The FCA announced this week that it was teaming up with the Cambridge Centre for Alternative Finance (CCAF) – part of the Cambridge Judge Business School – to look at how the peer-to-peer (P2P) lending industry could be regulated after its rapid growth in recent years.
The rise of peer-to-peer lending
One consequence of the financial crisis of 2008 was the rise of P2P lending, writes Prableen Bajpai for
Nasdaq. As a result, ‘exposed’ banks had to adhere to “time consuming, length and rigid procedures”, leading to “more innovative lending and borrowing options”. P2P lending platforms, therefore, are now among “the fastest growing segments in the financial services space,” she adds.
Bajpai cites research by
Transparency Market Research that says the global P2P market could be worth as much as $897.85bn by 2024. This would be a dramatic increase on the $26.16bn it was worth in 2015.
Regulating this burgeoning industry will be difficult, says Bajpai: “While the growth projections for P2P lending are promising, the journey to that destination isn’t easy. One of the major challenges is managing fraudulent activities and malpractices as they result in loss of investor confidence and trust. These can only be tapped when there are certain regulations guiding these platforms.”
Nasdaq article
Academic insight
Academics from the CCAF will provide the FCA with “in-depth analyses” of the P2P sector, according to John Hewitt Jones of the
Mortgage Introducer website.
Hewitt Jones says that the announcement follows a consultation on the future of the crowdfunding market that was launched in July. By bringing in the CCAF, he says that the FCA hopes to “broaden the range of evidence being used in the consultation”.
The CCAF will expand on studies taken in 2014 as part of the
Understanding alternative finance report that the university published with innovation charity Nesta. A director of the CCAF told Hewitt Jones: “The FCA wants to replicate the 2014 work to understand the way in which the investor base is potentially changing.”
Mortgage Introducer article
Analysing the crowd
The CCAF held its inaugural conference last week, where it brought together a “distinguished cadre of policymakers, platform operators, and academicians” to discuss the future of finance, writes JD Alois for the
Crowdfund Insider website.
$897.85bn
The amount the global P2P industry could be worth by 2024
The partnership with the FCA was announced at the conference, with CCAF co-founder and director Bryan Zhang pointing out in his speech that “ongoing structural changes in the provision of finance demand new and innovative approaches in policy making and regulation”.
Zhang hailed the regulator’s “forward-thinking and collaborative outlook when it comes to alternative finance and fintech. It launched Project Innovate back in 2014 and recently opened its new regulatory sandbox. This new joint FCA-CCAF thought leadership programme is a continuation of that innovative regulatory approach.”
Crowdfund Insider article
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