Peer-to-peer better on customer satisfaction

June 28th, 2015

Peer-to-peer lending platforms such as RateSetter score more highly than the top-rated savings account providers for customer satisfaction, according to a Which? survey of 5,000 members.

RateSetter is the highest-rated peer-to-peer lender, with a total customer satisfaction rating of 80%, scoring the maximum 5 stars for rates offered and four star ratings for explanation of risks to investors, customer service, default rates and ease of use.

91% of Which? members who invested more than two years ago still have investments with peer-to-peer platforms, demonstrating that the vast majority recognise the benefits of including peer-to-peer within their portfolios.

Which? members with a RateSetter account have invested an average of £15,134, with one member commenting: “I am getting good returns on my investments and am able to control that level of return”.

Rhydian Lewis, CEO at RateSetter, commented: “For the members of Which? to have given their vote of approval to peer to peer lending is a significant moment for our industry.  I am thrilled that Which? members are so positive about RateSetter in particular, with a customer satisfaction score that exceeds their rating for any savings account provider.”

Yorksire Building Society's guide to peer-to-peer lending

June 22nd, 2015
Yorkshire Building Society

On Friday the Yorkshire Building Society published their guide to peer-to-peer lending, entitled "Peer-to-peer lending explained".  The first line of the press release sets the tone for the guide:

Research from Yorkshire Building Society has highlighted a lack of understanding about peer-to-peer investment (P2P) and the potential risks it poses among consumers.

The Yorkshire Building Society’s guide highlighted the lack of understanding about peer-to-peer lending, and we would fully concur that there are a lot of misconceptions about the industry.

Ian Gurney, founder of responded to the research:

Peer-to-peer lending has grown into a £2billion a year market in the UK.  There are now more than 50 companies operating within this sector, covering various degrees of investment risk.  Returns of 5% to 6% are achievable but there are risks to capital and lenders should do research, as with any financial investment.  Peer-to-peer lenders need to ensure their investments are fully diversified between multiple borrowers and P2P providers.

So why would an organisation publish a guide about a product that they don’t offer?

Banks, building societies and other financial institutions are now starting to take notice to peer-to-peer they are a direct competitor to the incumbents.  We believe that some of these risks are sometimes overstated, or taken out of context.

We fully agree that lenders capital is at risk, however returns of 5% AER to 6% AER are achievable even after deductions for basic rate tax payers, where leders have diversified sufficiently.

Peer-to-peer lending isn’t just unsecured. Loans secured on property and assets are available. Some peer-to-peer providers operate provision funds to reimburse lenders when a loan defaults, and this is paid for through an increased margin between the lender rate and the borrower rate.

As with any financial investment, peer-to-peer lenders should do some research. Lenders need to ensure their investments are fully diversified between multiple borrowers and P2P providers to ensure that a single negative event does not adversely affect their overall return.

Read our press release on the subject.

Crowdstacker launches

June 6th, 2015

There is another new entrant in the UK peer-to-peer market.  Crowdstacker is today launching with its first loan.

Crowdstacker is looking to differentiate itself by lending to only mid-sized established businesses, rather than small companies or start-ups.  With a minimum lending amount of £700 Crowdstacker is tagetting higher net worth individuals.  Lenders can earn 6.8% AER over 3 years.  Crowdstacker has full permission from the FCA, but like all other peer-to-peer companies, is not covered by the Financial Services Compensation Scheme.

Here is the full press release:

Crowdstacker ( will be one of the first peer-to-peer (P2P) platforms to offer retail investors the opportunity to lend money to non-listed but established, mid-sized and financially stable businesses.

For the struggling UK business community, Crowdstacker is set to fill a need for larger ticket funding of up to £50million sought by companies with strong trading track records and a proven ability to provide a solid return on investment - but which are still struggling to secure lending since increased risk aversion by banks following the Global Financial Crisis.

Its first loan product, The Quanta Loans, has been created for Quanta Group, a nationwide property investment company that purchases run down or hard to sell houses and flats, refurbishes them, and then resells them. With a history of successfully buying and selling over 500 properties in the UK, Quanta plans to use the target £3m raised by The Quanta Loans to purchase some of the five to ten high quality property opportunities it is currently having to turn down each month because of lack of investment capital.

Investors can lend anything from £700 and will be offered a 6.8% return per annum over the three year life time of the product, with interest paid in quarterly instalments. Properties bought with the money will be done-up and quickly sold on, aiming to ensure that the investment is not affected by fluctuations in the buy-to-let market.

Karteek Patel, CEO, Crowdstacker, said: “We see Crowdstacker as the democratisation of higher calibre investment options.
“We know from our research that the average man or woman on the street isn't yet engaging with investment opportunities such as crowdfunding because they don’t know what it is - or they are put off by not knowing exactly where their money will be spent.

“The average consumer investor is also put off other sophisticated and less risky investments such as bonds or equities, outside of their standard pensions or managed ISA funds, because they don't understand how they work or they don't have the higher sums of money typically required.

“Crowdstacker aims to bridge this gap - we’re offering Crowdfunding style simplicity combined with quality investment opportunities; we’ll only work with businesses that have passed our stringent due diligence tests.”

Crowdstacker will be launching a series of lending opportunities throughout 2015 beginning with the Quanta Loans. Excitingly investors in the first loan product will really be able to feel involved in the property investment and development process by tracking how their money is being spent with photographs and details of properties bought, as well as updates about any work being carried out. Quanta Group works to quickly turn properties around, typically only owning them for five months or less.

Karteek added: “Quanta was deemed eligible to be one of the select products we will be offering because of its solid track record in its industry, plus the ability to provide further protection for lenders by using the properties purchased as collateral against the loaned capital.”

 We will be adding Crowdstacker to the P2P money company tables in due course.

Institutional lenders "cherry picking"

May 27th, 2015
P2P Finance Association

There have been several press articles and several discussions on the P2P Independent Forum (links here and here) concerning institutional lending on peer-to-peer platforms "cherry picking" loans.  The Peer-to-Peer Finance Association is believed to be looking at amending its operating principles to ensure that institutional lenders are treated the same as retail lenders.  Several insiders have stated that they believe that this is not happening, but it is our belief that this is indeed happening, either directly or indirectly.

Some peer-to-peer companies have stated privately to P2P money that the costs of acquiring or maintaining a smaller number of institutional lenders is less than a larger number of retail lenders.  Others have privately stated that they have offered institutional lenders lower fees in order for them to join a particular platform.  These companies may not be members of the P2PFA but these practices are belived to be taking place.

Even on Funding Circle an institutional lender can reject a loan and this would then be passed on to retail lenders to fund.  The due diligence an institutional lender would do for say a £250,000 loan would be significantly more than a retail lender for a £100 loan.  If an institutional lender rejected a loan it is likely that their perceived risk of a loan was too great for the lending rate, and then the retail lenders would take on this loan.  Therefore the institutional lender is, by the very nature of the lending mechanism, cherry picking loans.

There is a historical similarity with Zopa listings, which Zopa used to offer as well as their market model.  A listing would allow a borrower to appeal directly to lenders.  The credit checks for listings were less rigorous than markets, and quite a few listers - as they were known - were actually rejected borrowers from their market model.  The bad debts for listings were considerably greater than on the Zopa markets and Zopa removed the listings offering in June 2011.

A few companies, such as RateSetter, have come out and publically stated that they will not treat institutional lenders any different to retail lenders, but there are others that remain silent.  We would encourage all platforms to treat institutional lenders the same as retail lenders without positively discrimination, and we would welcome any change to the operating principles on the Peer-to-Peer Finance Association.

P2P lending guide

May 26th, 2015

Premierline, one of the leading business insurance companies, have written a detailed P2P lending guide on how to borrow money for businesses through peer-to-peer.

The guide covers the history of peer-to-business lending and why businesses are now choosing peer-to-peer.

Why small businesses are choosing P2P business lending over bank borrowing?

  • Small businesses are disgruntled with the banks, who are often unable to lend to some small business because they fail stringent lending criteria.
  • Lower interest rates are available partly because P2P business lending platforms don’t have high street branches to run.
  • It’s faster –the speed of access to funding and the ease of platform use are valued highly by P2P business borrowers1.
  • It’s easier – 91% of P2P business borrowers think it’s an easier way to get funded than traditional channels1.
  • There’s no middleman – the individual lenders put money directly into the business using the P2P platform as a tool to do so.
  • It’s up to the public if a business receives the loan, rather than a banking institution.

The guide includes all of the leading companies such as Funding Circle, ThinCats, Assetz Capital, Funding Knight, rebuildingsociety, Funding Tree and Funding Empire.  It also states that sole traders can also use peer-to-peer providers such as Zopa and RateSetter.

This is an essential read for companies looking to raise capital.