The Alternative Finance sector in general, and the P2P crowdlending platforms in particular, had everything going their way in 2015: low interest rates, traditional banks still dabbing their wounds, economy picking up, helpful new legislation (e.g. Innovative Finance ISA) from a newly-elected Tory Government, no major ‘car crashes’ in the industry and dramatically heightened interest from institutional investors. It is hardly surprising that the industry grew to a cumulative total of £4.6 billion lent (source: AIR) – indeed, it would have been more surprising if it hadn’t.
However, 2016 is likely to be a lot more challenging and will, I believe, start to “sort the men from the boys” – those who are in it for a quick opportunist buck and those who are in it for the longer haul. Interest rate increases cannot be far away now that America has made the first move in an upward direction. The big question is what impact is that likely to have on the savers who have been turning away from the banks and building societies in pursuit of a better return. In my opinion, this may affect consumers concerned about safety, but will have little effect on the outlook of HNW investors or institutions more used to balancing risk against reward.
Centre stage next year will be the FCA in its key role of granting authorisation to the scores of platforms that have applied – a vital step in stimulating the hugely influential IFA community to get behind P2P after the new Innovative ISA goes live in April 2016.
Finally, the scramble by the big institutional battalions to grab a piece of the Alternative Finance action is also set to gather pace. One of the final corporate actions of 2015 was the sudden departure of CEO Geoff Miller from GLI Finance, one of the great Altfi consolidators – a sure portent of things to come in an industry where the struggle for dominance has only just begun.
The other slightly disturbing question is whether in time, though not necessarily in 2016, the dis-intermediation brought about by the P2P revolution will fade away in the face of restored institutional dominance – bringing with it the need, once more, to pay the middle man at the expense of the ordinary punter. I do hope that does not come to pass. Then again, it is not always easy to turn away institutional money.
