PEER-TO-PEER lending is an industry that prides itself on its transparency, but a significant change this month put its methods of disclosure under the spotlight.
Until this month, members of the self-regulated trade body the Peer-to-Peer Finance Association (P2PFA) had to make their entire loanbook available for retail investors to download.
But an amendment to its rules now stipulate that members can “either continue to publish their entire loanbook, or provide a detailed breakdown of loans in their overall loanbook to enable a consumer to be informed about the nature and number of loans of different descriptions presently originated through the platform according to standards to be approved by the P2PFA board.”
Hot on the heels of the rule change, P2PFA member Funding Circle withdrew its downloadable loanbook and stopped publishing loan performance data on a daily basis.
Instead, it has launched a new statistics page which will be updated every three months.
Industry onlookers have speculated that the changes are linked to Funding Circle’s reported plans for an initial public offering (IPO), as that level of data disclosure may not be feasible for a company with shares trading on the stock market.
So what does this mean for the future of P2P and transparency, and for its retail investors?
The P2PFA rule change means that its eight member platforms – Crowdstacker, Folk2Folk, Funding Circle, Landbay, Lending Works, MarketInvoice, ThinCats and Zopa – no longer have to provide a downloadable loanbook for investors.
The P2PFA has justified its rule change by saying that the loanbooks of the largest platforms “are now of such a magnitude that their continued accessibility for a large number of investors is of questionable value”.
No other P2PFA member has come out and announced it will be making changes yet, and non-P2PFA member LendingCrowd has spoken out against the rule change, arguing that it is a “step backwards” for P2P platforms to add “a layer of opaqueness”.
But as platforms scale – and some float – is it inevitable that transparency will have to decrease?
Fellow ‘big three’ lender RateSetter – which left the P2PFA last year after breaching its rules on transparency – has told Peer2Peer Finance News that it has no plans to change what it currently does.
The platform publishes its loanbook and also real-time performance data.
Of course, RateSetter’s business model is quite different to Funding Circle’s. For example, its provision fund means that risk is spread across all active loans, so investors would be justified in taking a greater interest in the entire loanbook.
However, one thing the two platforms do have in common is their ambitions to go public. RateSetter’s chief executive Rhydian Lewis has been open about his long-term plans for an IPO, calling it a “natural step”. A recent Sky News report said the firm is in talks for a £30m fundraising round, although it added that a flotation seems unlikely to happen before next year.
Would RateSetter plc change the way it publishes its loanbook data? Peer2Peer Finance News understands that this is not something currently on the platform’s agenda, but it will be interesting to see if it has to make changes when it gets closer to an IPO.
So what of the last of the ‘big three’, and the world’s first P2P lender, Zopa? The P2PFA member’s founder and chairman Giles Andrews has also expressed interest in an IPO in the past. Furthermore, Zopa’s plan to launch a bank could complicate matters further when it comes to data disclosure.
A Zopa spokesperson would neither confirm nor deny that the platform is planning to change how it publishes its loanbook data, but said: “We pride ourselves on our high level of transparency as well as helping customers to contextualise and understand our data”.
Perhaps Funding Circle and the P2PFA are right, and daily data and downloadable loanbooks aren’t appropriate as the industry scales up.
But for their critics, any move away from what P2PFA proudly calls “an unparalleled level of data transparency” amongst its members is a sad day in the history of P2P.