Recently, it seems like peer to peer lending has barely been out of the news. Newspapers and websites are almost falling over themselves to comment on the growth of alternative finance companies like Zopa, or peer to business lenders like Funding Circle.
Last week, the news gathered pace when John Mack – the former chairman and CEO of Morgan Stanley – joined the board of a large US P2P lender, the Lending Club.
Back here in the UK, the FundingKnight team is pleased that everyone from the Bank of England down to the media seems to recognise the potential of peer to peer lending.
Last month, Andrew Haldane, Executive Director for Financial Stability, put what many were thinking into words, saying:
“Small peer-to-peer lenders like Zopa and Funding Circle could in time replace High Street banks. These firms could be revolutionary. At present, these companies are tiny. But so, a decade and a half ago, was Google. If eBay can solve the lemons problem in the second-hand sales market, it can be done in the market for loans.”
The FT followed up with this Lex article that begun by asking “why not cut the banks out altogether? They are, after all, too busy deleveraging to want to lend to all but their most creditworthy clients.”
FundingKnight doesn’t think it’s time to cut banks out of the equation, as we’ve said before, we all have a vested interest in a healthy banking system, but we do agree that the high street banks need some help servicing the borrowing needs of healthy British businesses, and we do agree with the final point made by the FT, namely that the:
“Growth in P2P lending is a sign of the way bankers’ relationship with capital providers has been broken. With few signs that their interests are any more closely aligned post-crisis, it is hardly surprising that investors now seek returns by cutting out the costly middle man.”
Our last post spoke about the challenges facing savers on the hunt for higher interest rates and with both borrowers and lenders searching for a better deal, the reasons why Britain needs peer to peer lending are starting to grow.