There is clear regulatory manoeuvring going on within the sector, including the introduction of the Innovative Finance Isa, which is mainly for new and directly regulated platforms.

While this does indicate that the market is maturing, there is now a stark difference between those platforms which stay true to the original ethos and transact on a genuine individual-to-individual basis, and those which, in essence, just allow institutional investors to transact on a pooled-funds basis.

It has been argued that P2P platforms should not mix institutional funds and private money as this can cause ambiguity and a reduced service to individuals investing alongside institutions. Many of the older platforms – which were trading prior to the defined regulation – are adopting more of a bank-style, balance-sheet lending.

Crowdfunding platforms which enable businesses to grow by nurturing strong relationships with like-minded investors and full transparency offer a richer experience to investors and, therefore, are able to draw more liquidity from them. In addition, genuine P2P platforms are now more attractive for businesses raising funds due to the benefits offered from working alongside private investors, as opposed to institutional money.

Crowdfunding and investing through pooled funds clearly offer very different propositions for their audiences. Crowd2Fund offers crowdfunding in its purest form, with funds lent exclusively by private investors.

Why are legacy platforms limiting choice?

It is our opinion that legacy platforms are removing investor choice mainly due to a combination of regulatory pressures and the need to plug a liquidity gap with institutional funds.

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Deploying institutional funds through a platform marketed as P2P, in our opinion, is misleading.

Platforms granted the Innovative Finance Isa do not have a liquidity issue and, therefore, do not need to rely on institutional money.

We also believe that legacy platforms display very limited information, impeding investors from making a balanced investment decision and, therefore, the credit band associated with each investment is much more relied upon.

In some cases, inaccuracies with the credit risk band could also be seen as misleading.

The removal of choice for investors removes this risk; in turn, this will reduce potential earnings for some investors.

At Crowd2Fund, we have always taken a firm stance on regulation.

Being directly regulated by the FCA since launch has meant that we were one of a very limited number of platforms that offered the Innovative Finance Isa on terms that let users directly choose the companies in which they invested and also ensured that the right amount of detail on each business is clearly communicated.

Legacy platforms are acting like banks

One of the starker criticisms around recent changes is that legacy platforms are fast becoming indistinguishable from the traditional institutions they originally sought to disrupt.

This isn’t wholly negative, as the trend of platforms moving towards a pooled-fund approach takes alternative finance to a larger and more mainstream market. Indeed, historic returns associated with these platforms have outstripped those of savings and current accounts.

Investors now have a clear choice between pooled funds and direct crowdfunding. As long as the benefits and risks of each asset class are clearly communicated, there is room for both types within the marketplace.