Chirag Shah

Mass consolidation of small peer-to-peer platforms unlikely, claims lender

Smaller peer-to-peer (P2P) platforms are unlikely to consolidate during 2017, a lender has claimed.

Last week, Stuart Law, CEO and co-founder of Assetz Capital, warned that smaller P2P companies may be forced to consolidate in the potentially tumultuous year ahead.

However, Chirag Shah, chief executive of P2P lender Nucleus Commercial Finance, has argued that such a move would offer little advantage to these platforms.

“Mass consolidation of smaller firms is fairly unlikely,” he stated.

“At the moment, the market is quite fragmented with lots of smaller companies coming in to the market.

“Partnerships normally emerge and are [mostly] successful because they offer some kind of commercial advantage to both parties.

“Most companies use the same technology or have a big market crossover already, so there is barely any commercial advantage other than the increased monopoly from sharing a database.”

‘I don’t think we have yet reached the saturation point’

Although Chirag’s scepticism of consolidation was partly shared by Tarlochan Garcha, CEO of P2P bridging lender Kuflink, he did concede that it was a possibility.

“I don’t think we have yet reached the saturation point where only the biggest will thrive.

“However, P2P is subject to the same rules of competition for investment as any other medium.

“Unless a firm can provide the right combination of security and potential return, as well as attracting borrowers to its platform, then consolidation in the market will happen.”

‘It will be some time before we see any major consolidation’

 Financial Conduct Authority
More P2P platforms are expected to receive FCA authorisation

Jane Dumeresque, CEO at P2P business lender Folk2Folk, also recognised that consolidation was a possibility, albeit on a smaller scale.

“We may see some consolidation in 2017 in the way of other platforms taking over another’s loan book if they fail to get fully authorised. 

“The P2P lending industry is still growing fast and with many more platforms expecting their FCA full authorisation it’s likely that it will be some time before we see any major consolidation in the industry.”

‘I would hope any consolidation would help to simplify the market’

Passing regulatory hurdles could help P2P companies earn investors’ trust

Regardless, John Goodall, CEO & co-founder of P2P buy-to-let platform Landbay, expressed optimism about any potential consolidation.

“Like all emerging industries, consolidation of smaller players may well happen over the next year or so.

“It’s hard to know how this will pan out, but I would hope any consolidation would help to simplify the market for investors and borrowers.”

John suggested that the regulatory hurdles faced by some P2P companies may benefit the sector in the long term.

“The launch of Innovative Finance Isas will undoubtedly lead to an increase in retail investments, but it’s more than that.

“The regulatory processes Isa-ready platforms have gone through have been rigorous and companies who have made it through these hurdles will gain not only the trust of the regulator, but of potential investors too.”

‘There will continue to be new entrants’

Robert Pettigrew, director of the Peer-to-Peer Finance Association, agreed that regulation would be key to whether platforms would look to consolidate.

“While recent growth in P2P lending levels has been impressive, the sector as a whole is relatively nascent, and the process of FCA authorisation and a regulatory review are on-going.

“…Ensuring that the regulatory framework complements the public policy priority of enabling space for alternative finance platforms to continue to evolve and innovate … is a major priority.

“Within that, it seems probable that there will continue to be new entrants, and some degree of consolidation within and between platforms, as a sign of that competitive dynamic.”

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