British Business Bank: P2P is here to stay but banks will react to threat
THE HEAD of the British Business Bank (BBB) has said that peer-to-peer lending is “starting to make an impact” on the small- and medium-sized enterprise (SME) finance market, but warned that banks would rise to the competition.
Keith Morgan, chief executive of the state-backed institution, said that “positive net lending [to SMEs] is now coming from the banking system”, having slumped after the financial crisis.
However, he added that the SME market is now realising the benefits of additional choice, such as alternative finance providers.
“The centrepiece of the P2P offering is the level of information, convenience and speed, which add up to a compelling customer experience,” he said.
High-street banks are waking up to the competition posed by P2P lenders and are developing their technological processes as a result.
“I think P2P is here to stay but I’d certainly expect the banks to react, as any business would react commercially,” said Morgan.
The BBB was set up by former Business Secretary Vince Cable to boost funding to SMEs. It has channelled funds through a number of P2P platforms including Funding Circle and MarketInvoice. In January, it pledged a further £40m for lending through Funding Circle, bringing the total lent by the UK government through the platform to £100m.
Morgan also said that SMEs’ business plans have not been impacted by Brexit and that it is too early to understand the impact of the UK’s exit from the EU on the BBB.
“I don’t think negotiations are advanced enough to understand the form Brexit would take and what role we would be asked to play, but the BBB stands ready to play a role,” he said.