British peer-to-peer lenders are already shutting up shop ahead of regulation of the sector, according to reports.
The UK’s Financial Conduct Authority (FCA) is in the process of regulating the peer-to-peer sector, where people can lend money directly to consumers and businesses via online platforms. The sector has exploded in popularity since the 2008 crash due to a drying up of credit and the stagnation of interest rates.
BI reported on Tuesday that many in the sector are expecting a big clear out of smaller platforms who can’t face the cost or weight of regulation.
It looks like the clear out is already happening — financial regulation consultancy Bovill says 26% 0f platforms that have applied for authorisation have already abandoned the process, industry website AltFi reports.
The FCA have received 114 application and 30 have been withdrawn, with 26 of those “partial withdrawals”, meaning a company is just giving up peer-to-peer activity but will continue whatever else financial services it offers.
AltiFi quotes Gillian Roche-Saunders, head of venture finance at Bovill, as saying: “The high number of withdrawals suggests that the FCA is setting the bar high when it comes to full authorisation for P2P lenders — the process appears to be much tougher and more costly than many firms first anticipated.”
Nick Harding, CEO of Lending Works, told BI his company has spent over £100,000 preparing its application for the FCA, ahead of the deadline at the end of the month.