The coronavirus crisis has exposed a weakness in lenders solely relying on retail money but has presented an opportunity for peer-to-peer and marketplace platforms to show their strength, a senior Varengold Bank executive has said.
Alison Harwood (pictured), who leads the German bank’s London office said the rush of retail investors to withdraw funds from both P2P platforms and investment funds showed the benefits of institutional backing.
Varengold has previously provided funding lines to Assetz Capital, MarketFinance and LendInvest.
“Retail money can be quite flighty in uncertain times,” Harwood told Peer2Peer Finance News.
“There are a minority of lenders in our portfolio that are reliant on a P2P model but the majority are looking at funding through institutional relationships.”
Harwood said alternative finance firms have benefited from borrowers flocking to the faster service offered by online platforms compared with banks.
“Fintech with a lending model is going to be of huge importance over the next few years,” she said.
“The fintech model proves itself in an environment where you need quick decision making
“There needs to be sensible and sustainable lending.
“There will definitely be some winners and losers but the industry came out of the 2008 global financial crisis and will look at this one as a moment of opportunity.”
Harwood added that the alternative finance industry is well represented in the British Business Bank’s coronavirus business interruption loans scheme (CBILS) compared with support from other countries.
She said Varengold was happy with the performance of its portfolio during the pandemic and said the UK remains on its radar for investment.
Harwood said there is a pipeline of one or two investments being looked at but they are not in the P2P lending space.
It comes as Varengold marks its 25th anniversary.
Board Member Frank Otten said the brand, which gained a banking licence in 2013, has spent the past seven years focusing on transforming itself from a hedge fund backer to a financial institution helping those not served in the market.
“We take care of ‘the underbanked’, which refers to those who lack access to financing and banking services because they fall outside the target markets of larger institutions,” Otten said.