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Are P2P platforms about to face their toughest test yet?

Posted 3 years ago

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On Monday GLI Finance wrote down the value of its investments in eight peer-to-peer (P2P) lending platforms by £12.6 million. The investment company that backs fintech businesses cited “concerns over the collectability of some platform loans.”


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GLIs announcement followed news at the weekend that around a quarter of Lendy Finance’s loan book may well be in default and a letter from Zopa to investors telling them to expect higher than forecast losses thanks to deteriorating credit conditions.

 

The warnings referenced consumer rather than business lending but there could be a knock-on effect, any slow-down of consumer spending is likely to also feed through to the business sector – albeit with varying degrees of impact dependent on the sector and client base of the business.

 

Critics of P2P have long cited concerns that the platforms do not manage underwriting risk appropriately, something that the platforms refute. Tougher lending conditions (or rather conditions that make it harder to get money back from debtors) may well be the proving ground that platforms need to answer their critics. Of course, it may also prove the critics right.

 

What is worth noting is that P2P platforms have adopted different operating and risk models. Direct comparison isn’t necessarily a fair comparison and this is something that many critics overlook.

 

For investors lending to businesses via P2P getting access to up to date default rates from platforms should feature prominently as part of their decision making and investment monitoring processes. For their part the platforms themselves should be making an effort to get that data out there to investors and providing the information that people need to make an informed decision.

Tagged: business finance P2P lending peer to peer lending GLI Finance invest investment Lendy Zopa risk



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