahmed Director of Sales and Marketing alamgir@p2pfinancenews.co.uk Tehmeena Khan Sales and Marketing Manager tehmeena@p2pfinancenews.co.uk SUBSCRIPTIONS AND DISTRIBUTION info@p2pfinancenews.co.uk Find our website at www.p2pfinancenews.co.uk Printed by 4-Print Limited ©No part of this publication may be reproduced without written permission from the publishers. Peer2Peer Finance News has been prepared solely for informational purposes, and is not a solicitation of an offer to buy or sell any peer-to-peer finance product, or any other security, product, service or investment. This publication does not purport to contain all relevant information which you may need to take into account before making a decision on any finance or investment matter. The opinions expressed in this publication do not constitute investment advice and independent advice should be sought where appropriate. Neither the information in this publication, nor any opinion contained in this publication constitutes a solicitation or offer to provide any investment advice or service.

he Peer2Peer Finance News team was even busier than usual last month, as we held two events targeting different facets of the peer-to-peer lending industry. Our Regulation Deadline Breakfast Briefing on 5 November gathered chief executives and compliance heads from P2P platforms for an insightful discussion about the incoming rule changes. You can read our full post-event coverage on page 16. On 21 November, we hosted the P2P Lending Zone at the VCT & EIS Investor Forum. A huge thanks to Angel News which organises this annual event and gave P2PFN the opportunity to hold a designated P2P lending area and panel discussions. The event attracted an array of private investors and financial advisers who were able to learn more about the P2P sector. It was clear from both events that the sector is booming and I’m excited to see what 2020 brings. We have plenty more events planned for industry stakeholders that we will reveal in due course, so watch this space!

SUZIE NEUWIRTH EDITOR-IN-CHIEF

We hope you’re enjoying the latest edition of Peer2Peer Finance News! We have now moved to a paid-for subscription model. If you would like to continue reading the magazine, please go to www.p2pfinancenews.co.uk/subscribe/ to find out about subscription options.

NEWS

cont. from page 1 process as time goes on.” Stephane Blanchoz, head of SME alternative financing at BNP Paribas Asset Management, said that investors should consider both sustainability and profitability. “Of course, all

businesses are aiming to make money, but it won’t happen overnight,” he said. “You need capital before you can achieve profitability. “But investors should consider both – for the question, what happens if the platform

goes bankrupt? Would somebody take care of the loan servicing/ recovery process?” The new FCA rules that come into effect on 9 December include stricter requirements on platforms to have a comprehensive ‘living will’, to protect

investors as much as possible in the event of a platform failure. Platforms can trigger standby arrangements ahead an anticipated insolvency, enabling them to wind their loanbook down and return money to investors.

P2P bosses bullish about rule changes THE VAST majority of peer-to-peer lending platform executives feel optimistic about the new rules coming into effect this month and their ability to comply with them, an exclusive Peer2Peer Finance News survey has revealed. Chief executives and compliance heads polled at P2PFN’s Regulation Deadline Breakfast Briefing last month were asked about their views on the Financial Conduct Authority’s (FCA) updated regulations for the sector, which include investor marketing restrictions and tougher requirements on wind-down plans and transparency. 14 out of 17 decisionmakers on compliance matters surveyed at the invite-only event said they were “very confident” about complying with the incoming FCA rules

in time for the 9 December deadline. Just two said that they were “neither confident nor unconfident” and only one respondent said they were “very unconfident” about meeting the deadline. Looking more broadly

at the impact of the rules on the sector as a whole, 12 chief executives and compliance heads said they thought the new rules would be good for the sector. One respondent said that they thought the regulatory changes would be a bad

thing overall, while four were indifferent. P2PFN’s Regulation Deadline Breakfast Briefing took place on 5 November 2019 at The Soho Hotel in London. Read our post-event coverage of the topics discussed on page 16.

NEWS

Crowd with Us readies for £2m funding round ahead of IFISA launch CROWD with Us is gearing up for a £2m equity fundraise, in order to expand the team and to invest in marketing and technology. The property debt and equity crowdfunding platform said it is set to launch the fundraise before Christmas to scale up the business faster. “We are working on a secondary market and improvements to the investor experience,” co-founder Robert Pasternak told Peer2Peer Finance News. “We are planning on launching ‘social

investing’, whereby investors can follow each other on the platform.” A longer-term project will be the development of AI to speed up the decision-making process on deals, Pasternak added. “Over the next two to three years we will be developing an AI solution to bring the approval process down to a matter of minutes,” he said. “We would like to be able to white label this product for other platforms eventually.” Crowd with Us is planning to launch an Innovative Finance ISA

(IFISA) by the end of the first quarter of 2020, although the equity fundraise takes priority. “We’re ready to go but we’re focusing on the equity raise first,” Pasternak said. “We need to use the proceeds to grow the team so that we have enough resources to support the IFISA.” Ahead of the equity raise, Crowd with Us is launching a revamped website shortly, with the focus on improving the customer experience. With regard to investor inflows, co-founder

Rob Wilkinson said that they are seeing caution among sophisticated and high-net-worth investors ahead of the General Election. “They’re holding off investing to see if we get a Corbyn-led government or not,” he said. “This seems to be in line with what other people we speak to in the industry are seeing. “I do strongly believe there’s enough money out there. I think people are just waiting for the political climate to settle down in order to move forward.”

Cogress diversifies to offset Brexit jitters PROPERTY investment platform Cogress has shifted its focus from development lending to a variety of different partnerships and geographies to cater for Brexit uncertainty among investors. Tal Orly, chief executive of Cogress, said the platform is now focusing on bigger margins, less risk and more experienced partners. He said of five to 10 deals with UK borrowers, only one may pass the necessary lending requirements. The platform, which offers Innovative Finance

(IFISA)-eligible bond investments, has recently launched a partnership with Latin hospitality chain Selina, which specialises in purchasing and renovating hotels. The partnership will see £80m of funding going toward Selina projects and a new dedicated IFISAeligible bond launched this month. One portfolio of hotels in Portugal and the UK raised £5.8m last month. “Brexit is something is something we have been talking about for three years,” Orly said. “We are looking

at different kinds of investment that represent lower risk and exposure, sometimes out of the UK. “We are reducing the amount of deals and going to a bigger and stronger partner to allow some investor money to come out of the UK. “Investors can get income through this

partnership rather than just relying on capital growth as you need to with development.” Cogress launched in 2014 and provides a mix of debt and equity property development investment opportunities to high-net-worth and self-certified sophisticated investors. It is regulated as an alternative fund manager rather than a peer-topeer lender, which means its investors are already used to appropriateness tests and marketing restrictions, which the wider sector must follow from this month.

NEWS

Confusion surrounds definition of sophisticated investors PEER-TO-PEER lending platforms have expressed confusion around the definition of a sophisticated investor under the new Financial Conduct Authority (FCA) rules. In an addendum to Consultation Paper 18/20, which outlines the new rules for P2P lending, the regulator says that “our rules allow for such investors to re-classify as sophisticated investors... if they have made two or more P2P investments in the past two years.” Under the FCA guidelines, sophisticated investors would not be subject to the controversial ‘10 per cent’ rule, which bars

retail investors from putting more than 10 per cent of their portfolio into P2P loans. However, some industry figures have blasted a lack of clarity around the definition of sophisticated investors, as the 9 December regulatory deadline looms. “There is an awful lot of confusion out there from what I hear amongst platforms,” said Stuart Law, chief executive of Assetz Capital. “All platforms need to

have an appropriateness test. Whilst the option of a platform certifying an investor as sophisticated exists in the regulations so that they can avoid the investor having to sit the test, it is rather unwise in my view at this stage and we have taken the decision to let everyone show us they understand through a detailed knowledge test.” An in-house lawyer and a spokesperson from another P2P platform told Peer2Peer Finance News that their

interpretation of the rule was that anyone who has P2P lending experience could be reclassified as a sophisticated investor. Peer2Peer Finance News has learnt that the FCA has told platforms that a sophisticated investor could refer to any person who has previously lent through a P2P platform; a person who has been a member of a business angels or other network for the past six months; anyone who is registered as a director of a company with an annual turnover of at least £1m in the past two years; or anyone who has worked in private equity or finance over the last two years.

Orca expands remit to advise City investors

ORCA is expanding its services to advise institutional investors looking to enter the peerto-peer lending market. The firm, which provides analysis and a P2P investment portfolio product, said it is increasingly working with institutions to provide research, recommendations and risk management. The new service will offer research on entering P2P lending markets in different countries as well as its own portfolio man-

agement service for institutions. “We are looking to partner with institutions hoping to enter the market,” Iain Niblock, chief executive of Orca, said. “The service is ideal for investors with an interest in the sector but where people may not know who the lenders are, what the returns are like, how to set up investments or the best way to manage allocations. “It is also good for those who may have inexperienced teams and

need the benefits of a third party.” Orca’s latest research focused on Germany, where it claimed there is an opportunity for institutional investors to back P2P platforms due to the consolidation of mainstream banks in the country. It said there was an opportunity for investors to get exposure to Europe’s largest economy through Germany’s established P2P lenders including Auxmoney, Exporo and Funding Circle. “If P2P platforms or

other direct lenders are not doing the lending, it’s worth taking a look at the wider market to investigate if this market is likely to grow,” Orca said. “The German banking system, in part government owned, is being drastically consolidated. In particular, the regionalised savings banks and co-operatives of old who typically lend to consumers and small businesses are being acquired, merged, or replaced.”

NEWS

Platforms gear up for appropriateness test deadline PEER-TO-PEER lenders are rolling out investor appropriateness tests ahead of new industry regulations that come into effect on 9 December. Zopa and Ablrate are the latest platforms to release details of their tests, which aim to ensure investors fully understand the risks associated with P2P. The Financial Conduct Authority (FCA) hasn’t provided guidance about how many questions investors must pass correctly, which has led to variation among platforms. Ablrate’s test, which was due to go live before the end of November, has six questions with multiple choice answers. Chief executive David BradleyWard said investors must get a minimum 75 per cent pass rate. If they get a score below this, there will be pointers to education. “We are undecided

on the number of times lenders can take the test as we need to mindful of the spirit of the rules,” Bradley-Ward added. “Our new platform being rolled out in January will have additional seamless data checks to comply with our regulatory obligations to take reasonable steps to verify self-classification.” Ablrate’s approach is similar to that of Assetz Capital, which requires investors to correctly answer at least 70 per cent of its seven test

questions. Assetz has some “critical questions” that must be answered correctly, including one that ascertains whether investors understand their capital is at risk. Zopa, meanwhile, said investors will have to get all of its seven test questions right. Where there is an incorrect answer, the customer will have a second chance to answer that particular question correctly. Zopa’s approach mirrors that of LendingCrowd and RateSetter, which both

revealed last month that investors must get a 100 per cent pass rate – although they can try as many times as they like to answer the questions correctly. Frank Brown, managing consultant at financial services regulatory consultancy Bovill, said platforms should consider the underlying objective of the rule change – that investors understand the risks of P2P – when deciding on pass marks and what to do about investors who fail the test. “Firms should have active and honest discussions internally to gain sufficient comfort that the tests they are proposing are truly fit for purpose, and meet Treating Customers Fairly requirements,” said Brown. “They should document and evidence the journey they have gone down, to reach these conclusions.”

WHAT ARE THE NEW REQUIREMENTS? The FCA hasn’t produced a standard template for platforms to use, nor provided specific guidance on what must be included in appropriateness tests. Instead, each platform must create a bespoke test that follows more general guidelines on what types of questions should be asked. The regulator has

said tests should assess the investor’s understanding of the relationship between the borrower and the platform, as well as their exposure to the risks of P2P lending. Tests should also confirm that there is no Financial Services Compensation Scheme protection, that returns may vary and that P2P investments are not

comparable with a savings account. According to guidance from The Investing and Saving Alliance (Tisa), a good assessment should be brief enough to ensure the customer engages with the questions properly but should avoid yes/no answers. Tisa's example questions include: What is your investment and how does the plat-

form manage it? Is P2P investing like depositing money in a savings account? What would happen to your investment if the platform went out of business? Platforms can be flexible about the placement of the appropriateness assessment in the customer journey, but it must take place before an investment is made.

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PROMOTED CONTENT

An added layer of reassurance

Business Agent Ltd, trading as NextFin, is launching a new, regulated peerto-peer lending rating service. The firm explains how NextFin will provide an additional layer of due diligence on the industry for investors

N 17 OCTOBER, Business Agent Ltd held a launch party to unveil its new branding, NextFin, at the Karma Sanctum Hotel in London. The evening went down a storm and it was great to see investors and platform providers support NextFin. It also celebrated and recognised the successes and growth of the UK’s alternative finance market, as awards were presented to a number of equity crowdfunding and peer-to-peer lending platforms. NextFin revealed that it had acquired CrowdRating, the Financial Conduct Authority (FCA)-regulated equity crowdfunding ratings company. The firm also announced that it was about to launch a P2P ratings service in line with the new FCA crowdfunding rules coming into force in December. The firm has also launched a Social Impact Rating, alongside CrowdRating’s successful equity rating product. This recognises the contribution that equity crowdfunding has had on society in terms of employment, equality, environmental impact and funding innovation. The new P2P rating service will be a compliance solution for platforms that will undoubtedly bring trust to the industry. The new rules compel platforms to allow their investment products and services to be compared with other providers. Paragraph 2.36 of the PS19/14 document says that platforms must “ensure that investors are provided

with relevant information about an investment, to improve transparency of the fees and platform charges for the services provided, and to help prospective investors compare investment opportunities across different platforms.” Business Agent Ltd, trading as NextFin and Wheatfromchaff Ltd, trading as CrowdRating, are regulated entities and are bound by the overarching principles of the FCA. They are authorised to give advice and promote equity and P2P investments. “Platforms should be aware of unauthorised rating platforms that are not qualified to give advice,” says Sacha Bright, chief executive of NextFin. “It is a legal requirement to be authorised by the FCA before giving advice or offering a financial promotion.” Regulation is expensive but it is necessary to protect investors. NextFin is an independent ratings agency for alternative finance and because it is authorised, it is governed by the principles and rules of the FCA. Therefore, it aims not only to protect investors but also the platforms themselves, by ensuring the correct due diligence procedures

are in place. It does this while presenting ratings in a clear, fair and not misleading way. Drawing on the success of CrowdRating’s equity rating service, NextFin has used a similar algorithm to rate P2P platforms on their due diligence, security, return on investment, default rate, transparency and products, to ensure it compares the platforms fairly. NextFin’s checks even include web security on the platforms. In its first test run, NextFin found weaknesses in some platforms’ security – once informed, the platforms rectified this immediately and were delighted that a trusted third party identified the potential threats. It is NextFin’s mission to protect the industry, help investors make more of their money and help entrepreneurs get the funding they deserve. It is doing this by aggregating and rating the whole market free of charge, creating the alternative finance marketplace. NextFin is helping platforms with their marketing, web security and compliance by providing the industry with an independent rating and comparison site. Sacha Bright has been visiting P2P platforms over the past few months, gathering data ahead of the January launch of its P2P rating service. Feel free to get in touch to organise an appointment by emailing taz@nextfin.co.uk. For more information on NextFin, please go to www.nextfin.co.uk.

IFISA

Full steam ahead?

Innovative Finance ISA (IFISA) inflows hit the £1bn barrier this year, cementing the wrapper’s place in the ISA landscape. But could tougher regulations and platform defaults stall the IFISA’s upward trajectory? Kathryn Gaw reports

E ARE ALL FAMILIAR with the story of the Innovative Finance ISA (IFISA). After getting off to a muted start in 2016, with just a handful of platforms authorised to offer the tax-free wrapper, its popularity has grown substantially. This September, it was confirmed that IFISA deposits had hit the £1bn milestone, with Peer-to-Peer Finance Association chair Paul Smee heralding the product as “a major landmark in the development of the

UK alternative finance landscape”. But just as IFISA investing appeared to be entering the mainstream, the bad press began. Just days before the end of the 2018/19 tax year, the Financial Conduct Authority (FCA) warned investors that they should be careful to make sure they understand the risks before putting money into the “high risk” IFISA. Since then, the high-profile closures of IFISAauthorised platforms Lendy and FundingSecure have created even

more negative headlines. However, the declining popularity of cash ISAs and ongoing stocks and shares volatility are encouraging investors to seek out alternative ways to protect their money in a tax-free wrapper. Furthermore, the P2P industry has been making efforts to educate the investor community about the diverse range of business models, so that all platforms are not tarred with the same brush. RateSetter believes that it is the

IFISA

leading provider of the IFISA with more than £275m in its ISA pot at the time of writing – representing one third of the platform’s investors. A RateSetter spokesperson told Peer2Peer Finance News that the platform has received “very positive” feedback from its IFISA investors, adding that “we look forward to continuing our strong rate of growth.” The FCA has introduced new rules for the P2P sector, designed to protect retail investors. From 9 December, platforms must carry out appropriateness tests and self-certification questionnaires on all new customers. Questions have been raised on how this will impact IFISA inflows this ISA season – the period leading up to the end of the tax year when people clamour to make the most of their tax-free allowance. “The new regulations mean that the P2P industry is a well-regulated sector in which people can have

“ The new regulations mean that the P2P industry is a well-regulated sector in which people can have confidence

confidence,” says the RateSetter spokesperson. “In fact, one could argue that people can invest in P2P with more confidence than ever before. The regulations confirm that P2P lending is becoming an established investment and a logical component of everyone’s investment portfolio.” Kayne Osbourne, compliance manager at FinTech Compliance, agrees that IFISA inflows are unlikely to be negatively impacted by the new rules. “In fact, we think that higher standards will only increase the likelihood that financial advisers recommend P2P platforms to their clients," he comments. Mike Bristow, chief executive

”

and co-founder of P2P property lender CrowdProperty, said the firm has seen very strong demand for its IFISA product for almost two years now and expects the upward trajectory to continue. “We expect another recordbreaking ISA season, both before the end of this tax year as people look to use up their annual allowance, as well as a strong start to next year as we always see many lenders looking to get their ISA allowance working for them as soon as possible in the new tax year,” he adds. However, others were a little more cautious. “With new regulations following the bad press, I think momentum

IFISA

is going to take a hit,” says Neil Faulkner, managing director of the P2P analysis firm 4th Way. “There needs to be another period of calm, so that investors can again see through the fog to the fact there are actually stable returns to be had, and platforms need to learn to handle the conflicting signal offered by the FCA in its new regulations.” Regardless of headwinds, the array of IFISAs on the market is certainly growing. According to HMRC data, there were 97 authorised IFISA managers in the UK by November 2019 – up from just 12 authorised providers in November 2016. At The Investing and Saving Alliance (Tisa), the IFISA has been hailed as a long-term diversification tool for tax-conscious investors. The investment and savings trade body’s technical policy director Jeffrey Mushens believes that the wider availability of IFISAs has “provided a welcome boost” for the P2P sector at large. “The growth in the number of IFISA providers authorised by the regulator has stimulated competition in the sector and offered more choice to the investor,” says Mushens. “In time we hope that investors will increasingly consider the P2P

“

While demand has perhaps not been as strong as some thought, the opportunity for future growth is still significant

”

sector on its merits alongside other mainstream risk asset classes.” In order to capitalise on the mainstreaming of the IFISA, P2P platforms may benefit from comparing IFISA portfolios with stocks and shares ISA portfolios, in terms of the returns that may be on offer and the risk involved. Stock market volatility now dates back several years and this economic

uncertainty is likely to continue for some time. Meanwhile, most IFISA providers have been able to keep their default rate below two per cent, while delivering returns of between three and 12 per cent per annum, tax free. “The vast majority of investors are investing safely and most have made highly satisfactory returns every year since 2005,” says 4th Way’s Faulkner. “This contrasts

IFISA

“ The growth in the

number of IFISA providers authorised by the regulator has stimulated competition in the sector

”

with the stock market, which has seen four down years over the period – meaning the average investor lost money.” Meanwhile, Charlie Taylor, head of property-backed P2P platform Octopus Choice, has noticed another emerging trend that may point towards future uptake of IFISAs. Octopus Choice is one of the few P2P platforms which works closely with the financial adviser

community and their IFISA feedback has been resoundingly positive. “Generally, we find that our customers, whether direct investors or financial advisers, are really impressed with how quick and easy it is to open an IFISA,” says Taylor. “Based on previous experience, often with banks, they assume that opening a new ISA or transferring an existing ISA into Choice is going to be a slow

and painful process. But it really doesn’t have to be.” Rather than the overnight sensation that would transform the P2P industry, the IFISA seems to have simply sown the seeds for the industry’s long-term growth. If platforms can prove that they are lending responsibly and making investors aware of the risks involved, there is no reason why IFISA providers can’t take a significant share of the £700bn+ ISA market. “It’s often the case that we overestimate the effect of innovation in the short run, but underestimate it in the long run,” says Taylor. “I think that definitely applies with the IFISA and, while demand has perhaps not been as strong as some thought, the opportunity for future growth is still significant.” While recent bad press may have a short-term effect on IFISA inflows, the wrapper still has a significant role to play in the future of the P2P sector. As more IFISA products are launched and more IFISA investors build up their own track records, P2P lending will eventually become a standard piece of every diversified investment portfolio. Add to that the safety net of the new P2P regulations and any IFISA growing pains may soon be a thing of the past.

JOINT VENTURE

“Level the playing field” New regulations threaten to stifle growth and innovation in the property-backed peer-to-peer sector, says Frazer Fearnhead, chief executive of The House Crowd

HE INTRODUCTION of the Innovative Finance ISA (IFISA) has helped to make property-backed peer-topeer loans an attractive investment for investors of all stripes. But according to Frazer Fearnhead, chief executive of The House Crowd, a series of upcoming regulations threaten to undermine the potential of this up-andcoming sector. On 9 December, the Financial Conduct Authority (FCA) will launch a series of new rules designed to protect investors from the riskier elements of P2P lending. Each platform must add an appropriateness test for new investors, adhere to new marketing restrictions and encourage all investors to place no more than 10 per cent of their net worth into P2P. “I don't necessarily think the regulations are a bad thing, but if they are being applied to the IFISA, surely they should be applied to stocks and shares ISAs as well,” says Fearnhead. “It doesn't make it a level playing field if you're only applying it to one of the types of ISAs and it stacks the game in favour of the traditional institutions and providers of stocks and shares.” Fearnhead feels particularly strongly about the introduction of 10 per cent rule, saying: “I understand why the FCA do not want people to put all their money in one investment and we always

advocate diversification but, ultimately, if an adult has illustrated they understand the risks, it should be entirely up to them what they do with their own money.” “They should consider if these new regulations are appropriate for all types of investing and not just P2P lending,” adds Fearnhead. “However, given recent events and the task faced by the FCA, I understand why they have reacted in the way they have. I hope when things settle down they will adopt a more balanced approach.” Fearnhead is an enthusiastic proponent of the benefits of property-backed P2P investing and The House Crowd has been working hard to educate existing and potential investors about the

unique benefits and risks of the sector. Fearnhead believes that every diversified portfolio should include property investments, no matter how much money the investor can commit. The House Crowd currently offers an IFISA product that targets returns of seven per cent per annum, with each investment diversified across a number of bridging and development property-backed loans. In the New Year, the platform will introduce three separate pots for IFISA investors which will target up to eight per cent per annum. Each of these pots will include a mix of bridging and property development loans and the interest rate payable will be determined by the loan to value (LTV) of each basket of properties. The higher the LTV, the higher the return. Until then, Fearnhead is focused on educating investors about the benefits of property-backed IFISAs. “It's a mammoth task to get the message out there to people,” he says. “Just to get people to pay any attention at all to what you say is very difficult in this day and age when we’re being constantly bombarded by different marketing messages. “It's definitely an uphill struggle and there’s a skill involved to engage people's interest.” Luckily, this is a skill that The House Crowd understands well – regulations or no regulations.

P2PFN EVENT

Peer2Peer Finance News Regulation Deadline Breakfast Briefing AS THE Financial Conduct Authority’s (FCA) new regulatory deadline approaches, platforms still have plenty of questions. So we decided that the time was right to host our second Breakfast Briefing – this time around the topic of the regulation deadline. Held in the modern surroundings of The Soho Hotel, our panel included Gilbert van Roon, founder and chief executive of FinTech Compliance, Lisa Best, research manager at Intelligent Partnership and Frank Brown, managing consultant at Bovill. Speaking under Chatham House rules, our panel answered a series of questions from moderator (and Peer2Peer Finance News editor-in-chief) Suzie Neuwirth, before the discussion was opened up to the floor and a lively Q&A. It quickly became clear that despite the regulator’s best efforts, a lot of confusion still surrounds the upcoming regulations and how they should be enacted. While some had faith that the FCA

P2PFN EVENT

would forgive minor oversights, others felt that the regulator would show no flexibility whatsoever when it comes to issues such as the introduction of the appropriateness test, and company wind-down plans. The invite-only event – which was supported by headline sponsor FinTech Compliance and sponsors Bovill and Cartwrights – was attended by chief executives and compliance heads from many different peer-to-peer platforms, as well as government officials and regulation experts. The discussion spilled out into the halls of The Soho Hotel after the briefing concluded and a number of new professional relationships were formed. Read on to get a sense of how the industry feels about 9 December and beyond... Reporting by Kathryn Gaw SPONSORS

FinTech Compliance is the first dedicated financial services compliance consultancy to specialise in advising technology-based, innovative and alternative finance businesses on FCA compliance. The team has particular expertise with dayto-day compliance queries, FCA authorisations, product feasibility assessments, compliance monitoring and training on areas such as financial crime. FinTech Compliance provides commercially aware advice that helps business leaders focus on growth with the assurance that risk, governance and operations are compliant. For more information, please email info@ fintechcompliance.co.uk.

Bovill is an independent, specialist financial services regulatory consultancy. With offices in the UK, Asia and America, the firm offers a globally integrated service, with subject matter experts covering all aspects of the regulatory landscape. Bovill has worked with crowdfunders and peer-to-peer lenders since the beginning. The firm’s consultants come from backgrounds in law, compliance and consulting and it employs a number of ex-regulators. The firm takes time to understand its clients’ businesses and its advice is pragmatic, proportionate and commercial. For more information, please email pbarton@bovill.com.

Cartwrights is a highly dedicated team of chartered accountants with expertise in all areas of financial management, audit, accounting and taxation, as well as business support services. The firm is accustomed to working with a range of business clients, including local ownermanaged businesses and start-ups, as well as individual clients. Cartwrights can help you to deal with your obligations efficiently and cost effectively, while also offering up-to-date advice to help maximise your profitability. For more information, please email reception@ cartwrights-ca.co.uk.

P2PFN EVENT

HE COUNTDOWN has begun for peer-to-peer lending firms. On 9 December, after a lengthy post-implementation review of the sector, the Financial Conduct Authorityâ&#x20AC;&#x2122;s (FCA) new regulations come into effect. The rule changes include the mandatory introduction of appropriateness tests and selfcertification questionnaires for new investors; tougher requirements on wind-down plans; greater transparency and disclosure; and explicit clarification of the risks involved with P2P lending. By early November, most of the platforms represented at the Breakfast Briefing were well on their way to meeting these requirements, but it soon became clear that for all their specificity, there was still some ambiguity around the minutiae of the regulations.

P2PFN EVENT

One thing everyone could agree on was that some of the regulations will be more difficult to achieve than others. For example, firms which manage portfolios of P2P loans are considered to be more complex than those that don’t. In these cases, the FCA is likely to expect to see a much more robust structure in place which will stand up to independent scrutiny. They will have to set out a full risk management process detailing how they intend to achieve their targets. In fact, some of the compliance experts at the Breakfast Briefing

“ Some of the

regulations will be more difficult to achieve than others

”

P2PFN EVENT

suggested that firms which manage large loan portfolios may require an independent compliance officer, an independent risk-management function and an independent internal audit function in order to assure the FCA that they are able to properly enforce the new marketing restrictions. Regarding the wind-down policies, platforms were warned that the FCA would be expecting an incredibly detailed approach. Each firm will have to have a resolution manual in place which is separate from the Client Assets Resolution Pack (CAS RP) and separate from the business continuity plan. Each platform will also have to inform clients of the wind-down arrangements that are in place, including how and where client money will be held if thereâ&#x20AC;&#x2122;s a failure of the firm or a transfer of the business.

P2PFN EVENT

“ The cost of meeting

the new regulatory requirements was brought up repeatedly

”

Most of the industry stakeholders present agreed that this seems to be the FCA’s main area of focus. In fact, there are firms now being established that focus entirely on P2P wind-down arrangements, underlining the importance of getting this right. While every platform has to have a detailed wind-down plan in place by 9 December, it has to be a living document which is refreshed and updated as frequently as possible. A well-organised firm should have a flawless wind-down policy that they never need to use.

P2PFN EVENT

One of the major sticking points for P2P lenders has been the FCA’s insistence that retail investors should not invest more than 10 per cent of their portfolio (excluding property) in P2P platforms. However, some of the attendees at the Breakfast Briefing identified an easy workaround – if a platform has a retail client who has made two or more investments in P2P loans within the last two years, they can technically be reclassified as a sophisticated investor. This brought us to the thorny issue of appropriateness tests. Since the Breakfast Briefing, several platforms have unveiled their own appropriateness tests, and it is notable that there is no standard template in use. Instead, each individual platform must follow the FCA’s guidance and create a bespoke test which can answer questions about an investor’s understanding of, for example, the

“ A major factor in

future consolidation could be the regulations themselves

”

way the loans are priced, the way these loans are operated, and how client money is held. Some compliance experts warned that the FCA is also going to be looking out for any improvements in financial promotions, including clearer provision of any information that might be relevant for investors. This will apply to all external marketing materials, as well as client-facing communications. Opinions were split on how the FCA might respond to breaches in the rules. While some compliance

specialists urged platforms to have honest internal conversations and keep customer protection at the heart of every decision, others said that they see the FCA taking a more forgiving approach to implementation and adhering to the concept of best endeavour. These opposing views stirred up some conflict in the room and it was revealed that the FCA had already begun visiting the offices of some platforms to see how their regulatory preparations were going. This suggested a more robust approach to compliance, it was argued. On the other hand, as a regulatory body whose core mission is to promote innovation in the financial sector, surely there must be some leeway for those platforms who are acting in good faith, even if they haven’t managed to meet the FCA’s standards? The cost of meeting the new

P2PFN EVENT

regulatory requirements was brought up repeatedly. The FCA appears to expect all firms to spend more on compliance, yet at the same time they are asking platforms to offer fairer pricing for retail clients, which sends a mixed message on where financial priorities should lie, particularly for smaller platforms. One of the key concerns among platforms was the possibility that the higher cost of compliance may have a knock-on effect on borrower pricing, which could then eat into any profits or – worse – target investor rates. Everyone present agreed that there will be more platform failures over the next months and years, even with the new FCA regulations in place. And ironically, a major factor in future consolidation could be the regulations themselves. The cost of complying with the new rules has been estimated at anywhere between £25,000 and several hundred

“

The new rules could make financial advisers more likely to start recommending P2P

”

thousand pounds – an amount that may not be feasible for some of the smaller companies. Furthermore, the detail required by the regulator may mean that some firms have to hire in-house compliance officers or seek third-party advice. However, attendees were broadly positive about the industry’s ability to enact the new rules and use them to their advantage. One potential upside of the new regulations is that it could make financial advisers more likely to start recommending P2P investments to their clients. In fact, some platforms have already started to use their

enhanced compliance measures as a selling point to advisers and retail clients. This could have the benefit of adding credibility to the P2P sector, and promoting the risk management practices of the best platforms. Platforms also agreed that these new regulations are unlikely to be the last major regulatory shifts that the sector will experience. As the outcome of the upcoming rules becomes clear, the FCA is likely to review what the industry has done and fill in any gaps in compliance. This may or may not involve feedback from the wider P2P community, so all firms should make sure that they are in a position to enact new compliance directives as quickly as possible. For those platforms who are still worried about meeting the 9 December deadline, the advice was simple: get cracking, be mindful of the facts and make sure your house is in order.

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JOINT VENTURE

Dear future Prime Minister... As an election looms, Andrew Turnbull, managing director of Wellesley Finance, calls on the next UK government to prioritise affordable housebuilding...

HERE’S AN ELECTION coming up. And that means potential changes to the housing market. As the UK prepares to go to the polls on Thursday 12 December, the property experts at Wellesley have just one demand of the next government: support policies to encourage the building of lower value houses. “We still have a fairly serious structural shortage of housing in the lower end of the housing market,” says Andrew Turnbull, managing director of Wellesley Finance. “We've seen over previous years a number of initiatives put forward to try and address those problems, and we do see some improvements. However, we are still not building enough houses. “What we want to see is a real focus on making sure that there's commitment to trying to make sure that first-time buyers and people buying their second home – and their next family home – are supported.” Wellesley has been particularly focused on the affordable end of the housing market. In recent years, the property-backed lender has extended its reach across all areas of England and Wales, investing in affordable properties in the most accessible areas of Manchester, Birmingham, Leeds and Nottingham, as well as commuter belt hubs such as Harlow and Bishop’s Stortford. “The common denominator is always that the houses are sensibly

priced and can be afforded by the average person,” says Turnbull. By focusing on this end of the housing market, Wellesley has had a front row seat to the effects of public policy over the past few years. Turnbull has seen how stamp duty has led to a slowing of house sales on the higher end of the market, while Brexit-based uncertainty has resulted in fewer families downsizing, which has led to a shortage of mid-market properties. By contrast, affordable housing has flourished, thanks to the Helpto-Buy scheme and a stamp duty waiver on cheaper properties. “Fundamentally the reason why we decided to focus on affordable property three and a half years ago was because we wanted to align ourselves with public policy,” explains Turnbull. “We knew that's where the long-term backing of that market would be and that proved to be a really good move from our perspective.” Wellesley’s nimble business model

means that the platform is in a good position to switch its focus again, should public policy change after the election. So what can the next government do to stimulate the housing market in the years ahead? According to Turnbull, it will require an easing of planning permissions, a reduction in stamp duty and better access to development finance. “If we look at the Conservatives it's likely they will want to continue the work they've been doing in recent years with things like Helpto-Buy, and the support they've provided to lenders,” says Turnbull. “With regards to Labour, it’s likely they will promote a greater amount of affordable housing, i.e. social housing. And so I think we'd see significant action there. “I think it's very unlikely that either party will do nothing on this front. This is a really important long-term issue that the UK is facing and so the idea of doing nothing to create more sensiblypriced housing seems very unlikely. “The one thing I would ask any incoming party to consider is that if they do wish to make some radical change, they do not leak it, they do not give a long notice period – they just do it. Periods of indecision are generally not good and that's been an understatement when it comes to Brexit.” Whatever happens after 12 December, Wellesley will be ready for it.

BUSINESS LENDING

Open for business

Business lending is one of the most celebrated segments of the peer-to-peer finance industry, providing much-needed funding for smaller firms that, in turn, support the UK economy. But how will platforms maintain their edge in a competitive market? Emily Perryman reports

EER-TO-PEER BUSINESS lenders have become an important lifeline for the UK’s smaller businesses, in part due to their willingness to step in and lend where traditional banks won’t. In 2018, nearly £2.3bn was lent to

UK businesses through P2P business lenders – significantly higher than the £1.8bn of consumer P2P lending done over the same period and an increase of 18 per cent on 2017, according to an analysis by the British Business Bank.

Yet the market isn’t without its challenges. Finding borrowers is an extremely competitive process and achieving scale has become crucial as fears of an economic downturn intensify. One of the ways lenders

BUSINESS LENDING

“ Enticing borrowers is competitive in this space and different platforms cope in different ways”

are adapting to the tougher environment is by trying to differentiate themselves from other players in the sector – whether that’s through the types of businesses they back, the size and style of loan they offer, or innovations in their underwriting process. Variety in the market means the sector not only meets the needs of a range of business borrowers, but also provides choice for investors. Risk-return profile For investors, the P2P business lending sector represents an attractive way to back British businesses while benefitting from inflation-busting returns.

Advertised returns are usually lower than in the riskier property development finance sector, but higher than in consumer P2P lending, which reflects the fact that small- and medium-sized enterprise (SME) loan default rates tend to be greater than consumer loan default rates. “If people are in financial difficulty they tend to sort themselves out, for example they might work part time,” explains Stuart Law, chief executive of Assetz Capital. “Businesses, on the other hand, reach a cliff-edge and it’s more common for them to completely shut down.” The vast majority of SME loans are unsecured, although some platforms, including Assetz Capital, LendingCrowd and Folk2Folk, do offer security in the form of charges over property or other assets. A spokesperson for Funding Circle, which offers unsecured loans with a personal guarantee, says the platform reduces risk for investors by only lending to well-established companies who have been operating for an average of nine years. “On the investor side, we are delivering attractive returns of four to seven per cent a year, and investors have earned a total of £300m in interest (after fees and bad debt),” the spokesperson said. Finding borrowers For big names like Funding Circle, many borrowers come directly to the platform, but other lenders are seeking out alternative ways to

attract borrowers. “Enticing borrowers is competitive in this space and different platforms cope in different ways: cold-calling profitable businesses; contacting potential borrowers in their own networks; online and traditional advertising; loan comparison sites; customer referrals; referrals from platforms' parent companies; regional offices; and receiving offers from partner lending businesses to lend to the same borrower,” says Neil Faulkner, managing director of P2P comparison site 4th Way. Some platforms are making use of online business lending aggregator sites. Katrin Herrling, chief executive and co-founder of online marketplace Funding Xchange, claims borrowers who use the site will get an offer within three minutes, while lenders will have access to pre-qualified customers thereby ensuring higher closing rates. Aggregator sites are mainly targeted at small businesses – 98 per cent of the loans provided via Funding Xchange are below £150,000, reflecting the fact that most borrowers have a turnover of less than £1m. “The traditional broker relationship is becoming less viable for loans of less than £150,000 because the ability to charge fees on top is difficult,” says Herrling. “Borrowers who come through us don’t pay any more than if they went direct to the lender.” Assetz Capital, on the other hand, which offers loans of up

BUSINESS LENDING

to £10m, gets 80 per cent of its business through brokers. “There is a theory that forming relationships with accountancy firms works, but it doesn’t,” says Law. “It’s not their job to sell loans and so it is a very relaxed, ad hoc referral method. A broker’s job is to serve lenders and they maximise their day selling loans.” It was hoped the government’s bank referral scheme would boost the number of SME borrowers but the figures suggest otherwise. Since November 2016, almost 30,000 small businesses that were rejected by big banks have been referred to the scheme, but as of the end of June 2019 only 1,700 of those have secured funding, with an average loan value of less than £20,000. Angus Dent, chief executive of ArchOver, argues that the scheme was “a complete and utter waste of time and effort for all concerned”.

“ The traditional broker relationship

is becoming less viable for loans of less than £150,000 Embracing technology Many platforms are turning to technology to attract borrowers, make the lending process smoother to better compete with other players. Julien Tavener, chief operating officer at online lender aggregator Alternative Business Funding (ABF), says technology is changing the relationship between finance providers and businesses from a purely responsive, provider one into a proactive and more advisory one. “Open Banking and cloud accounting access allows finance partners to refine their automated acceptance processes, leading

”

to a dramatic reduction in time and friction,” he says. “In turn, the visibility of up-to-the-minute transactional information allows finance providers and others to tailor products to meet needs in a more predictive manner, allowing them to ‘get in front’ of the SME requirement and serve live quotes and other information.” Greg Carter, founder and chief executive of Growth Street, claims technology such as Open Banking and cloud accounting has dramatically increased the efficiency of the platform’s credit analysis. Growth Street has created an overdraft-style product and

BUSINESS LENDING

recently became the first overdraftstyle finance provider on the marketplaces of cloud accounting platform Xero and Starling Bank. “This is an API-based integration which means when a firm connects their Xero account they can share their financial information with us at the click of a button and soon will be able to manage their facility entirely from Xero, such as requesting a drawdown and making a repayment,” Carter says. Growth Street recently slashed almost a third of its workforce and has now pivoted its origination strategy away from a ‘boots-on-theground’ approach, focusing instead on its Xero and Starling Bank partnerships. Some lenders, however, are less enthusiastic about the benefits of technology, arguing that human input is still required. “Developments such as Open Banking, APIs and data feeds are welcome, but it’s important to remember that many borrowers still value the personal approach,” says Stuart Lunn, founder and chief executive of LendingCrowd. “At LendingCrowd, a human always

makes the final lending decision, based on the risk-band modelling tools that we developed in-house. At a time when the banks continue to scale back their physical presence, we have also expanded our business development team so we can meet potential borrowers face to face and support them with empathy and care.” Looking ahead With an economic downturn potentially on the horizon, many industry onlookers think the P2P business lending sector will see some consolidation, particularly given its competitive nature. Herrling says many lenders have failed to successfully scale and that the costs of doing business are simply too high to make it viable. “There are also questions around which P2P lenders have viable risk models that will survive a full economic cycle,” she warns. A spokesperson for Folk2Folk says the platform, which focuses on providing finance to rural businesses, is always mindful of external influences that could undermine lenders’ investments

“ There is a strong,

emotional simplicity to P2P funding

”

such as falling interest rates, sector stability and the current political environment. “Due to the secured nature of our business, a key area we monitor is a fall in property asset values and we look at this on a sector and portfolio basis to ensure that our ongoing risk management framework is appropriate and allows us to mitigate against falling values over the term of any loan,” the spokesperson adds. For the sector as a whole, most platforms feel positive about its future. They argue that in an economic downturn the traditional banks’ model is to pull back on lending, whereas the P2P sector should be able to ramp up lending once the worst of the recession has passed. “The outlook for alternative finance providers, and P2P lenders in particular, looks strong,” says Tavener. “The mood music from the large, traditional lenders is that the SME market remains a danger area for them and although they won’t exit it entirely, it is probable that they will continue to adjust their exposure to this market by gently tightening credit conditions. “There is a strong, emotional simplicity to P2P funding. Investors take part in supporting UK ltd and achieving an uplifted yield in return. There will, of course, be ups and downs on this journey, however we believe that not only is P2P here to stay, but it will ultimately be seen as a major contributor to a vibrant and innovative economy.”

PROFILE

Breaking the brick ceiling Arya Taware is not afraid to stir things up. The 26-year-old founder and managing director of peer-to-peer development property lender FutureBricks tells Kathryn Gaw why she represents the future of alternative lending...

T 26 YEARS OF AGE, Arya Taware is probably the youngest alternative lending leader in the UK. With youth comes ambition, and Taware certainly has this in spades. But she is also unusually suited to run a Londonbased property lending platform. Born in Mumbai, India, she spent her childhood visiting construction sites with her property developer father. Before she was 18 years of age, she had moved to London to study urban planning and real estate at the Bartlett School of Architecture at UCL. She went straight from university into a job with architect-developer Solid Space, and it was there that she discovered the limitations faced by small- and medium-sized (SME) housebuilders. “My job was to look for sites, and there were a lot of sites that we found where the developer couldn’t get funding,” she says. “That bothered me. If everything else is stacking up, why is there this lack of finance, especially from the mainstream lenders?” She then moved over to a role in the planning department at Southwark Local Authority, where she quickly learned how the council’s bigger sites are sold to housebuilders and how planning permission is granted. It was in this role that – convinced that she had spotted a gap in the market – she decided to establish peer-

to-peer property development platform FutureBricks. Taware’s aim for the platform was to make funding available to those SME housebuilders who were not eligible for bank funding, while also making property investing accessible for retail investors.

With the backing of 20 angel investors, she launched FutureBricks in 2018. Within its first 12 months, the platform has amassed more than 1,000 active lenders, lending more than £1m to seven different property development projects across the UK.

PROFILE

If you are wondering why you may not have heard of the platform, this is probably down to Taware’s under-the-radar style of marketing. “We had to be very smart with our limited resources early on,” she says. “So we started by targeting doctors and IT contractors because we realised that they had a lot of disposable income. We started sponsoring events at doctor’s unions, and IT events – then once we get into those communities we just talk to them.” Taware also hand-picks her borrowers; sourcing developers in need of funding by using planning data. A member of the FutureBricks team will contact these developers directly and explain how the platform works and what sort of financing is available. Following a rigorous due

“

We had to be very smart with our limited resources early on

”

diligence process, borrowers are typically offered rates of between eight and 10 per cent on a firstcharge loan, and between 10 and 12 per cent on a second-charge loan. Since FutureBricks makes its profit purely via arrangement fees, whatever interest rate is paid by the borrower is what the lender receives. The FutureBricks approach relies heavily on the team’s expertise and ability to explain the benefits of P2P lending to people who may never have considered alternative finance before. “Expertise is so important,”

says Taware. “If you look at our sales team they have PhDs in finance; they are former property developers – they have a lot of experience.” One thing that FutureBricks’ team and angel backers have in common is a long-term commitment to the idea of ethical lending and filling the gaps in the property lending market. “SME housebuilders don’t get access to mainstream finance and this has been quoted as the main reason for the housing crisis,” she says. “If you look at any government document from the past five years this is a consistent theme. We actually built more homes after the Second World War than we did in the 2000s.” FutureBricks will only consider properties with a value below £5m, which tracks with the company’s aim to deliver more affordable

PROFILE

housing, rather than targeting prime real estate or big-budget projects. It caps loan-to-values (LTVs) at 65-70 per cent to ensure that there is enough liquidity if something goes wrong. “The problem with the banks is that they’re not looking at projects below £5m,” explains Taware. “They prefer lending to bigger housebuilders because they’re publicly-listed companies. Even if they do give money to projects below £5m, it has to be to someone who has a track record of 20+ years and a strong balance sheet. They will usually only offer a maximum of 55 per cent LTV and after all this they’ll take three to four months to deploy the capital. The site could be gone by then.” Of course, the other option that SME housebuilders have is bridge lenders, but this can be an expensive option. “Everyone wants to do bridge loans where it’s quick and easy and they don’t have the headache of development,” Taware points out. “But there are a lot of hidden fees in bridge lending. For instance, if there are delays in construction that are not necessarily the developers’ fault, they’ll still get charged penalising interest. What you want to do as an ethical lender is to make sure that the developers are also making their minimum 20 per cent profit, otherwise what is their motivation?” Taware’s professional background means that she has first-hand experience of the difficulties faced by smaller property developers. “Just because they are smaller housebuilders, that doesn’t mean that they are amateurs,” she says. “These are professional property developers – we will not fund someone if it isn’t their main business.” However, FutureBricks is not

“

Expertise is so important

”

racing to build an extensive loanbook just yet. Taware entered the market just as Lendy was on its way out, and she has learned some tough lessons from that platform’s failure. “I learned never to compromise on the quality of the loan and not to

give in to pressure just to grow the loanbook,” she says. “We are here to be ethical longterm lenders. We might not always have a project on the platform but we’re OK with that as long as we’re only putting the best of the best deals on there.” Next up is the launch of the first FutureBricks Innovative Finance ISA and a plan to start accepting pension investments via the Small Self-Administered Scheme.

PROFILE

“ The P2P property sector could definitely be a more inclusive space

”

Machine learning is also on her radar within the next five years. “Our mission is ‘let’s break the brick ceiling’ and that applies to everyone,” she says. “Let’s build houses for the borrowers, and let’s give retail investors access to secured lending as well, because investing in property was always seen as something with a very high barrier to entry. The property industry is still very, very traditional, but we are here to try

to change that.” Taware knows better than anyone just how challenging this traditional environment can be for newcomers. She has dealt with both sexism and racism in the property industry so far, but it is her age which seems to draw the most criticism. “I think ageism is something I have faced more than sexism or racism because the property sector is very old and traditional,” she says. “But we are coming in with

a completely different perspective and our ambition is to shake up the industry. Those who don’t adapt are dinosaurs.” Taware is committed to gender equality and inclusivity in the property lending sector and she regularly gives talks to young women to help inspire them to enter the industry. “The P2P property sector could definitely be a more inclusive space,” she says. “Our business touches property, lending, compliance, technology and marketing – and out of those five core streams, three are super male-dominated.” This extends to the borrower community as well. Taware estimates that around 95 per cent of FutureBricks’ borrowers are male, and five per cent are female. So how can that change? “More role models,” says Taware, instantly. “Women are great property developers because they have a great eye for detail. They are highly organised and efficient. It’s in our DNA. In my experience, women make great property entrepreneurs.” She would like to see more femaledriven apprenticeships, and a move to make workplaces more inclusive in terms of age, ethnicity and gender. “It sounds so basic but if we were all more inclusive I think the world would be a better place.” In the meantime, Taware has her own business to grow and her own goals to achieve. Underestimate her at your peril.