The first speaker on the second day of LendIt Europe was Christine Farnish, who represents the P2PFA (Peer 2 Peer Finance Association). The P2PFA mission is to gather all the stakeholders in the industry and coordinate the dialogue between all partners in order to help regulators, set standards and create a common understanding of the market amongst both borrowers and investors to reduce confusion and also educate the customers. This benefits to each and every player and the industry will enjoy a higher level of trust.
There are strict criteria for market places to be able to join the Association:
Regulation of P2P Lending in the UK Christopher Woolard – (FCA)
The UK market is currently the most compelling one for P2P market place due to the fact that regulation was introduced in 2014. This regulation is much easier than any other market (such as the US).
The FCA wants to have customer oriented products that are innovate, technology oriented and it is in favor of providing choice to the customers (in terms of financial products) and a market with high degree of competition (in order to put pressure on the prices).
- The first duty of the FCA is to promote competition that delivers the right outcome to consumers and companies
- It is important the bring more players in the field by removing the barriers to enter
- Regulations can build market and confidence even though they are not always perfect. The financial theories state that markets automatically regulate themselves and should automatically promote the best products, however, information asymmetries and confusion do not allow this to happen
- The FCA wants to promote innovation
- Investors need to show that they understand the risk they are taking by investing in the market places and they should invest a quiet small amount in order not to put their financials at risk
The government’s approach to innovative finance and P2P Lending: Harriet Baldwin – Economic Secretary to the Treasury, City Minister
As said earlier this morning, the UK already enjoys some level of regulation and the lending market places are able to operate in a quiet stable and predictable environment. Still, the government does not want to stop there and:
- Has ambition to be the largest global FinTech hub,
- Wants to give savers more freedom to choose how to invest their assets, the best possible way,
- States that great freedom required great responsibility and therefore education is key,
- Wants to inject choice and competition to incentivize best services, products and better deals for the customers,
- Wants to create open standards for bank data and enable easy access to data for everyone,
- Wants to lower barrier to enter,
- Wants to introduce simpler regulation for the payment systems in order for new banks to access payment systems on fair terms compared to larger established banks
The UK market is the second largest after the US and it must continue to grow as customers currently have difficulties accessing performant financial products, especially customers that do not have access to advisors or advisory services.
The government plans to put in place new policies (savings package), which will enable the investors to better benefit from tax deductions (expected 2016/2017) such as allowing them to offset losses from income generated from p2p products.
FinTech is seen as tool to provide financial services in a new and more convenient way, forcing others (established banks) to work harder and focus more on the end customers, their needs, the experience, etc. In addition, the government has put in place a special envoy dedicated to FinTech that will benchmark the UK versus international FinTech hubs, identify opportunities and best practices.
Last comment that I thought was worth highlighting is that Harriet mentioned that the government wanted digital currencies to happen. This is very encouraging for those who are trying to make this part of the FinTech move forward.
Rest of the day
The remaining part of the day was very inspirational as we listened to some of the major players in the UK such as Zopa, RateSetter and Lending Works. We also had the chance to hear what other major platforms operating in other European countries had to say. As part of the panel we listened to AuxMoney, Pret d’union, Bondora, Lendico, Smava just to name these guys.
The main takeaway from these discussions are that obsession to reach exceptional credit risk management, building top quality data analysis capability, transparency, regulations, controls, standards and obviously focusing immensely on the customers’ needs are key pre-requisites for companies to succeed and for the market to grow.