How the big three shaped P2P
- Tim Evershed
- On June 15, 2018
ALTHOUGH we still tend to think of peer-to-peer lending as a young sector, it is now 13 years since Zopa became the first lender in the market. It was joined five years later by Funding Circle and RateSetter and since then the big three have dominated the P2P market.
Here are some of the key moments in their journeys.
Zopa is launched in the UK after being founded the previous year by a team which included the creators of internet bank Egg.
After receiving £2.5m in funding from venture capital firm Index Ventures, the Funding Circle platform begins trading in the UK.
Investment banker Rhydian Lewis and lawyer-turned banker Peter Behrens launch RateSetter, which is pitched as the first P2P platform with a ‘Provision Fund’ to help manage the risk of borrower default.
The Peer-to-Peer Finance Association is established with the ‘big three’ as founding members. Zopa’s then-chief executive Giles Andrews is named as the inaugural chairman.
Funding Circle successfully securitises marketplace loans in Europe for the first time through SBOLT 2016-1 with the senior tranche bought by the German development bank KfW.
Zopa’s MOCA 2016-1 became the first securitisation of marketplace loans for consumers in the UK.
Moody’s gave the £114m senior tranche of Class A notes an Aa3 ratingand the £7.5m tranche of class B notes an A2 rating.
The deal was backed by 27,137 loans, which were mainly used to finance cars, home improvements and service existing debts.
Zopa reveals it is planning to launch a bank.The platform said that the bank would sit alongside its existing P2P business and will provide further diversified sources of funding for the company, which will give it “a strategic advantage over pureplay banking”.
RateSetter stops taking on new wholesale partners after the Financial Conduct Authority(FCA) says wholesale lending is not consistent with current regulations and confirms its intention to run down its existing wholesale lending and replace it with direct and broker lending.
Following a rigorous 18-month approval process Zopa is granted full authorisation by the FCA.
“Zopa, both individually and as a founder member of the Peer-to-Peer Finance Association, has campaigned for P2P lending to be a regulated activity for a number of years,” said Andrews. “We are delighted to receive our full FCA authorisation.”
Funding Circle becomes the second P2P lender to receive FCA approval, just a few weeks after Zopa.
“Our vision is to support thousands of people across the UK to earn stable, industry-leading returns by lending directly to small businesses,” said James Meekings, Funding Circle’s UK managing director and co-founder.
Zopa officially unveils its Innovative Finance ISA (IFISA), which was initially made available solely to existing investors to head off a lender-borrower imbalance.
Soonafter, the P2P platform soft-launched its new tax-free-wrapper, which marked the debut foray of a ‘big three’ player into the IFISA market, after receiving “an incredible amount of interest” from investors.
RateSetter announced that it was leaving the Peer-to-Peer Finance Association – the industry’s self-regulated trade body – after breaching its transparency rules.
The platform was late to announce its purchase of a struggling company that was indebted to one of its former wholesale lending partners.
Despite its travails RateSetter becomes the final member of the ‘big three’ P2P lenders to gain full authorisation from the City regulator.
Lewis said that they had “learnt a lot” during the process and had made the business more transparent.
Funding Circle rolls out its IFISA with priority given to active investors who have lent money since 1 May 2017, followed by those who have previously transferred funds.
The account is a flexi-ISA, meaning it is possible to withdraw any available funds without affecting an annual £20,000 ISA subscription limit, providing they are transferred back in by the end of the tax year.
Funding Circle becomes the first UK peer-to-peer platform to reach the £3bn cumulative lending milestone.
The business finance provider said on its website that “30,948 UK businesses have financed their goals by borrowing £3bn through Funding Circle”.
RateSetter launches its IFISA to existing customers and says it will be open to new customers on within weeks and to inward transfers from other ISAs shortly afterwards.
“RateSetter’s purpose is to give people the opportunity to earn more on their money,” said Lewis. “Our ISA makes that opportunity even more compelling because investing is now tax-free.”
News reports suggest that Funding Circle has hired four City heavyweights to lead its initial public offering (IPO) in the second half of this year.
The P2P business lender has appointed Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley and Numis Securities to lead the flotation, according to a Sky News report.
If Funding Circle’s flotation plans are realised later this year, it will become the first UK IPO of a P2P lending platform.
The other ‘big three’ P2P lenders are likely to follow suit. RateSetter’s Lewis has confirmed the company’s plans to float, although no specific timeframe has been confirmed. And Zopa’s Andrews has in the past described a public listing as a “natural route” for the business.
TagsBank of America Merrill Lynch Egg FCA Financial Conduct Authority Funding Circle Giles Andrews Goldman Sachs IFISA James Meekings KfW Moody's Morgan Stanley Numis Securities p2p Peer-to-Peer Finance Association Peter Behrens Ratesetter Rhydian Lewis Zopa
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