P2P Lending Jumps Amid UK Banking Reform

The U.K. financial market is in the midst of significant shifts on several levels, and collectively, these changes are altering the lending landscape. Amid a late payment crisis and regulatory reforms, the U.K. has seen a significant spike in peer-to-peer lending in the first quarter of 2015, according to the newest data.

The Peer to Peer Finance Association released Q1 statistics on Thursday (April 30), revealing more than $709 million being lent out through P2P lenders during this time frame. The numbers bring the total amount of lending in the P2P finance sector to $4 billion.

A closer look at these figures revealed a 32.7 percent increase in P2P lending compared with the fourth quarter of 2014.

“These numbers are excellent and reflect the strong industry growth into 2015,” P2PFA Chair Christine Farnish said. “We are continuing to see strong appetite in the consumer market and a significant increase in lending flow to businesses too.”

But the P2P lending market, Farnish added, hinges on new regulatory reforms. She pinpointed the recent decision by U.K. policymakers to include P2P assets in individual savings accounts statistics later this year.

“The future decision around how peer-to-peer lending will work within the ISA wrapper remains crucial for the industry this year,” Farnish said. “It is important to ensure a separate ‘Lending ISA’ is created, a decision that will not only create greater consumer choice, but will avoid any confusion of placing peer-to-peer loans with stocks and shares, a completely different and riskier asset class.”

Other regulatory reforms have likely led to a spike in P2P lending, too. For example, the government has introduced a new scheme that requires mainstream banks to refer small businesses to alternative lenders if they are rejected for a bank loan. The recently enacted Small Business Act also tackles the late payment problem by requiring large corporate buyers to review their payment policies and practices twice every year and report their findings to the government. The rise of late payments in the industry has forced SMEs to seek out alternative ways to access cash flow as they face higher rejection and interest rates with bank lenders.