The new Financial Conduct Authority (FCA) regulations introduced a new era of transparency among peer-to-peer lenders, so how easy is it to work out how a loanbook is performing?
The new P2P regulations introduced in December said platforms must be more transparent about the returns and risks of P2P lending and do more to disclose data such as default rates.
There are no hard and fast rules on how this should be done and Peer2Peer Finance News analysis shows many are taking different approaches.
It is standard in the P2P lending sector for platforms to provide information on loans that a registered investor has money in, but what if you are just browsing? How easy is it to assess how a platform is performing before you choose to invest?
P2PFN visited a sample of the UK’s largest P2P lending websites – Funding Circle, Zopa, RateSetter, Lending Works and Assetz Capital – to see how easy it is to find loanbook information without having to sign up to the platform.
Here is what we found.
The user experience is meant to be central to any fintech so it should be easy to find loanbook information on a P2P lending platform, but our research shows it is not always clear where to find the data.
Funding Circle and RateSetter both have a dedicated statistics page that can be found through their homepages.
However, it is a bit more complex for the others.
Lending Works’ data can be found by clicking “about us” and following the “statistics” option.
Similarly, you need to click the “invest” option on Assetz Capital’s website and then the “loan performance” category.
Zopa may be the oldest lender in the sample but its navigation is perhaps the most complicated.
Users need to click the “P2P Investments” option at the bottom of its homepage which first details its products and then has a link to historical performance.
In the days of the Peer-to-Peer Finance Association (P2PFA), all members, which included Zopa, Funding Circle, Lending Works and at one point RateSetter, had to provide an accessible version of their full loanbook.
However, Funding Circle scrapped its downloadable loanbook in 2018 citing a lack of use and because it would be treated as market sensitive data for a listed company . The P2PFA changed its rules at the same time to say platforms could instead provide a detailed breakdown of the loans.
RateSetter’s was removed a year later and now, of the sample, only Zopa and Lending Works offer a downloadable loanbook that lets users view details of the loans such as their value, length and level of defaults.
Each platform has a different route to find loan data but most of it is shown in a similar way. All platforms will reveal their loanbook size but there are some differences.
Zopa displays historical performance of investments for its Core and Plus products, with charts showing annual investment returns and the expected and net losses for 2016, 2017 and 2018. The page didn’t show figures for 2019 at the time of going to press.
There is also a performance page for its legacy products.
Similarly, Lending Works shows the average annual returns on its Flexible and Growth products between 2014 and 2019 as well as expected and actual losses. It also provides information on average loan sizes and borrower ages and incomes. Vistors can also see how much is in its Shield contingency fund and how much is due to come in.
However, the other platforms in the sample don’t break their loan data down by product, instead providing overall figures for lending and average rates across the board.
Funding Circle shows data from 2012 up to the third quarter of 2019, with bar charts showing the amount lent, historical returns, projected returns, bad debts and default rates. Users can also see how much money is lent in certain UK regions and the most popular business sectors.
RateSetter’s data starts from pre-2016, showing total amount lent, returns, project and actual losses as well as the balance and coverage of its provision fund.
Potential Assetz Capital users can see data going back to 2013, showing overall loanbook size, average rates and default expectations and rates.
It mentions the existence of a discretionary provision fund but doesn’t detail how much is in it.
A standardised approach to reporting may be unlikely in the near term, but platforms need to recognise that providing the data is just the first step – users also need to be able to find it.