Peer-to-peer lending must mature to thrive

It seems that the original P2P model may not be delivering levels of business quickly enough

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The Independent Online

Does the push for growth mean the end for the original peer-to-peer model? There have been some impressive growth figures posted in the peer-to-peer (P2P) sector in the last couple of years by market leaders Funding Circle, RateSetter and Zopa, but is the latter's collaboration with Metro Bank a sign of things to come?

To move to the next level and to become a serious disrupter, it seems that the original P2P model may not be delivering levels of business quickly enough, certainly without a lending Isa in place anyway.

The Metro Bank tie-up with Zopa looks a good fit for two relative newcomers with fresh ideas looking to challenge the mainstream competition whilst maintaining a strong focus on customer service excellence.

Also the deal will be easier to swallow for supporters of P2P as Metro is offering something radically different in the tired old world of banking and isn't tarnished with the baggage of scandals or multi billion pound mis-selling claims.

In April, Zopa lent a record £45.4m. It will be interesting to see how the monthly numbers compare in the second half of 2015 and it might give us an idea of the part that the Metro partnership will play in making Zopa a bigger thorn in the side of the banks. In one sense, it's sad that growth couldn't be maintained without involving the banks but it seems that even though traditional savings rates are the worst they have ever been, P2P still doesn't deliver the level of funding required for serious expansion.

There was great excitement on Twitter this week regarding a new instant-access savings account paying 1.5 per cent AER, yet it's been possible to earn three or four times that via RateSetter, Zopa et al for a number of years now. But P2P is still finding it a struggle to break into the mainstream.

RateSetter customers have got back every single penny invested and the Zopa bad debt levels are minimal with both players protecting investors' funds via their own Provision and Safeguard funds respectively. I'm sure this won't be the last tie-up, but if and when the much anticipated lending Isa eventually comes to fruition, maybe it will spark interest and reduce the need for more bank-to-peer (B2P) deals.

Ethical investments

The third annual "Great British Money Survey" sponsored by Abundance, the UK's leading ethical investment platform, reveals that 70 per cent of people would be unhappy if they discovered their money was being invested in unethical businesses.

Despite an increasing desire among consumers to find an ethical or environmentally friendly home for their money, there is still a huge ethics gap which many financial services providers are failing to address. Savings rates may be at rock bottom but people still want to be in control of where their money is invested. At the moment consumers don't feel this is happening as less than four in 10 people surveyed think their bank is transparent about where the money goes.

While P2P investing and crowdfunding may still be in their formative years, companies like Abundance are beating the banks and pension funds when it comes to offering ethical investment choices.

More importantly, the chance to earn a reasonable return whilst maintaining your ethical principles is open to everyone with investment options starting from as little as £5.

Andrew Hagger is an independent personal finance analyst from

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