P2P: Driving the fintech revolution

P2P: Driving the fintech revolution




If you work in finance and are somewhere between the ages of eight and 80, it is likely that you have heard the buzzword ‘fintech’. Fintech is basically technology that engages with or delivers financial services - and it is a very big deal right now..

 
One sector that has simultaneously been born of and is advancing fintech, is the phenomena that is online peer-to-peer (P2P) lending and its cousin, crowdfunding. 
According to the Peer-to-Peer Finance Association, P2P lender members lent over £500 million by the end of Q2 this year and the market is on track to hit £1 billion by the end of 2014. The number of P2P platforms operating in the UK has grown to over 20 since the launch of industry pioneer Zopa in 2005. 
B&C Distributor decided to delve into the inner workings of some of the country’s top P2P lenders and crowdfunders – our fintech ambassadors - to find out just how technology is driving this financial revolution.
Technology is often synonymous with speed. According to LendInvest – the online mortgage marketplace launched in June 2013 – lending is one of the only areas in finance that is lagging behind. 
Commenting on the rise of technology, David Serafini, Managing Director of LendInvest, said: “There is such a huge opportunity to take advantage of modern technology to disintermediate the slow moving giants of the traditional finance world. The UK mortgage market is well behind the technology curve and is therefore one of the last bastions of the traditional finance market to break into. We have seen great innovations and new developments in eCommerce, electronic payments and online money transfers.”
Funding Circle – one of the UK’s biggest success stories, having been granted with Government funding and support from the investors behind Facebook and Twitter – echoes this sentiment regarding mainstream banking and speeding things up.
Laura McMullen, Head of Business Development, commented: “Our marketplace gives brokers access to fast capital for their clients that otherwise might not be available. This means that they can now meet more of their customers' needs, filling the void left by the banks, since our loans can be used for almost any purpose. We're a fast, efficient and flexible way for brokers to get deals away with decisions typically within 48 hours and a handy pre-application tool giving brokers an instant quote.”
Ratesetter is a free market in which the interest rates are set by the savers and borrowers themselves. Its rate-setting mechanic in unique in the marketplace and is a true alternative to traditional banking.  
James Tall, PR Manager, explained: “Central banks will set the official rate, and banks will always set their own rates. But we are now offering a third rate to consider - a more equitable rate; a rate driven by the crowd that you can influence. The market rate.” 

So, what exactly goes into these online platforms? 

Besides some very well-guarded secrets as to what goes on ‘under the bonnet’, it turns out that user feedback and constantly updating and evolving is of paramount importance. 
When Funding Circle expanded their property and non-limited product ranges, “the input we received from brokers was very important and helped shape how it looked. We continually seek feedback and will be launching more new processes soon that will make it even easier for brokers to use us.”
LendInvest’s roots are in property lending (co-founder Christian Faes is also MD at established bridging lender, Montello Bridging Finance). “What stands LendInvest apart from other platforms is that we come from an existing mortgage lending background. [Our] in-house technologists have created a modern bespoke platform using industry standard technologies with an eye towards security and scalability. The development of the platform and the business itself was born out of the long-standing existing relationships we have with hundreds of intermediaries.”
Besides being able to access the platform anywhere, quickly and at any time, intermediaries are likely to find the experience very low maintenance as the processes are automated and designed for ease. 
rebuildingsociety – which has over 3,000 users and has advanced almost £4 million in funds, expanded on the broker experience. 
Nick Moules, Marketing and Communications Manager, said: “We take a lot of the weight off introducers by inputting the numbers at our end, we simply require statutory and management accounts and the fast cooperation of the introducer and their client.”
Speaking on rebuildingsociety’s branded platform feature available to brokers, Nick commented: “We offer introducers the opportunity to strengthen their brand alignment with the peer-to-peer market by creating a branded portal that feeds directly into the rebuildingsociety marketplace. Introducers’ clients can see that they’re specialists in peer-to-peer finance, which is quickly becoming the go-to funding type for SMEs.”

Is there a downside to this online world and will you be waving goodbye to good old-fashioned human interaction altogether? 

Not really and no. 
According to Funding Circle, its technology team is the largest in the business and its focus is stability of the site to avoid user disillusionment. 
rebuildingsociety accepted that an online business brings with it inherent “trust issues that arise through not having a branch network.” 
“This means combining flawless technology with efficient and personable customer service and, of course, prompt payment of proc fees!” said Nick. 
It appears that relationships are still important to the technology-driven P2P lending community. Funding Circle has BDM’s who are regularly in touch with introducers and rebuildingsociety guarantees a dedicated contact and commits to trade events in order to meet brokers face-to-face. 

What can we expect next from these growing businesses? 

Users of the rebuildingsociety platform can look forward to revamped application processes and upgraded accounting software to expedite approval decisions. 
For IFAs, Ratesetter has recently launched a bespoke portal that will allow you to set up, manage and benchmark clients, set fees and get notified as client’s funds mature. 
LendInvest claims that it is in the nature of the business to be in “constant development mode” and has plans for adding features aimed specifically at intermediaries, property developers, buy-to-let landlords and investors. 
There is no doubt about it - social lending is here to stay, and P2P is flying the flag as a fast, viable and dynamic member of the alternative finance family, guaranteed to add value to any intermediary’s offering. 
 
 By Caron Schreuder

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