Metro Bank’s acquisition talks with RateSetter have got the whole peer-to-peer lending sector talking.
If successful, it would mark the largest acquisition deal to date involving a P2P lender and could pave the way for a wave of consolidation across the industry, as banks and platforms realise the benefits of teaming up.
But why has Metro Bank chosen RateSetter as an acquisition target? And why has RateSetter chosen Metro Bank?
According to an official stock market announcement by Metro Bank, released yesterday (Monday 15 June), the bank is primarily interested in RateSetter’s unsecured consumer lending book, which would aid Metro Bank in its goal to diversify away from mortgage lending.
But Frank Wessely, partner at advisory firm Quantuma, believes that there is more to this deal than loans alone.
“Diversification away from mortgage lending is part of it but I don’t acquiring a platform is going to make a significant difference in that regard,” says Wessely. “I think it’s more about seeing an opportunity.”
Just last week, Wessely predicted that more banks could be seeking to acquire P2P platforms, saying that it “might be an attractive proposition for banks to acquire platforms and use their technology and efficient lending capabilities to drive their growth in lending.”
The Covid-19 pandemic has shown would-be acquirers the strength and resilience of the P2P model, and a Metro Bank/RateSetter deal could inspire other banks to reach out to P2P platforms in a bid to diversify their loanbooks, attract more customers and access better technology.
For P2P platforms, the benefits of a bank acquisition could be game-changing.
“It eases the capital requirements on the platform if they’ve got a substantial high street bank behind them,” says Wessely.
“It makes them a more stable, safer bet. It gives them ready-made access to prospects and loan originations being fed through.”
The big question, Wessely adds, is whether other banks will choose to follow Metro’s lead, particularly given the current uncertain economic climate.
“I wouldn’t say it’s likely but I would say it’s possible,” he says. “It depends on how the P2P marketplace resumes after Covid-19.
“All you need is one deal to go ahead successfully and the P2P industry will see that they have something of potential interest to the banking sector. It’s all an unknown at the moment but it could be the start of a small trend.”