For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
Oxera report - The economics of peer- to-peer lending
Today, Oxera, a leading global economic research organisation, published a comprehensive review of the UK peer-to-peer lending (P2P) market. The review, from this independent consulting firm, provided a ringing endorsement of the economics and practices concerning the P2P industry.
The exhaustive and evidence-based report, which focused on the eight platforms comprising the membership of the industry body, the Peer to Peer Finance Association (P2PFA), was commissioned in order to provide an assessment of the risks, costs and benefits associated with P2P lending, with a view to informing debate and offering an objective assessment of platforms’ business models.
The key findings of the Oxera report included:
- Peer-to-peer lending has created new competition in the market for loans and investment, improving the financial services available to consumers
- Retail investors can expect returns in excess of four to eight per cent
- Platforms are transparent, offering sound information such that investors are able to make meaningful assessments of performance against expectations
- Platforms follow best practice for credit-risk assessment consistent with traditional lenders
- P2P lending does not create systemic risk, and platforms are in a good position deal with a downturn. Borrower defaults would need a threefold increase in order for investors to start losing money
- Current regulation is both proportionate and targeted, although there are some sensible ways to improve the regulatory regime
- Investors have a good understanding of the risks involved
Such conclusions are especially significant in light of a period in which the sector has attracted some negative publicity. While we as a sector welcome scrutiny, and accept that criticism within the media comes with the territory, the Oxera report has addressed many of these concerns, and in doing so has unequivocally refuted many of the points.
A copy of the report can be downloaded here: Oxera Report - Economics of peer-to-peer lending
Nick Harding, founder and CEO of Lending Works, commented:
“It is with great delight that we acknowledge the findings of the Oxera report today. As an industry, we initially enjoyed something of a honeymoon period within the media, but, subsequent to peer-to-peer lending’s meteoric rise, there has predictably been a shift, with the voices of a few sceptics becoming slightly louder.
“Certainly, we embrace all forms of scrutiny and welcome input from all quarters – positive or negative. That said, we do hope that where people have feedback for our industry, it is based upon facts not hearsay. The findings from the Oxera report, all based upon facts, provide a resounding stamp of approval on the business models we adopt, our processes, the levels of regulation and compliance we adhere to, and, most importantly, real benefits we are delivering to consumers.
“We will not be resting on our laurels, and, as P2PFA members, we will continue to further our commitment to transparency and putting the customer first. However, consumers can now feel vindicated in their choice to turn to peer-to-peer lending as a means to improving their financial position.”
One of the hallmarks of the sector has been its often self-imposed levels of regulation and compliance. Indeed, the P2PFA itself is an industry-formed body, which sets out a strict set of operating principles to which its members must adhere.
Underlying such an embrace for regulation is the desire to enhance credibility, and with authorisation from the Financial Conduct Authority likely to be gained in the near future, Lending Works – and the wider peer-to-peer lending industry, looks set to be propelled into the mainstream of consumer lending and investing.
Reinder van Dijk, Partner from Oxera, added:
“P2P lending has been a real innovation in the market for credit, bringing benefits to both borrowers and investors. The existing regulatory regime in the UK has been successful in enabling the P2P market to develop to where it is today. As the sector continues to mature, regulation will need to evolve alongside it to ensure consumers continue to achieve the benefits made possible by this new model.”
The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
As the tax year end approaches, the financial services industry readies itself for a flurry of activity. That's in large part because, with just a couple of months to go, the so-called 'ISA season' is upon us.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.