The scale of P2P losses are 'not alarming'

Peer-to-peer revenues hit the news earlier this year where some key players revealed they could be facing losses.

Earlier this year Zopa claimed it had become the first UK platform to hit the £1bn lending mark, and that it expected to double its revenue this year to around £23m.

Is it a surprise then that earlier this month Zopa also announced it made a loss of £5.6m in 2014 and that it expects to make an overall loss in 2016?

Around the same time Funding Circle reported increased revenue, but its losses on ordinary activities before tax had risen from £5.3m to just over £19m.

Last week B&C reported that P2P lender RateSetter had reported a profit of £618,468 before tax for 2014-15, however still expected to make a loss over the next two years. This was in order to kick start a major investment drive.

Rhydian Lewis, Founder and CEO of RateSetter, stated that its next focus was to scale up, including serious investment in its marketing in order to boost awareness.

Aldwyn Boscawen, Marketing Manager at P2P lender Wellesley & Co, said it was important to stress the differences between each platform, something he believes industry analysts should not forget.

“It is important to stress how different each platform is and the reports are alarming because the industry commentators need to acknowledge this,” Aldwyn said.

“Different types of lending are more profitable than others, and likewise the different ways for platforms to make profit are variable in sustainability.”

Wellesley & Co is a profitable business that lends its own capital alongside investors’, a selling point that Aldwyn believes is crucial to the lender’s growth.

“The industry has [reportedly grown to] over 100 platforms and the competition is healthy for the industry. However, in such a competitive landscape it is to be seen how some of the less established players will cope,” Aldywn added.

This increased competition may prove difficult for newcomers to stand out.

Neil Faulkner, Co-Founder of P2P lender comparison website 4thWay, told B&C: “In a rapidly growing industry it is normal for businesses to choose to spend far more than they earn in order to expand and achieve scale.

“The scale of losses is therefore not alarming. That said, platform debt increases risk and the future of each individual platform is not certain.

“A score of peer-to-peer lending platforms already offer commercial and bridging loans and, with over 100 platforms having applied for full regulatory permission recently, they will have a lot of competition with each other as well as from traditional lenders.”