The Financial Conduct Authority’s (FCA) overhaul of the peer-to-peer (P2P) lending sector risks changing the origins of the industry and could mean institutional investors dominate the market, Orca Money, the peer-to-peer investment aggregator and analyst, has warned.


Iain Niblock, founder of the Orca Money P2P investment platform, said changes introduced following the P2P post-implementation review, would give investors more protection when it comes to wind-downs and increased governance as well as a clearer understanding of the actual investment they are making.

But he has expressed concern regarding new rules on marketing to investors.

From 9 December 2019, P2P platforms will only be able to market products to those who are certified as sophisticated or high-net-worth investors, people who receive regulated advice, or those who certify that they will not invest more than 10 per cent of their net investible portfolio in P2P loans.

Peer-to-peer platforms will have to introduce appropriateness assessments to ensure investors understand the risks.

‘P2P is still a small, but rapidly growing market so it feels too early to overly regulate’

Niblock warns this goes against the original aims of P2P – to link lenders and borrowers directly.

He said: ‘It changes the ethos of P2P lending, which was to lend to consumers directly through online platforms.

‘Now that has morphed to institutional investors agreeing to fund large amounts of loans on lending platforms.

‘P2P is still a small, but rapidly growing market so it feels too early to overly regulate; over-regulation at this stage will stifle innovation.

‘It is sending a mixed message as on the one hand, you have the Innovative Finance ISA, which is good for investors, but then there are marketing restrictions which is the equivalent of a warning for investors.

‘It will make people think twice as they will see P2P as a riskier asset class, which will change their mentality when they are signing up.

‘I don’t agree with the marketing restrictions.  The regulator should still be trying to innovate and encourage people to launch solutions.”

He suggested the changes could mean European P2P platforms become more popular as they don’t fall under FCA regulation and can implement different business models.


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