Peer2Peer Finance News October 2020

ISSUE 49 | OCTOBER 2020

The P2P Power 50 2020

The most influential people in the UK’s peer-to-peer lending sector

RISING STAR

THE

FIRM OF INFLUENCE P2P Power 50

P2P Power 50

2020

most influential people in P2P 2020

2020

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EDITOR’S LETTER

Published by Royal Crescent Publishing

Green Park House, 15 Stratton St, Mayfair, London W1J 8LQ info@royalcrescentpublishing.co.uk EDITORIAL Suzie Neuwirth Editor-in-Chief suzie@p2pfinancenews.co.uk Kathryn Gaw Contributing Editor kathryn@p2pfinancenews.co.uk Marc Shoffman Senior Reporter marc@p2pfinancenews.co.uk Michael Lloyd Senior Reporter michael@p2pfinancenews.co.uk PRODUCTION Tim Parker Art Director COMMERCIAL Tehmeena Khan Sales and Marketing Manager tehmeena@p2pfinancenews.co.uk SUBSCRIPTIONS AND DISTRIBUTION tehmeena@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.

A

s you can see, this month’s edition of Peer2Peer Finance News is focused on the fourth annual P2P Power 50 – our definitive list of the most influential people in the industry.

Overseeing this year’s list gave me more food for thought than previous years for a number of reasons.

Firstly, the removal of a number of names who headed up now-collapsed platforms, reflecting the evolution – and consolidation – of the market.

Secondly, the addition of new faces who were relatively unknown in the world of P2P last year but are now making their mark in myriad ways.

And finally, in a year faced with mammoth challenges, it is fantastic to see how many individuals are supporting the industry and, in many cases, running successful platforms.

P2P was born out of the last economic downturn and it will still thrive after the next one – onwards and upwards.

SUZIE NEUWIRTH EDITOR-IN-CHIEF

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04

NEWS

Assetz Capital to fund housing for ex-prisoners and supported living ASSETZ Capital is set to fund the development of homes for ex-prisoners and people with learning disabilities, which its chief executive says is a gap in the market.

The peer-to-peer business and property lending platform will finance the development of supported living apartment blocks and rent them to local authorities, who will then house people with learning difficulties.

It will also develop housing that it will rent to the Ministry of Justice (MoD) for ex-prisoners.

Stuart Law, chief executive of Assetz Capital, said the platform is filling a gap in the market, whilst providing a good return for an

ethical investment.

“Trying to get people out of an institution and into more normal life in society is a very big issue for the country,” he said.

“We’re helping to provide accommodation

for people who need additional care to adjust to society while offering a better yield because charities are paid by the government and can’t find affordable properties to rent.

“It can cost up to £400,000 a week for local authorities to pay for accommodation and care for people with special needs, with several layers of profit.

“We’re looking to cut out some of these layers of people profiteering and produce savings for local authorities whilst providing a fair yield.”

Law said that there is an undersupply of housing for special purposes and the financial system is failing people in this area.

“The mortgage industry is preventing enough housing in these important segments by not lending to people in this area,” he said.

“So, what we’re doing is very good, funding these living segments.”

Goji scraps plans for automated SIPP capability GOJI has abandoned its plans to add an automated self-invested personal pension (SIPP) capability to its technology offering.

In May, the alternative investment platform technology provider said it was working on launching a white label SIPP capability in the third quarter.

At the time Goji said it was to give platforms, approved by a SIPP trustee, the ability to offer their investors the

opportunity to invest via a SIPP directly through the Goji platform, without the need to complete separate paperwork.

However, David Genn, chief executive of Goji, said the platform has scrapped the plans to focus on looking after its customers and onboarding a number of peer-to-peer lending platforms.

Goji continues to accept SIPP investments from other companies,

rather than providing the planned dedicated SIPP account itself, he added.

“Investors can open a SIPP with a SIPP provider and use that SIPP with P2P lenders – our platform technology can allow them to do that, but we don’t have the dedicated capability to allow investors to open it on our platform,” Genn told Peer2Peer Finance News.

“We’re working with a number of our platforms to allow them to onboard

SIPP investments from SIPP providers that let them include P2P investments.

“There are quite a few P2P lending platforms that want to allow investors to invest via a SIPP and that’s good for platforms as they can attract long-term capital.

“And it gives investors more flexibility to be able to invest not just via an Innovative Finance ISA, but through a SIPP as well.”

NEWS

05

Who are the ‘big three’ in P2P now?

RATESETTER’S acquisition by Metro Bank will eventually leave a gap in the top three peer-topeer lenders, but who is best placed to fill it?

Metro Bank last month completed its acquisition of RateSetter and will go on to be the sole funder of its consumer loans.

RateSetter said existing investors will continue to receive interest and repayments and its loanbook would go into run-off, effectively removing the platform from the retail P2P market for new investors.

It traditionally made up the third place in the ‘big three’ lenders with a £4bn loanbook alongside Funding Circle, which has lent more than £6.2bn and Zopa which has funded £5bn of loans.

“I think it's fair to say it is just the big two now, with the third being a long way behind,” Neil Faulkner, managing director at P2P analyst 4th Way, said.

“No other platforms have achieved either the results or scale they need to be seen in the same class as Funding Circle, Zopa and RateSetter.”

MarketFinance could stake a claim to being the next largest, with a loanbook of more than £3bn but its focus is on institutional and high-networth investors.

Faulkner suggested that Assetz Capital, which has a loanbook of more than £1bn, can now stake a claim to being the third largest retail P2P lender.

This is a mantle that Stuart Law, chief executive of Assetz Capital, is reluctantly

happy to take up.

“It is with sadness that I think we are probably one of the ‘big three’ now,” Law said.

“RateSetter put so much effort into transforming the industry and making it what it was.

“We are putting a lot of efforts and costs to getting working again following the crisis.”

Law highlighted that Assetz could currently be the largest retailorientated P2P lender as Zopa focuses on its bank launch and Funding Circle remains open only to institutional backers while it supports the coronavirus business

interruption loan scheme.

Both Zopa and Funding Circle have said they remain committed to retail investors as part of a diverse range of funding channels.

“For the next couple of months at least Funding Circle will be focusing on the coronavirus business interruption loan scheme (CBILS), so it’s temporarily not doing P2P lending in the UK,” said Faulkner.

“Zopa hasn't shown any signs yet of shifting away from P2P lending, although it could certainly turn around and do so when it's got its bank going properly.”

This year’s P2P Power 50 announced THE DEFINITIVE list of the most influential people in the peer-topeer lending industry has now been revealed.

The fourth annual P2P Power 50 sheds a light on

the movers and shakers in the sector, with a number of new faces in this year’s top 10.

The list is compiled by the Peer2Peer Finance News editorial team, with

input from a range of industry experts.

As well as the Power 50, we give special mention to firms of influence that are supporting the industry’s growth, and

the rising stars who are starting to make an impact.

To read the full list (and see whether you’re included!) go to page 14.

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PROMOTED CONTENT

A different kind of distancing Frank Wessely, partner at Quantuma, explains the growing strategic separation shaping the P2P market

A

S THE FINANCIAL services sector looks beyond lockdown, all eyes are on the future of the peer-to-peer lending space. But that future is not just about survival of the fittest; it’s about an increasing strategic split between those platforms that are staying true to their traditional retail remit, and those that are setting their sights on more institutional ambitions.

The P2P sector has come a long way since Zopa first broke new ground back in 2005 when it became the UK’s first platform. But Zopa didn’t stop there. In June 2020, the platform was granted its full banking licence, paving the way for the launch of its new digital bank later this year, with an expanding portfolio of products set to include fixed-term savings accounts and credit cards.

Zopa is far from alone in pushing the original boundaries of the P2P sector. Other platforms have turned to M&A as an intuitive route to achieving their strategic growth ambitions and winning greater market share. In August this year, Metro Bank snapped up ‘big three’ platform RateSetter, capitalising on a valuable opportunity to add muscle to its existing unsecured lending capabilities.

Institutional money continues to pour into the sector. As the P2P sector comes of age, clear signs are emerging of a strategic split in the market. As the more successful, ambitious platforms seek

“ This is a critical time for the P2P sector

”

to grow and achieve scale, they are becoming increasingly corporate and institutional both in nature and in scope, distancing them from their smaller, more traditional peers.

Make no mistake: this is a critical time for the P2P sector, and stakeholders across the board are watching like hawks to see how it shapes up going forward. The true extent of the impact of the lockdown will be impossible to gauge until well into next year, but one thing is already certain. In this new business landscape, platforms that are targeting greater market share – and those developing a more institutional lender base – will need to manage four key areas of risk.

One, they must continue to provide attractive products for their investors; two, they must carefully manage their operating costs and expenses in an environment where reduced loan activity has chipped away at income; three, they must effectively manage communication

with borrowers in financial distress; and four, they must do everything they can to keep defaults to a minimum.

Platforms that can successfully maintain stability in their business, while tackling these four areas head on, will emerge from lockdown as those that are best positioned not just to cope, but to thrive, in the post-Covid landscape.

Sector experts across the P2P spectrum Here at Quantuma, our work with P2P platforms spans our broad range of services. Advisory, creditor services and corporate finance colleagues work together to support and advise platforms on a variety of strategic, operational and regulatory issues. We also work with platforms at every phase of development, from fledgling start-up businesses to more established players moving towards a more institutional identity.

Get in touch with Frank Wessely to discuss your needs, on +44 (0)7770 210628.

NEWS

07

JustUs founder writes to MPs calling for SBILS government guarantee JUSTUS founder Lee Birkett is writing to ministers to urge the government to add a guarantee to his Small Business Interruption Loan Service (SBILS).

SBILS, which opened for applications last month, is aimed at businesses that missed funding under the coronavirus business interruption loan scheme (CBILS).

Firms create an account on the Moneybrain app, a sister brand of JustUs, list their business and then raise money through crowdfunding, which the company starts repaying a year later.

Birkett said he wants

to launch an Innovative Finance ISA (IFISA) for SBILS, which would allow people to lend tax free, and is calling for the government to provide a one per cent guarantee in this IFISA. Birkett called this the SBILS IFISA guarantee

and said it would provide something JustUs can claim on in the event of a default, similar to how the guarantees work in the bounce back loan scheme, whilst providing a tax-free opportunity for people to invest in a business’s recovery.

“There’s £800bn worth of savings in UK banks earning nothing, which is just used to prop up the banking framework,” he said. “But the banking framework isn’t working and fintechs should be utilised much more.”

Birkett said SBILS and an evolution of the future fund should provide the funding to mitigate a second wave of Covid-19.

The future fund launched in late May, offering convertible loans ranging from £125,000 to £5m from the government, subject to at least equal match funding from private investors.

Government urged to make better use of alternative lenders

RY ST

BACK

Bank of England’s term funding scheme.

“A large IND proportion of small businesses aren’t funded by the banks,” she said.

“I would support creating stronger balance sheets for businesses such as debt forgiveness that will help their ability to survive and make them more attractive to alternative lenders.

“It would be useful if there was a form of liquidity support for the U

THE GOVERNMENT is being urged to make better use of alternative finance UR O providers such as peer-topeer lending platforms during the pandemic.

Katrin Herrling, chief executive of business finance aggregator Funding Xchange, said alternative lenders have been at a disadvantage as they haven’t had the same access to liquidity as banks, due to their exclusion from the

alternative finance sector as well, to help it develop and provide competitive lending solutions to businesses now that the government schemes are being withdrawn.”

Herrling’s comments come as Peer2Peer Finance News has been calling for the government to recognise the vital role peer-topeer lending platforms can play in supporting the country’s small businesses.

At the time of going to press, the Treasury was rumoured to be extending the application

deadline for four of its government support schemes until 30 November, and lenders will have until the end of the year to consider and process loans.

Herrling also said that the pandemic has helped speed up the adoption of digital technology in lending.

“Initially it was about bridging the gap to reach those who were displaced,” she said.

“Now it is about using technology to assess a customer’s ability to repay and understand cashflow issues in real time.”

We see and do things differently

Unique, niche banking & financial services talent recruitment

This is what we do

Contact Tracy Fletcher on 07852 150953 or email at tracy@cfrecruitment.co.uk Call: 0161 932 1722 Visit: www.cfrecruitment.co.uk

CAMPBELL & FLETCHER BANKING & FINANCIAL SERVICES RECRUITMENT

PROMOTED CONTENT

09

Time for change?

Tracy Elizabeth Fletcher, managing director of Campbell & Fletcher Recruitment, discusses the need for companies to rethink their recruitment strategies to fully benefit from a diverse workforce

S

TUDIES SHOW THAT companies that rank in the top quartile for gender, racial and ethnic diversity amongst their senior management were more likely to have financial returns above those who fail to address diversity challenges. A diverse workforce offers fresh viewpoint perspectives, innovation and commercial success.

So why are not all companies ensuring that their recruitment strategies are focused on addressing this?

“We spend much of our time ensuring we have a fully diverse talent pool available for all our clients across all roles,” comments Tracy Elizabeth Fletcher, managing director of Campbell & Fletcher Recruitment. “As part of our own commitment to the Woman in Finance Charter, we set a goal to supply over 30 per cent of our shortlisted candidates to our clients as female.”

This can prove challenging due to the lack of diversity in top roles, Fletcher explains.

“We know from speaking with female and BAME candidates that there’s a reluctance to push themselves forward for certain roles; we believe this perceived lack of belief comes from previous experiences,” she says.

“The facts are out there; unless a company makes a real statement about adapting a diverse recruitment strategy then nothing will change.

There are areas within financial

services where there is no female representation at all, such as business development roles. In order to address this, companies need to be prepared to recruit based on capability as opposed to experience.”

Recent reports highlight that the world’s major financial institutions and professional services firms have shown some particularly poor results in gender diversity in senior positions. However, some companies, such as HSBC, have committed to increasing the proportion of women in senior positions to 30 per cent by the end of the year and have targeted a 50/50 graduate gender hiring split.

“It is unfortunately common and something we try to address with our customers; identifying unconscious bias is part of our own staff induction process by providing specific training towards diverse hiring, CV screening and advising on interview panel makeup,” Fletcher explains.

“A recent report found that 58 per

cent of female finance and banking professionals in the UK felt that their gender had proved a barrier in career progression, and only 25 per cent of these think salaries are equal.”

The Office for National Statistics recently reported that the mean gender pay gap in the banking and finance sectors has actually risen to 23.1 per cent from 22.2 per cent in the past two years, despite efforts to address this.

Driving change through positive recruitment “Change has to come,” states Fletcher. “Companies will need to look at talent and potential as well as experience, otherwise the sector will go stale. We need new blood and fresh ideas regardless of gender, ethnicity or religion.”

Ultimately, companies want the best candidates who are truly qualified, and having a diverse recruitment programme should not hinder that in any way.

In fact, having a better, more diverse talent pool can improve a company’s access to a wider range of exceptional candidates.

Campbell & Fletcher Recruitment will be running a number of free online webinars during November, on creating a diverse recruitment strategy and understanding unconscious bias.

For more information or to register for one of these events, please visit www.cfrecrtuitment.co.uk.

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.

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NEWS

11

Funding Circle plc: Two years on FUNDING Circle is heading for its second anniversary as a publicly listed company with its share price and market capitalisation well below the level at the time of its initial public offering (IPO), but analysts say there are still reasons to be cheerful.

The firm became the first peer-to-peer lender to launch an IPO in the UK on 3 October 2018, priced at 440p a share, which gave it a market valuation of £1.5bn.

It entered the second half of September 2020 with its share price at 72p and a market capitalisation of £235m.

Russ Mould, investment director at broker AJ Bell, says Funding Circle’s valuation was too high to start with.

“Funding Circle’s

share price swoon owes much to the lofty valuation attributed to, and hopes pinned on, the firm at the time of its IPO two years ago, just as enthusiasm for ‘fintech’ stocks was really gathering,” he told Peer2Peer Finance News.

“Last July’s profit warning, a soggy UK economy, Brexit and a pandemic have hardly helped either, with the result that the potential risks of P2P lending have come into greater focus than the potential rewards.”

Funding Circle has navigated an eventful two years as a publiclylisted company. Last year, it tightened its lending criteria and halved its revenue growth forecasts due to the challenging economic environment.

However, there were bright spots for the firm as its UK business was profitable for the second half of 2019 and it completed its seventh securitisation of its loans in January 2020, underlying the attractiveness of the asset.

And when the coronavirus pandemic took hold earlier this year, Funding Circle was the first P2P lender to gain accreditation to participate in the coronavirus business interruption loan scheme (CBILS).

As a result of its CBILS involvement, the platform has temporarily closed to retail investors as it focuses on providing the emergency finance to businesses that can only be funded through institutions.

Mould said Funding Circle’s involvement in

both the CBILS scheme in the UK and the paycheck protection programme in America are an endorsement of its capabilities and the value of its model.

“Investors will rightly worry about the risk of impairments and loan losses but if Funding Circle can come through these extraordinarily testing times with positive returns, that would help to convince sceptics that the P2P model and online borrowing work,” he added.

“A subsequent economic upturn could then offer a further lift to demand, and also risk tolerance among investors.”

He suggested “risktolerant investors” may yet come back to P2P as a potential source of income, as they balance potential rewards with the risks.

Money&Co eyes more niches in secured lending market MONEY&CO is looking to expand its lending into TV and film rights as well as other areas of legal finance such as divorce.

The peer-to-peer business lender has already pivoted into the niche areas of music loans and litigation finance, and chief executive Nicola Horlick said she is keen to explore other specialist segments of the market.

“TV and film rights are other areas that we can lend in, and there's a vibrant market in selling the rights,” she said.

“I think that’s the next area I’ll be investigating along with other areas of legal finance. There are still divorces, housing

claims and perhaps more with the recession.”

Horlick told Peer2Peer Finance News in June that the platform was lending with caution even prior to the pandemic, due to concerns about a Brexit-induced economic downturn. It decided purely to offer secured loans, focussing on music loans and litigation finance.

Providing practical and targeted advice for P2P platforms Corporates, investors and regulators trust us to support them through challenging periods of change and uncertainty Support with underperforming loan portfolios

Strategy and execution in relation to restructuring or disposal of loan portfolios

Solvent restructuring and wind-down support

Advice and implementation of insolvency appointments to restructure firms or trace and enforce on assets to maximise returns to stakeholders

Regulatory expertise and data enablement with our financial services regulatory team

To find out how we can help your business mitigate risk and realise its potential, contact: Chris Laverty Partner, Head of Financial Services Restructuring and Insolvency T +44 (0)20 7865 2302 E chris.m.laverty@uk.gt.com

Andrew Charters Partner T +44 (0)20 7865 2321 E andrew.charters@uk.gt.com

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Please see grantthornton.co.uk for further details DS1875

JOINT VENTURE

13

Platforms should invest now for post-Covid growth Chris Laverty, partner and head of financial services restructuring and insolvency at Grant Thornton, outlines post-Covid opportunities for peer-to-peer lenders

P

EER-TO-PEER LENDING platforms should start planning now to take advantage of post-Covid opportunities, which includes setting up stable funding lines, identifying specialisms, and refocussing their loan portfolios to take advantage of acquisition opportunities.

According to Chris Laverty, partner and head of financial services restructuring and insolvency at Grant Thornton, there are investors on the lookout for new opportunities to make inflationbeating returns and this represents an opportunity for those platforms that can demonstrate clarity of offering, good governance and market related returns.

“For a P2P lending platform, there can be significant opportunities as normal high street banks continue to face a level of pain through defaults in the short-term future,” says Laverty.

“This may mean that there will be less money available in the retail banks, and alternative lenders may step in to provide the return that investors want.”

But not all platforms will be starting from the same place. And in order to attract new investors and take advantage of these post-Covid opportunities, some platforms may need to make changes.

“You have to look at what the activity level of the P2P lending platform has been during the time period,” says Laverty.

“Have they actively brought borrowers onto the platform?

Are their investors still seeking and obtaining a return from the platform? Or has the platform had to, in some way, restrict that lending because of the impact of Covid on some borrowers?

“If that is the case, has the performance of the borrowers affected the investor base of the P2P platform?

Have the investors stayed with that platform and are they comfortable with risk/return outcome?”

P2P lending platforms have plenty of experience working with borrowers and managing their default rates, and this has been particularly evident during

the pandemic. But platforms also need to acknowledge the changing macro-economic environment and be prepared to adjust their portfolios accordingly.

“Pre-Covid, they may have specialised in residential development opportunities, commercial development opportunities or other business lending opportunities,” says Laverty.

“But this could change post-Covid to manage risk and support returns to their investors.

Stakeholder support will be vital to ensuring the future of P2P platforms, she adds.

When discussing future opportunities with P2P clients, Laverty asks: do you have debt funding, or do you still have equity investment? Are these equity investors represented on your board and are they on board with your platform’s future plans?

These plans may include some M&A activity, or even a partial run-off of the platform’s portfolio.

However, as these plans develop, platforms should be focused on a future where investors are hungry for returns and looking for an alternative to low bank rates and stock market volatility.

“It is about adapting your strategy to encompass opportunities as you see them,” adds Laverty. “And ensuring that you have adequate levels of funding and an appropriate governance structure in place that will be required for those opportunities.”

14

POWER 50

The Peer2Peer Finance News

Power 50 2020

Words by Michael Lloyd and Marc Shoffman

T

HE 2020 PEER2PEER Finance News Power 50 recognises the remarkable achievements of the individuals leading the growth of this sector during an extraordinary year.

This list highlights the people at the top of the UK’s largest and fastest growing platforms as well as the government officials and regulators who have helped shape the sector into what it is today.

It also features lawyers, analysts, and commentators whose services have been needed more than ever this year.

We give a particular mention to the top 10 most influential individuals who have made the most significant impact in 2020.

This year the top 10 underwent a shake-up with a number of new entrants.

Mike Carter, head of platform

lending at the industry trade body, the 36H Group, was a new entrant to the list who went straight into the top 10. The 36H Group replaces the now-defunct Peer-to-Peer Finance Association so Carter now has a key role to play in representing the voice of the industry on important matters such as policy.

Other new names on the top 10 – although not new to the Power 50 – were Abundance Investment’s Bruce Davis and Simple Crowdfunding’s Atuksha Poonwassie, who not only run successful platforms but also help to drive change through their work at the UK Crowdfunding Association.

Executives from the ‘big three’ platforms were also on the top 10, due to their undoubtable influence on the industry, as well as Assetz Capital’s Stuart Law. Outside the top 10, there are a

number of new entrants, such as Charlotte Crosswell, chief executive of Innovate Finance and chair of the 36H Group.

Several rising stars were promoted into this year’s Power 50, including Mansour Bouaziz, chief executive of Elfin Market, Daniel Rajkumar, managing director of Rebuildingsociety, and Cormac Leech, chief executive of AxiaFunder.

Outside of the Power 50 list of individuals, we also note firms of influence, which include the government bodies, trade associations, law firms and academic institutions all supporting the industry’s growth, as well as the rising stars who are starting to make their mark on the P2P sector.

There are no rankings, aside from the special mention given to the top 10, so the list is compiled in alphabetical order.

POWER 50

Mike Carter, head of platform lending, 36H Group

15

Bruce Davis, managing director, Abundance Investment

The 36H Group replaced the defunct Peerto-Peer Finance Association earlier this year. Carter now leads the TOP organisation, which 10 sits within fintech trade body Innovate Finance. Members to date are Assetz Capital, CrowdProperty, Funding Circle, Lending Works, RateSetter and Zopa. Carter will aim to garner one voice among these firms to represent the sector on policy and regulatory matters. He has an investment banking background but has advised challenger brands and is currently executive chairman at The Money Platform.

A pandemic may not appear to be a common time to launch a new product but Davis has helped revolutionise TOP council funding by 10 allowing the local authorities to finance green infrastructure projects alongside individual investors on his renewable crowd bond platform, Abundance. Warrington and West Berkshire councils have already issued ÂŁ1m bonds and there are more in the pipeline. The renewablesfocused platform was one of the first Innovative Finance ISA (IFISA) providers and Davis is a respected lobbyist and representative of the sector, having also helped to launch Zopa and the UK Crowdfunding Association.

Jonathan Davidson, executive director of supervision, retail and authorisations, Financial Conduct Authority

Lisa Jacobs, UK managing director, Funding Circle

Davidson is responsible for ensuring all authorised firms, including peerTOP to-peer lenders, 10 behave. He has helped oversee new rules for the sector on marketing restrictions, appropriateness tests and transparency requirements that were introduced at the end of 2019. This year, he oversaw the launch of a more user-friendly financial services register and has been in charge of rolling out the Senior Managers and Certification Regime to ensure all individuals at regulated firms understand their roles and responsibilities.

Lisa Jacobs stepped into the shoes of Funding Circle co-founder James Meekings as UK managing director last TOP year and 10 has quickly established herself as an influential player in the industry.

It is under her leadership in the UK that Funding Circle became the first P2P lender to be accredited under the coronavirus business interruption loan scheme (CBILS). Funding Circle had facilitated a 16 per cent share of lending under the scheme as of the end of June 2020, equating to ÂŁ300m of lending.

16

POWER 50

Stuart Law, cofounder & chief executive, Assetz Capital In a year that has seen some platforms shift purely to institutional funding, Stuart Law has steered Assetz Capital through the TOP coronavirus crisis 10 while keeping the platform open to retail investors through most of the pandemic.

The platform managed to resume lending quickly when lockdown restrictions eased and has arranged forbearance for borrowers, while creating a new access account marketplace to maintain liquidity for investors. It was also accredited to provide CBILS finance and had yet another successful Seedrs fundraise recently, attracting more than £700,000.

Rhydian Lewis, co-founder and chief executive, RateSetter Rhydian Lewis set up RateSetter in 2010 with an innovative business model, enabling investors to set their own rates and pioneering the TOP provision fund.

10 It is set for a new innovation this year though after becoming the first UK P2P lender to be acquired by a bank. Metro Bank’s acquisition means that RateSetter will no longer be open to new P2P investors, but Lewis’ influence on the industry and stellar track record mean that he still deserves a place in the Top 10.

Keith Morgan, former chief executive, British Business Bank Morgan ended a seven-year tenure as chief executive of the British Business Bank (BBB) TOP in September 10 but it is under his leadership that the organisation has channelled funds through P2P lenders such as Funding Circle and RateSetter. He has also worked closely with the Treasury on implementing the government’s coronavirus lending support, and the BBB has accredited P2P lenders such as Funding Circle, LendingCrowd, Folk2Folk and Assetz Capital to deliver CBILS.

Gwyneth Nurse, director of financial services, Treasury Gwyneth Nurse has been director of financial services at the Treasury since TOP 2015, making 10 her the P2P lending sector’s point of access for government and policy issues. During her tenure, she has seen the launch of the IFISA and the evolution of P2P into a fully regulated industry. Nurse previously worked as deputy director of the Treasury’s banking and credit team, after heading up the assets, savings and wealth team. Before joining the Treasury, she worked for HMRC.

POWER 50

Atuksha Poonwassie, managing director, Simple Crowdfunding Poonwassie has a busy to-do list.

She heads up property investment platform Simple Crowdfunding, which she is steering successfully through the pandemic TOP while supporting 10 the distribution of more than a million meals worldwide to vulnerable groups for food charity Go Dharmic. The platform also backed a Save Our Startups campaign ran by Crowdcube this year.

Additionally, Poonwassie is a director of the UK Crowdfunding Association where she regularly engages with policymakers, regulators and government.

Natasha Wear, chief executive, Zopa P2P The world’s oldest P2P lender may have focused much of its efforts on launching its banking brand this year but Natasha Wear has overseen TOP Zopa’s business in 10 its original home of alternative consumer loans. It has continued to lend during the pandemic and has released a tool with software provider Paylink Solutions to assess customer affordability better. The platform celebrated its 15th anniversary this year while reaching the milestone of £350m of interest paid to investors. Wear is also a regular name in Innovate Finance’s Women in Fintech powerlist.

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Giles Andrews Co-founder & board member, Zopa Andrews helped launch Zopa as the world’s first P2P lender in 2005 and has overseen its growth since then. He was made chief executive in 2007, chairman in 2015 and retains influence as a senior board member, making him the only founding member that is still with the platform.

Amany Attia Chief executive, ThinCats Attia has made the list for the second year running after a busy year at the alternative lender, which has been playing an important role during the coronavirus crisis. ThinCats has been delivering much-needed loans to small- and mediumsized enterprises (SMEs) under CBILS and the coronavirus large business interruption loan scheme (CLBILS).

Andrew Bailey Governor, Bank of England Bailey took the reins from Mark Carney at the height of the coronavirus crisis on 16 March, following four years at the helm of the FCA. His move has lost him a place in the top 10 but he still deserves a place on the Power 50 due to his influence over central bank policy and the UK economy as a whole, which in turn impacts the P2P sector.

Brian Bartaby Co-founder & managing director, Proplend Bartaby has built Proplend into a well-known P2P brand and is weathering the storm of the Covid-19 crisis, despite the challenges facing the commercial property sector. Although some loans have been repaid late, the lender has worked and communicated with borrowers throughout the pandemic, has used its interest reserves to protect them, continued lending and even doubled its loan queries in July.

Lee Birkett Founder & chief executive, JustUs Birkett has been promoted to this year’s list following his innovation during the crisis. He has been vocal in calling for the government to utilise fintechs as part of the economic recovery and aims to support the businesses left out from CBILS with his very own Small Business Interruption Loan Service.

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POWER 50

Mansour Bouaziz Co-founder & chief executive, Elfin Market When Bouaziz worked at Goldman Sachs, designing pricing models for financial products, he saw how much more cheaply institutions could obtain credit compared to consumers. He launched Elfin Market with this in mind, to provide a fair and affordable alternative to credit cards, using peer-to-peer lending.

The company is continuing to innovate, with a mobile app and a physical credit card coming soon.

Ali Celiker Founder & chief executive, British Pearl British Pearl has certainly been busy, earning Celiker a place in the P2P Power 50 for the first time. The platform has put its current property portfolio up for sale to preserve values as part of its ordinary exit strategy and is currently focusing on making its property investment platform model available in other countries.

David Bradley-Ward Chief executive, Ablrate Bradley-Ward has continued to grow his asset-backed lender Ablrate, which has seen its profits rise by more than a third in its latest financial year and weathered the pandemic, working with borrowers and offering payment holidays where needed. He is also targeting standardisation across platforms with blockchainbased secondary market platform ASMX.

Charlotte Crosswell Chief executive of Innovate Finance and chair of the 36H Group Crosswell has been representing fintechs and P2P in policy issues during the crisis, claiming they should be utilised as part of the economic recovery. She also called for non-bank lenders to be included in the term funding scheme and is part of the government’s financial services advisory group where she will represent fintechs and P2P in post-Brexit trade talks.

Mike Bristow Co-founder & chief executive, CrowdProperty Despite Covid-19, the development P2P lending platform has achieved a landmark year, repaying investors £10m since lockdown began and surpassing £80m lent to SME developers in July. That month, CrowdProperty reported that on average the platform’s last 22 projects were funded in less than a minute.

Samir Desai Co-founder & chief executive, Funding Circle Desai remains a respected and influential figure in the world of P2P after growing Funding Circle to the giant P2P lender it is today. In March, he said that the business’s UK arm became profitable in the second half of 2019, with revenues rising by 16 per cent yearon-year. And this year, the platform has been busy supporting SMEs through CBILS and the bounce back loan scheme.

POWER 50

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Frazer Fearnhead Founder & chief executive, The House Crowd Fearnhead has remained at the reins of The House Crowd since launching the bridging and development P2P lender eight years ago. This year, The House Crowd launched an auto-invest model and has so far weathered the pandemic well. In April, the platform announced its developments are heading back to normal, just one month after warning investors of possible delays.

David Genn Chief executive, Goji Genn has been chief executive of Goji for over a year and a half after rising through the ranks of head of software development and chief technology officer. Replacing founder Jake Wombwell-Povey, Genn has overseen the business during a period of extensive changes. Goji previously operated an investment aggregator model but has shifted its focus towards providing investment platform technology to alternative investment managers and ISA administration services.

Christine Farnish Chair & non-executive director, Zopa Farnish has been helping to steer the helm at Zopa with her knowledge and experience for over two years, after serving six years as chair of the Peer-toPeer Finance Association. She has previously worked as consumer affairs director at the Financial Services Authority (the forerunner to the Financial Conduct Authority) and as managing director of public policy at Barclays.

John Goodall Co-founder & chief executive, Landbay Goodall has grown the specialist buy-to-let mortgage provider into the respected brand it is today. In December 2019, the lender left the retail investment space in favour of institutional funding, but Goodall is still a well-known figure in the world of P2P. More recently, Landbay has refreshed its product ranges and has launched a new application process, a Decision in Principle, to quicken its decisionmaking on buy-to-let loans.

RISING STARS There are plenty of individuals rising through the ranks of the P2P lending sector who are either new recruits at influential firms or who are growing innovative businesses that will have a greater impact in the years to come.

Louis Alexander Managing director, BridgeCrowd Fawzi Kyriakos-Saad Chief executive, Leap Lending Catherine Lewis La Torre Chief executive, British Business Bank

Stephen Moss Managing director, Sourced Tal Orly Chief executive, Cogress Nadeem Siam Co-founder & chief executive, Fund Ourselves

Rob Wilkinson Co-founder, Crowd with Us Mark Williams Chief operating officer, Nexa Finance Rishi Zaveri Chief executive, Lendwise

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POWER 50

Rito Haldar Co-founder, Unbolted Halder co-founded the P2P pawnbroker in 2014, following five years working with Barclays Treasury and two years at management consulting firm Oliver Wyman. Already on to his next challenge, Haldar launched OnStep Homes this year, which enables investors to support first-time homebuyers.

Chris Hancock Founder & chief executive, Crowd2Fund Hancock’s P2P business lending platform prides itself on connecting investors with entrepreneurs, thus supporting the British economy. Crowd2Fund has spent the past few months preparing for an innovative relaunch of its platform, with an updated credit model and refreshed website, to scale and support businesses as part of its ‘Reboot Britain’ campaign.

Nicholas Harding Co-founder & chief executive, Lending Works Harding has had a tricky 2020, having implemented and extended a “normalisation period” at his P2P consumer lending platform in response to the pandemic. During the “normalisation period”, Lending Works stopped all new retail investor signups, all investments and all new loan issuances, and suspended the use of its secondary market.

However, it’s not all bad news for Harding – Lending Works announced in July that it had been acquired by alternative investment manager Intriva Capital.

Harding will continue to lead the firm, alongside the existing management team.

Alison Harwood Head of London branch, Varengold Bank German bank Varengold is building a name for itself as the go-to funding partner for peer-to-peer lending and marketplace platforms looking to scale up, and Harwood is playing a pivotal role in its efforts. In recent years, Harwood and her team in London have inked funding deals with well-known alternative lenders such as Assetz Capital and MarketFinance.

Nicola Horlick Chief executive, Money&Co The ‘City superwoman’ has led an illustrious career, from private equity and fund management to launching P2P lender Money&Co in 2013 and standing as a Liberal Democrat parliamentary candidate last December.

Horlick’s platform was already lending with caution prior to the pandemic, due to concerns of a Brexitinduced economic downturn and has pivoted its focus to the niche areas of music loans and litigation loans.

FIRMS OF INFLUENCE • 36H Group • British Business Bank • Federation of Small Businesses • Innovate Finance • National Association of Commercial Finance Brokers • Open Banking Implementation Entity • The Investing and Saving Alliance • UK Finance • Varengold Professional services: • BDO • Bovill

• Duff & Phelps • Fintech Compliance • Grant Thornton • Hogan Lovells • Legal Alternative • Pinsent Masons • Quantuma • RSM • ShareIn • TLT Solicitors • Thistle Initiatives Analysts • 4th Way • Goodbody • Numis

Jaidev Janardana Group chief executive, Zopa Janardana joined Zopa in October 2014 as chief operating officer and was promoted to the top role in 2015. He has overseen the P2P consumer lending giant during a period of stratospheric growth – highlights include hitting the £5bn cumulative lending landmark, raising £140m in an equity fundraise last year and the recent roll-out of its digital bank.

POWER 50

Filip Karadaghi Co-founder & chief executive, LandlordInvest Karadaghi’s buy-to-let and bridging loan platform LandlordInvest was one of the earliest IFISA providers and has attracted a loyal following of investors. The platform expects to break even or make a small profit in 2020, despite a challenging first half of the year due to Covid-19. Since lockdown restrictions were eased, the lender has reported a huge rise in enquiries.

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Cormac Leech Chief executive, AxiaFunder Leech has made the list for the first time this year.

Having previously founded Liberum Alternative Finance, where he was closely involved in raising $2m (£1.5m) for direct lending funds, he went on to launch litigation crowdfunding platform AxiaFunder.

The firm focuses on the smaller end of the commercial litigation market where it believes there is a significant shortage of capital and many viable cases.

Stuart Lunn Founder & chief executive, LendingCrowd Lunn heads up one of Scotland’s best-known P2P lending platforms, which this year played a part in supporting businesses during the pandemic through delivering CBILS. The platform’s current loanbook stands at more than £30m and despite the crisis it has produced an average annual return of 5.68 per cent for its investors this year.

Michael Lynn Founder & chief executive, Relendex 10 years has passed since Lynn founded the property P2P lender and there are no signs of the platform slowing down. This year, Relendex has been working on securing £100m in institutional funds and is planning to offer advice to investors and to manage their portfolios, subject to regulatory approval.

Narinder Khattoare Chief executive, Kuflink Khattoare became chief executive of the P2P property lender in 2017 and has overseen the platform during a period of strong growth. Kuflink has attracted £75m from investors in the four years since it launched and has continued to thrive during the pandemic. The platform reported net inflows of around £5m from the end of February to the start of May and had paid back over £5m of capital and interest over March and April. Going forward, the lender is looking to increase its focus on development finance.

Charlotte Marsh Managing director, ArchOver Marsh took over the day-to-day running of the business when Angus Dent stepped down as chief executive at the end of March. During the pandemic, the P2P business lending platform focused on managing its loanbook and supporting its existing borrowers. Then in June, it reported “unprecedented” demand from retail investors as it began to start lending again.

Yann Murciano Founder & chief executive, Blend Network Murciano steers the helm at this P2P property development lender, which focuses on regional projects that it sees as being more profitable. The platform has really come into its own during the crisis, repaying £2.3m to lenders in June. Blend has lent out £16.8m to date, comprising 52 loans, 14 of which were during 2020.

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POWER 50

Karteek Patel Co-founder & chief executive, Crowdstacker Patel heads up this P2P business lender, which was one of the industry’s earliest IFISA providers. The platform narrowed its losses in its latest annual results and is currently adapting its products and lending strategy as it monitors the impact of the pandemic.

Uma Rajah Co-founder & chief executive, CapitalRise Rajah has overseen year-on-year growth at the prime property lender since it launched nearly five years ago. The platform doubled its IFISA volumes from the last tax year, raised more than £1m which it will match via the future fund and has seen a significant increase in loan volumes this year despite the pandemic.

Daniel Rajkumar Founder & managing director, Rebuildingsociety Rajkumar's business lending platform Rebuildingsociety is hot on technological innovations, having launched an app for investors and gained access to open banking. The new Power 50 entrant is also chief executive of the platform’s technology provider White Label Crowdfunding, which produces software for a number of crowdfunding and P2P lending platforms.

Gillian Roche-Saunders Partner, Adempi Associates Roche-Saunders is new to the list, having been promoted from a rising star last year, but she is experienced in the industry. She co-founded financial services regulatory consultancy Adempi Associates, having previously headed up another consultancy firm, BWB Compliance. Adempi’s services include Financial Conduct Authority authorisations and applications, training courses, regulatory change support and monitoring.

Louis Schwartz Founder and chief executive, Loanpad Schwartz is another promotion to the Power 50 from last year’s rising stars. The qualified lawyer founded Loanpad in 2015, offering investors inflation-busting interest through shared shortterm property loans.

Jonathan Segal Partner & head of fintech and alternative finance, Fox Williams Segal is a respected name in this space, providing industry commentary as well as legal advice to firms across the sector. He acts for several P2P lenders on lending documentation, institutional funding lines, regulatory issues, new products and commercial contracts.

Anil Stocker Co-founder & chief executive, MarketFinance Stocker’s firm rebranded from MarketInvoice to MarketFinance last November, to reflect its expansion into other types of business funding products.

MarketFinance has had a busy year, having gained accreditation for CBILS in May. It recently partnered with trade finance provider Ebury to help process as many applications as possible under the scheme before it comes to an end.

POWER 50

David Turner Co-founder & chief executive, Invest & Fund Turner is another new entrant to this year’s list, following a recent surge of activity at Invest & Fund. The P2P property lender unveiled the full launch of its IFISA this June, after rolling it out on a selected basis last November, and has already reported huge demand from new investors. The firm recently announced a seven-year partnership with Homes England to increase the amount of finance available to SME developers.

Roy Warren Managing director, Folk2Folk Warren is the third head of the rural business P2P lender in three years, but his tenure so far appears to be going well. The firm has facilitated more than £17.3m to SMEs during the lockdown and is one of just four P2P lenders accredited for CBILS. Frank Wessely Managing director, Quantuma Wessely is a restructuring and insolvency specialist, with extensive experience in the peerto-peer lending space. He and his team advise P2P lenders on managing financial risks and, when needed, how to restructure their affairs to achieve the best outcomes for their business. He is also a well-known industry commentator and has predicted that the P2P sector will prove itself during this crisis.

Andrew Turnbull Co-founder and director, Wellesley Turnbull oversees this well-known alternative property lender, which goes from strength to strength. Over the past few years, Wellesley has refocused its lending strategy to focus on higherquality, larger developments. To date it has repaid more than £34m to investors, with average returns of 4.35 per cent.

Andrew Whelan Co-founder and chief executive, Sancus Group and chief executive, GLI Finance Whelan co-founded alternative finance group Sancus in 2013 and it was acquired by Aimlisted GLI Finance in 2014. In December 2015 he also became chief executive of GLI and restructured the group to focus on two key areas: Sancus and GLI’s fintech investments arm. While the latter division has struggled of late, Sancus has expanded into bridging and development finance in recent years and its efforts have paid off. GLI’s latest annual results showed that Sancus had swung into the black, with an operating profit of £400,000.

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BUSINESS LENDING

Mind the gap

Government support has created a distorted peer-to-peer business lending market. Michael Lloyd investigates…

W

HEN CHANCELLOR Rishi Sunak unveiled the coronavirus business interruption loan scheme (CBILS) – the lifeline of government support for small- and medium-sized enterprises (SMEs) – he could not have foreseen its unintended consequences for the UK’s lending community.

The 80 per cent governmentbacked loan scheme was welcomed by struggling businesses, who were able to apply for loans of between £50,001 and £5m to help ride out Covid uncertainty.

However, this scheme has also resulted in a distorted marketplace, whereby business lenders accredited

to deliver the scheme have an advantage over those that are not.

This is especially evident in the peer-to-peer lending sector, which contains many small business lenders. Only four of them – Funding Circle, Assetz Capital, Folk2Folk and LendingCrowd – have been accredited to participate in the scheme.

In April, Funding Circle became the first P2P lending platform to be accredited to CBILS, offering loans up to £500,000 with rates from 1.8 per cent APR. It is also the only P2P lender to be approved for the bounce back loan scheme (BBLS), which comes with a 100 per cent government guarantee and provides

loans of up to £50,000.

For SME borrowers, CBILS and BBLS are the ideal solution – widely available, and with extremely competitive rates. But for SME-focused P2P lending platforms which do not have CBILS accreditation, it is a different story.

Two months before it won CBILS approval, LendingCrowd complained that CBILS and BBLS had played a part in a decline in new borrowers on its platform during the pandemic.

Meanwhile, P2P business lender Rebuildingsociety has been vocal on the disruption caused by the government emergency loan schemes.

BUSINESS LENDING

In May, the platform said it had seen a few firms pull out of raising finance through the lender because they were able to receive a BBLS loan instead.

“It’s annoying that we don't have access to these other schemes but there’s not a lot we can do about it, we just have to get on with things,” says Rebuildingsociety’s founder and managing director Daniel Rajkumar.

“I’m hoping there will be some other initiatives that can be made available to non-bank lenders.”

And these concerns extend to the P2P investor base as well.

Nicola Horlick, chief executive of Money&Co, says that true P2P lending, funded by retail investors only, was not profitable for platforms prior to the pandemic and is going to be increasingly difficult now given the number of low-cost, government-backed loans that have been granted to SMEs. “I think alternative lenders will be pushed out of the market for a period of time because all the

good quality companies received government-backed loans, which undermines the whole premise of P2P lending platforms focused on SMEs,” she says.

“So, for the time being it’s better to avoid those types of loans.”

To some industry stakeholders, it seems as though government support is leaving certain P2P

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working on a five per cent loss, they are probably working on a 15 to 20 per cent loss now.”

Of course, it was vital that the government prioritised deploying finance to struggling businesses to rescue them from coronavirusinduced cashflow challenges, and some industry onlookers have argued that any market instability

“ It’s annoying that we don't have access

to these other schemes but there’s not a lot we can do about it lenders at a disadvantage, and there is a concern that the gap between CBILS and non-CBILS lenders could widen.

Lee Birkett, founder of JustUs, says platforms conducting unsecured SME lending will simply not be able to compete with the government guarantees.

“It was bad for these lenders preCovid-19,” he says. “If they were

”

caused by the schemes will only be temporary.

“Government intervention does distort the market, it’s inevitable, but it’s what had to be done with Covid-19,” says Mark Turner, managing director, regulatory consulting at Duff & Phelps.

“As the economy goes back to normal, you’d expect government interventions to be gradually withdrawn. Then, lenders will return to operating without them and I wouldn’t expect the gap between CBILS and non-CBILS P2P lenders to widen.”

Non-CBILS accredited P2P lenders have been forced to adapt not just to Covid-19, but to the increased competition of government guarantees and subsidised interest rates on CBILS and BBLS. As a result, Rebuildingsociety has focused on other areas of its business, such as compliance and onboarding more appointed representatives.

“That part of the business is still growing and developing,” Rajkumar says.

“So, we’re able to keep trading

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BUSINESS LENDING

even though it’s difficult to do new lending.”

Horlick says that Money&Co had already opted to lend on a secured basis and with caution prior to the pandemic, due to concerns of a Brexit-induced economic downturn. It has recently pivoted to operate in the niche areas of music loans and litigation finance.

She says there are opportunities for alternative lenders with multiple funding lines while retail P2P lending has a bleak future.

“Covid-19 could be the last nail in the coffin for retail P2P lending, although I think that property lending still has a future,” Horlick comments.

“But there are opportunities for alternative lending businesses – there are interesting pockets where you can make money.”

There is also an opportunity for non-CBILS accredited P2P lenders to support the businesses left behind by CBILS. P2P lenders have a deep understanding of the markets and risks involved in these sectors, and government statistics show that approximately half of all CBILS and around 20 per cent of BBLS applications are unsuccessful. That still leaves a lot of SMEs in need of funding.

Birkett aims to support these firms with his very own Small Business Interruption Loan Service (SBILS).

“I think too much has been made of CBILS,” he says.

“It was basically a rescue fund, only meant to be short-term. We didn’t want to participate in it because you have to take the first loss and it’s not profitable.

“The government has exhausted its initial bounce back

“ Government intervention does distort the

market, it’s inevitable, but it’s what had to be done with Covid-19

”

and CBILS channels and with SBILS we’re a regulated fintech pipeline for the distribution of much needed liquidity.”

Birkett says once CBILS ends he expects JustUs to return to normality because of record levels of borrower demand.

“Business P2P lending is rocky but I’m cautiously optimistic for secured lending against property,” he adds.

At the time of going to press, Chancellor Rishi Sunak was rumoured to be extending four

BUSINESS LENDING

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“ Covid-19 could be the last nail in the coffin for retail P2P lending, although I think that property lending still has a future

of the government's emergency funding schemes, including CBILS. There have also been calls for the government to convert loans into equity, while think tank Onward has recommended the government give businesses longer to repay its support loans through a surcharge on taxable profits and shareholder salaries.

Despite all the speculation, the consensus among the alternative lending community is that P2P should and could play a greater role

in supporting businesses during a possible second wave of Covid-19.

“There’s a potential of a second wave and businesses will be struggling with the furlough scheme ending,” says Charlotte Crosswell, chief executive of fintech trade body Innovate Finance.

“This is where the non-bank and P2P lending sector can play the role of meeting that demand.”

Neither Folk2Folk nor Assetz Capital have changed their risk mitigation and recoveries processes as a result of the government guarantees and both platforms are confident about their future once the government support ends.

Folk2Folk plans to continue as usual post Covid-19, and the platform claims that it has retained a strong customer base by acting fairly and welcoming both existing and new borrowers and lenders during the pandemic.

“We continued with business as usual,” says Roy Warren, managing director of Folk2Folk.

“And we didn’t take advantage of the situation by making our terms of business more favourable to us.”

Meanwhile, Assetz Capital expects to achieve stronger growth in 2021 than in 2019.

Chief executive Stuart Law forecasts a substantial drop in bank lending next year, following 13-year highs in 2020, according to a forecast from the EY Item Club, and says this presents an opportunity for alternative finance to fill that gap.

“We’re expecting a big year next

”

year,” he says. “There are plenty of things to work through to get there but we have a plan.”

One thing we know is that the government-backed loan schemes will eventually come to an end, and any related marketplace distortion will therefore only be temporary.

As the economy recovers, normal market conditions should return.

But in the meantime, nonCBILS accredited P2P lenders have been forced to adapt to the new normal, seeking opportunities amidst the crisis to support those businesses that have missed out on government support.

There is only speculation as to what will happen once the state loan schemes end, but hopefully the gap in the market between accredited and non-accredited P2P lenders will narrow.

“Only a small number of platforms were accredited to participate in CBILS,” says Frank Wessely, managing director of business advisory firm Quantuma.

“The CBILS-accredited platforms that are robust will be trusted as part of this type of government institute in future if they decide to provide similar support again, and if this happens I hope the chancellor takes that trust on board and opens the opportunity more widely to the sector.”

CBILS may therefore even benefit the whole P2P sector, but for now, non-CBILS accredited P2P lenders must continue adapting to the new normal until the economy recovers.

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JOINT VENTURE

CBILS will have long-term benefits for P2P sector Mark Turner, managing director in Duff & Phelps' compliance and regulatory consulting practice, shares his thoughts on how peer-to-peer lending platforms can retain and grow institutional investment in a post-CBILS world

T

HE INCLUSION OF alternative lenders in the government-backed coronavirus business interruption loan scheme (CBILS) will have long-term benefits for the peer-topeer lending community – but only if platforms can administer their loans effectively.

According to Mark Turner, managing director in Duff & Phelps' compliance and regulatory consulting practice, CBILS inclusion will ultimately be a positive thing for the P2P sector, even for those platforms which did not secure accreditation.

“It's almost a coming of age for the sector,” he says. “It's a recognition that the P2P sector is an effective way of getting money into the economy. And, of course, that's what CBILS was all about – getting money into the economy effectively, efficiently and quickly.”

He adds that there is every reason to hope that CBILS inclusion will help to attract and retain new institutional investment in the sector, but only if CBILS-approved firms can demonstrate that they have strong controls, and that their default rates are properly managed.

“If new institutional investors are dipping their toe into the sector for the first time and they have

had a good experience because they've generated returns and the firms have demonstrated that they can operate in a well-controlled and profitable way, then I don't see them necessarily pulling their money out of the sector as soon as

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the scheme ends,” says Turner.

But he warns that platforms need to be ready for a wave of defaults and the scrutiny that this will bring.

“One would expect there to be, on average, higher levels of defaults for CBILS loans than in the business that preceded it, because by definition the scheme is about trying to get money out to firms that maybe lenders wouldn't lend to otherwise,” he says.

“If default rates are very high, there will no doubt be scrutiny by the government as well as by the investors themselves. So, if a P2P platform – like any other firm that was involved in CBILS – has an outlying default rate, then they can expect the government to ask questions of them.

“Of course, the positive thing on the other side of that is that the platforms that actually have managed to keep defaults low and provide returns to their investors without extensively calling on the government guarantees, they will be in a really strong position after CBILS ends.”

In order to make the most of the opportunities offered by the government support loans, platforms must ensure that they follow good governance, maintain good audit trails, and document decision-making processes. This will show the government, the public and institutional investors that P2P platforms have what it takes to compete with the big banks.

“Even after CBILS has been unwound, firms will still have that badge that says we were accredited by the government,” adds Turner.

“The sector as a whole can benefit from the fact that a number of firms in the sector were accredited.”

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DIRECTORY

INVESTMENT PLATFORMS

Flender advances loans to well established, cash generative Irish SMEs. To date, the 17-strong team have originated and completed 161 loans, equating to 10,000 transactions with a cumulative total loan value of €10m in the Irish market. https://flender.ie T: +353 155 107 16 E: info@flender.ie

The House Crowd has raised over £120m from retail investors and paid out over £50m in capital and interest. Investors can earn up to seven per cent per annum through its auto-invest product and invest tax-free via its Innovative Finance ISA or SIPP. All loans are secured against UK property. www.thehousecrowd.com T: 0161 667 4264 E: member-support@thehousecrowd.com

LandlordInvest matches professional landlords looking for financing with investors that are looking to invest in asset-backed products with a monthly income. Loans range between £30,000 and £750,000. Investors can earn between 5-12 per cent per year, with the option of an Innovative Finance ISA wrapper. www.landlordinvest.com T: 0207 406 1491 E: info@landlordinvest.com

Sancus is an alternative finance provider specialising in bridging and development finance across the UK, Ireland, Jersey, Guernsey, Gibraltar and the Isle of Man. Borrowers benefit from expertise, flexibility and greater speed than traditional suppliers of funding. Co-funders participate in a range of asset backed, risk-adjusted returns through its interactive digital platform. www.sancus.com T: 0207 022 6528 E: Richard.whitehouse@sancus.com

Wellesley is an established property investment platform that issues bond investments to the UK retail market. Its core objective is to provide investors with higher rates of return than can be accessed through traditional investment routes, whilst simultaneously providing financing to experienced commercial borrowers within the UK residential property market. www.wellesley.co.uk T: 0800 888 6001 E: info@wellesley.co.uk

DIRECTORY

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SERVICE PROVIDERS

Duff & Phelps is the world’s premier provider of governance, risk and transparency solutions. The firm assists clients at every stage of the business lifecycle, in the areas of valuation, corporate finance, restructuring, debt advisory, disputes and investigations, cyber security, claims administration and regulatory compliance. www.duffandphelps.co.uk T: 020 7089 4700 E: ContactUs@duffandphelps.com

Fox Williams is a City law firm with a specialist fintech legal team. Fox Williams delivers commercially-focused and up-to-date fintech, legal and regulatory advice on various business models. A key focus area is peer-to-peer lending and it acts for several of the largest P2P lending platforms. www.foxwilliams.com T: 020 7628 2000 E: jsegal@foxwilliams.com

Grant Thornton’s restructuring team provides practical advice to mitigate the impact of both internal and external stresses on its clients and their stakeholders. The team is able to assist its P2P clients with regulatory, financial and operational challenges as well as providing restructuring or wind-down support. www.grantthornton.co.uk T: 020 7865 2302 E: Chris.M.Laverty@uk.gt.com

Quantuma is an independent advisory firm serving the broad needs of midmarket and corporate companies and their stakeholders. It has deep experience in the peer-to-peer lending sector, principally in relation to mitigating risks associated with borrower distress and related areas of regulatory compliance.

Quantuma works alongside a wide range of platforms. www.quantuma.com T: 07770 210628 E: frank.wessely@quantuma.com

Our magazine is read by peer-to-peer lending professionals, investors and more. If you'd like to be included in our directory, please email Tehmeena Khan on tehmeena@p2pfinancenews.co.uk for details and pricing.

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