Platforms could face conflict of interest from investors

A TREND among platforms to prioritise general business lending over property finance actually underpins a deeper shift and conflict of interest in the industry, a P2P specialist warned.

Ivor Freedman, chief executive and co-founder of F&P, said he expects a growing number of platforms to shift away from property lending, to reflect the heavier involvement of institutional investors, who prefer other borrower segments.

“There are different priorities being pursued in the sector now that bigger institutional investors have got involved,” said Freedman.

Financial firms are approaching the P2P sector to access segments other than property, where they already hold significant allocation through other investment channels, he argued.

This means that a number of platforms are increasingly torn between accommodating institutional lenders’ investment preferences and keeping their focus on retail clients, which is creating a conflict of interest, he said.

“There is a growing risk that it is not the retail lenders that are driving the market, but it is bigger institutions that are starting to direct platforms’ decisions.”

“There are a lot of platforms jumping through institutional hoops,” warned Freedman, “which has nothing to do with where demand is in the broader market.

The co-founder of the P2P specialist firm, which selects and advices SME, green energy and property borrowers and directs them to lending platforms, argued that demand from individual investors for property finance is in fact running high at the moment.

He added that the ongoing government campaign to help the country’s property developers build 300,000 new homes each year is focusing on smaller-scale developers, which ramps up opportunities for P2P funding in that space.

The firm, which is planning a platform launch later this summer, is currently prioritising property over the broader SME borrower sector, at a 60 per cent to 40 per cent ratio.

“The demand for development finance in the property sector is high, and it is unlikely to decline,” Freedman said. “So we see it as a key opportunity.”

Read more: MarketInvoice seals £45m annual funding from Banco BNI

Read more: Funding Circle winds down property lending

For more analysis of institutional investment in the P2P market, look out for our feature later this week.