PEER-TO-PEER lending has been cited by the Treasury as an example of fintech’s ability to reduce risk in the financial sector by reducing concentration.
The government released a response on Tuesday to the 2017 fiscal risks report, which outlines the actions it is taking to address the 57 risks outlined by the UK’s fiscal watchdog, the Office for Budget Responsibility.
The response noted “the comparatively large and highly concentrated UK banking system” as a financial risk to the UK.
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“Fintech – technology-driven innovation across financial services – has the potential to reduce the economy’s reliance on the banking sector and diversify the financial sector, reducing concentration,” the Treasury said.
“In 2016 P2P lending to businesses was the equivalent of seven per cent of all new loans by UK banks to small businesses.”
The response highlighted the actions that the government has already taken to support the fintech sector, including the Financial Conduct Authority’s regulatory sandbox and ‘fintech bridges’ with other countries.
The document also noted the government has worked to diversify the financial sector and thereby reduce systemic risk through promotion of Open Banking and alternative funding sources.
It highlighted the bank referral scheme and the commercial credit data sharing scheme as two actions that have stimulated competition in the small- and medium-sized enterprise lending market.