Mike Carter, head of platform lending at the 36H Group, talks to Marc Shoffman about his view of the peer-to-peer lending sector and the work of the new industry trade body…
Mike Carter started his career as a chartered accountant and now faces the task of balancing the needs of some of the UK’s largest peer-to-peer lenders in his new role at the newly formed 36H Group, which sits within fintech trade body Innovate Finance.
The 36H Group replaced the now-defunct Peer-to-Peer Finance Association in January. Carter, who is also executive chairman of The Money Platform, was appointed in April as the group’s head of platform lending. He brings an investment banking background to the role, having worked for Deutsche Bank and Lehman Brothers but he also has plenty of experience helping emerging and challenger financial institutions. He worked on the initial public offering for OneSavings Bank and supported private share placements for Metro Bank.
Carter, a new entrant to this year’s Peer2Peer Finance News Power50 list who went straight into the top 10, explains the role of the 36H Group amid the pandemic, and why both a trade body and P2P lending is still important to all types of investors.
Marc Shoffman: What attracted you to the P2P lending sector?
Mike Carter: I have worked with alternative finance companies doing advisory work and have lent via these platforms so I have known the sector for a long time. When the 36H Group was launched I had the right experience and strategic outlook to help the sector move forward to its next phase.
MS: What are your plans for the 36H Group?
MC: This was redefined for us when the coronavirus crisis hit in March. Our focus has been around the government coronavirus emergency financing schemes and getting members into those programmes.
MS: Why is it needed?
MC: We are focusing on regulatory and policy matters and promoting the benefits of the sector across wider stakeholders. Trade bodies vary enormously according to their budget and their firepower. We are not looking to get to granular details of looking at every policy document but we want to provide more high level leadership around policy. Its driven by the members and what they want to get out of it.
MS: Why do you think the Treasury was so slow to use alternative lenders in its loan schemes?
MC: They may find it easier to talk to banks, so non-bank lenders have to shout a bit louder to get their case heard. A large number of non-bank lenders have now been authorised by the British Business Bank and their use in the schemes has been recognised.
The data shows they participate very strongly when they are put in the schemes. A number have been accredited and Innovate Finance took the lead on getting non-bank lenders involved. We have a lot more punch by being able to team up with bigger firms through Innovate Finance and we also have leaders of our own such as Funding Circle, which was the first out the door to show what the sector could do with the coronavirus business interruption loans. It is good we have some of the biggest players in the fintech sector sitting within 36H that can provide leadership. The 36H Group is providing insight into what the next phase could be once the emergency lending schemes end.
MS: How have you found the Financial Conduct Authority’s (FCA) attitude to the sector?
MC: We have dialogue with the FCA on ongoing industry issues. Discussions are currently dominated by Covid-19. I expect at some point the FCA will carry out a post-implementation review of the new regulations that were introduced last year. When that happens our lenders will be keen to provide a lot of feedback but that is obviously not a priority right now.
MS: How have P2P lending platforms been affected by new marketing restrictions and appropriateness tests?
MC: There were concerns in the run up to the introduction of the new regulations that it would cut off supply but that hasn’t been the case at all. Most platforms welcome the change as they would rather deal with the right kind of investors for the product. Anecdotally, it hasn’t dented retail investment demand.
MS: Is there still room for retail investors in P2P lending?
MC: There is definitely still space for retail. If you speak with most platforms they will say diversifying with institutional funding is an important side to building a robust business. There is an education process to have after the crisis to bring the whole market up to speed. Originally P2P lending was a loan on one side and borrower on the other, the next phase is building a more diversified business with P2P at the core.
For example, Funding Circle runs its P2P business alongside securitisations. It’s a natural progression. Post crisis, platforms would expect to build their investment book at the same time as expanding institutional funding. Institutional funding will grow faster as it is growing from scratch.
MS: Have P2P lenders coped well with withdrawal requests?
MC: The crisis has probably highlighted that some investors didn’t realise how long it would take to get money out. The products have always been clearly explained: investor access to their funds is based on the ability to sell loans to other investors. This is all in the terms and conditions.
MS: Is P2P lending as competitive as it used to be?
MC: If you look at data available up to the start of the crisis, P2P was growing steadily with a positive return less volatile than equities. There are commentators who put it in the high risk bracket which is unfair. The Bank of England is getting ready for negative interest rates so savings rates will be low compared with P2P lending. The businesses that are diversifying and expanding in this sector are taking the P2P ethos with them.
When you see products such as Zopa launching a credit card, its P2P culture is giving it the mindset of how to approach and treat a customer. There is no reason to think the sector has to stay narrowly as P2P. You can take the ethos and technology approach to serve customers and redesign products to make them better.
I have had conversations with potential new entrants and existing businesses wanting to enter P2P. As we come out of the crisis we still start to see more entering the market.