According to FCA data, 185 firms registered with the FCA for interim permissions for P2P activities as of 1st April 2014.
Of these, the regulator estimated that just 42 will go on to apply for authorisation for P2P activities, a conversion rate of just 23%.
In its November 2015 regulation report, the FCA said it expects the other 143 firms with interim permission for P2P to apply for other consumer credit permissions which better reflect the services they offer.
Of the 42 firms which applied for authorisation, just six have been authorised, a conversion rate of just 14%.
However, the FCA revealed that it has yet to refuse authorisation for any firm.
The FCA told B&C: “Crowdfunding and peer-to-peer make up a small part of the overall market for lending and investing but growth has been rapid and we have kept the market under close scrutiny.
“Last year we published an early review of the market that explained what we’d done so far to supervise the crowdfunding industry, including details of where we’ve had concerns.
“Additionally, firms wanting to offer crowdfunding and peer-to-peer services have to apply to us for authorisation, which gives us an opportunity to look at their business models and ensure they’re fit and proper to serve consumers in the UK.”
The FCA did, however, reveal that eight P2P firms had withdrawn applications.
Three proactively cancelled their P2P interim permission applications, three applied but later withdrew from the P2P activity and two firms withdrew their P2P applications altogether.
The FCA told B&C that in 2014 it was keen to get in early and put rules that provided extra protection for customers in the fast-growing crowdfunding and peer-to-peer markets.
“The rules are there to ensure that consumers who want to make crowdfunding investments are treated fairly. Among other things that means consumers being clear of the risks, including the chance they could lose their money,” said the FCA.
“In setting up regulation, we took different approaches on peer-to-peer and equity crowdfunding to take into account the different levels of risk associated with these products.
“Crowdfunding and peer-to-peer make up a small part of the overall markets for lending and investing, but growth has been rapid and we have kept the market under close scrutiny.”
Simon Pearse, Head of Compliance at RateSetter, said: “All platforms need to be fully authorised by the FCA before they are able to offer an IF (Innovative Finance) ISA product.
“It’s unclear at this stage whether the FCA will be able to provide full authorisation to platforms ahead of the 6th April IF ISA launch, but we’re optimistic: the FCA is obviously working hard to get things done quickly and naturally we as platforms are doing the same.
Last year, RateSetter stated to B&C it was to fork out £500,000 in 2015 in order to apply for full FCA authorisation.
Zopa, the P2P platform, told B&C that the process of becoming fully authorised involved a lot of time, effort and resources from various teams, including its compliance and legal departments.
“Platforms are required to submit roughly 150 pages outlining the business model, operating procedures and other business areas based on questions from the FCA,” said Zopa.
“This takes time to pull together and then involves an ongoing consultation with the FCA to answer any questions they may have.
“We are now waiting to hear back from the FCA on their decision to grant full permissions to platforms as we are operating on an interim permission basis.”
Clare Joy, Communication Manager at Landbay, concluded: “Time has been perhaps the biggest hurdle for us as the FCA have a lot of applications to get through which has naturally slowed the process.
“However, things are now progressing well and we are working closely with our FCA case officer to get our application through.”
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