The City regulator has accepted two applications for peer-to-peer lending platforms to launch this year with three currently pending, marking the highest approval rating for new entrants in the sector for three years.
According to a Freedom of Information request by Rebuildingsociety on Financial Conduct Authority (FCA) P2P applications and approvals from 2014 to 2021, the regulator has received seven applications for permission to ‘operate an electronic platform for lending’ this year.
Two of these applications were later withdrawn, while three are currently pending and two were approved. This puts 2021’s approval rating at 28.6 per cent, the highest since 2018.
Since 2014, the approval rating has ranged from a low of 11.3 per cent (in 2015) to a high of 60.9 per cent in 2017.
In 2020, there were 14 applications, seven of which were withdrawn. Two were rejected by the regulator, while three were marked as ‘currently pending’ and two were accepted, giving an approval rating of 14.3 per cent.
In 2019, there were 14 applications, three were accepted and 11 were withdrawn to give an approval rating of 21.4 per cent. And in 2018 nine were accepted, 15 withdrawn and one was rejected out of a total of 25 applications, giving a success rate of 36 per cent.
Approval activity reached a peak in 2017, when 60.9 per cent of all applications were approved. During that year, 42 platforms gained their permissions and 27 applications were withdrawn out of a total of 69 applications.
2016 saw a success rate of 20.8 per cent of platforms gaining their permissions in a year that broke several records. It saw the highest number of total applications (77), withdrawals (56), approvals (16) and rejections (five).
In 2015, there were 62 applications, from which 55 were withdrawn and seven approved, giving the lowest approval rating of 11.3 per cent. While in 2014, five platforms were authorised and there were 17 withdrawals from a total of 22 applications, giving a success rate of 22.7 per cent.
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“The reason I requested this information was to see the proportion of applications to approved platforms and to try and better understand really how things have evolved since the post-implementation review,” said Daniel Rajkumar, managing director of Rebuildingsociety.
“A couple of things not necessarily clear are it doesn’t indicate which of these are appointed representatives and it’s not clear of those that were approved, which are still trading.
“2020 and 2021 have been exceptional years. What’s interesting is the regulator was slow to approve platforms. Five were approved in 2014, then seven the next then 16 in 2017 when the FCA approved a bunch of platforms, presumably because a backlog had been collecting and that has slowed down again.
“In 2017 there was quite a lot of negative press, it was the year when platforms started failing but also the year that a number got their permissions.”
The FCA has been contacted for comment.