Peer-to-Peer

Lending and the

P2PFA
Sam Ridler
Execu:ve Director P2PFA

UK Alternate Finance Market 2013

P2PFA Cumula:ve Lending Data

Risk Prole P2P Lending vs Equity Crowdfunding

High risk

Low risk

Bank
Deposits

P2P Lending
Is classed as a lower
risk category of
investment by FCA.
Loan default rate on
P2PFA member
plaVorms less than 1.5%

Equity Crowdfunding
Between 50-70% of early
stage investments may
completely fail and
investors on this basis
would lose 100% of any
money invested FCA
2013

Diagram of structure of P2P plaVorm

PlaVorms responsibility
Borrowers

Credit
worthy
borrowers

Investors/
Lenders

P2PFA Membership Criteria

P2PFA Members must:
Undertake debt based retail nancial services business in the UK by means
of an electronic plaVorm
Have been transac:ng business in the market for at least 6 months
Use lender funds to provide loan funding of any type to consumer or
business customers
Preferably, secure some lender funds from retail consumers
Operate to a signicant extent by means of direct loan contracts between
borrowers and lenders
Demonstrate high standards of loan underwri:ng and credit and
opera:onal risk management
Demonstrate high standards of transparency and provide clear, balanced
and fair informa:on to all customers
Comply fully with the P2PFAs Opera:ng Principles

P2PFA Opera:ng Principles

1. Senior management responsibili:es
2. Minimum opera:ng capital requirements
3. Segrega:on of par:cipants funds and audi:ng of the segregated bank
account
4. Appropriate credit and aordability assessment
5. Appropriate an:-money laundering and an:-fraud measures
6. Clear rules governing use of the plaVorm, consistent with these
Opera:ng Principles
7. Marke:ng and customer communica:ons that are clear, fair and not
misleading
8. Secure and reliable IT systems
9. Fair complaints handling
10. The orderly administra:on of contracts in the event a plaVorm ceases to
operate

Structure of P2PFA

Independent Chair
Chris:ne Farnish CBE
Execu=ve Director
Sam Ridler
Management commibee of
Member PlaVorms CEOs

P2PFA Membership

Members

Prospec:ve Members

Control and monitoring of P2PFA Principles

P2PFA Monitoring
P2PFA Enforcement*
By
the Associa:on,
member plaVorms,
Monitoring

non-member plaVorms, third party
organisa:on and Industry bloggers

Cau:on
from t he Chair
Enforcement
Suspension and/ or Expulsion
*Breaches of FCA regula:ons reported to
FCA

Thoughts on EC code of Conduct

Opportuni=es
Challenges

- Improve consumer condence

- Code has to be specic to type of
nance lending or equity
- Level the opportunity to provide
diversity across EU Lending market and - Must be func:onal to mul:ple
territories with dierent regulatory
provide new asset class to EU retail
requirements
investors
- Iden:fying the best governance for
- Propor:onate approach to
control & monitoring of code
harmonising approach across EU
- Ensuring compliance with code is
valued by EU consumers & the
Industry

Key points

The P2P sector is disrup:ng the tradi:onal Oligopolies in retail
investment, consumer and businesses lending
P2P lending largest form of alternate nance and provide vital
access to nance for SME
Sustainable P2P plaVorms perform thorough due diligence on
borrowers to ensure they oer low risk returns to investors
P2P Lending and Equity crowdfunding are very dierent asset
classes with dierent risk proles for investors therefore an
eec:ve code of conduct cannot be the same for both.

Website: www.p2pfa.eu
Contact: SamRidler@p2pfa.eu