P2P: more withdraw applications than apply

9 December 2019

Enforcement Manual

NEWS RELEASE: As the regulator’s new rules for P2P platforms goes live today (9 December), research by global financial services regulatory consultancy Bovill has found that since June 2018, more firms withdrew their application to be authorised as a peer-to-peer (P2P) firm than have submitted an application. However, Bovill suggests that the P2P industry will soon adapt to the new regulations, and will benefit from market-wide compliance with more robust regulatory measures.

The Freedom of Information Request (FoI) issued to the regulator reveals that between 13 June 2018 and 7 November 2019, seventeen firms withdrew their application to be authorised for P2P permissions, compared to sixteen firms that applied.

A previous FOI request found that since the Financial Conduct Authority (FCA) began regulating the P2P industry in April 2014, 83% of firms that submitted an application to be authorised as a P2P firm withdrew their application.

These findings come as the FCA introduces a raft of new marketing restrictions today, which include an ‘appropriateness test’ that mandates that platforms check investors’ knowledge and understanding of P2P investment, and a ‘restricted investor’ cap, which requires retail customers to pledge not to invest more than ten per cent of their portfolio in P2P loans.

Frank Brown, managing consultant at Bovill, said:

“Increased uncertainty in the run up to the implementation of the new P2P rules has left some firms roiling. But it’s not uncommon for a market to be shaken up by regulatory intervention. We expect the opacity to clear by early next year, when existing firms start transacting under the new rules. This should herald a more settled, robust P2P market.

“Although our findings show a reduction in volume of new market entrants, the P2P industry stands to gain from the new investor marketing rules. Firms with the right business model and sufficient resources can continue to offer an alternative source of funding to borrowers, whilst protecting investors.”

Bovill’s research also finds that one firm had their application rejected in the period between 13 June 2018 and 7 November 2019. In the first four years since the FCA took over the regulation of the industry, not one firm’s application for P2P permissions was rejected.

Frank Brown added:

“The P2P industry has been under the microscope in recent months, with a number of high-profile failures tarring the market. But it’s worth taking a step back and appreciating that this relatively young industry has introduced agile new platforms and popular financial innovation, like the Innovative Finance ISA.

“For those firms seeking an authorisation for P2P lending, they should prepare for close regulatory scrutiny and find the time to prepare in detail. But this shouldn’t dissuade potential entrants: firms that sign-up knowledgeable customers are more likely to meet both their business and regulatory objectives.”

For further information, please contact:

Polly Barton – Bovill
+44 (0)20 7620 6787

Jos Kelly/Sam Price – Linstock Communications
078 080 20673/075 853 00404

Notes to editors

The response to Bovill’s FoI from this year, covering the period between 13 June 2018 until 7 November 2019, is as follows:

‘Your request has been considered and we will answer each point in turn.  In considering our response, please note that the number of applications rejected and withdrawn does not add up to the number of applications received during the same period, as some of the applications would have been received prior to 13 June 2018.

  • How many peer-to-peer (P2P) firms have submitted applications to be authorised?

From 13 June 2018, sixteen firms have submitted applications to be authorised for P2P permissions.

  • How many P2P firms have had their applications rejected?

One firm has had its application to be authorised for P2P rejected.

  • How many P2P firms have withdrawn their application?

Seventeen firms have withdrawn their applications for P2P.

The response to a previous FoI, covering the period between when the FCA started regulating P2P in 2014 until 13 June 2018, is as follows:

‘I would like to know, since the FCA took over the regulation of the peer-to-peer (P2P) sector;

  1. How many P2P firms have submitted applications to be authorised – 373
  2. How many P2P firms have had their applications rejected – 0
  3. How many P2P firms have withdrawn their application – 310

About Bovill

Bovill is a specialist financial services regulatory consultancy, established in 1999 and headquartered in the UK with offices in London, Chicago, Singapore and Hong Kong. Our sole activity is the provision of high-quality, technically-focused advice and consultancy services on all aspects of financial services regulation. We aim to develop effective solutions to the complex problems of our clients, and do not offer commoditised advice or services. Bovill has experts spanning all aspects of financial regulation in the UK, EU, Asia and the Americas.

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