Common reservations of financial services sales recruits in the Peer to Peer Lending marketplace?
Peer to Peer or Alternative Lending has had the luxury of unexpected growth in the Fintech market over the last 5 years. The sheer volume of new businesses in this sector and in particular the success of some of the more recognisable names established in this space have enabled the sector to adopt the ‘gravy train’ tag.
Of course, any gravy train in history has been synonymous with earning big and fast before getting off, because the gravy train does come to a halt eventually. Peer to Peer has had its fair share of success stories, but has never been without its doubters.
So what of a career within Peer to Peer? Well it may have been a good move 5 years ago but are increased arguments that the market is untested and heading for a downturn breeding uncertainty within prospective sales entrants into the industry?
The base model of Peer to Peer lending has many finance purists ringing the alarm bells. Former city regulator Lord Turner strongly suggests that the losses on peer-to-peer lending which will emerge in the next five to 10 years will make the worst bankers look like absolute lending geniuses, because a group of people are going into a lending process with a tech platform without anybody really doing ‘go out and kick the tyres’ credit analysis.”
Criticism has also been pointed at unrealistic rates of return offered to Investors, even though P2P’s are on-line platforms and don’t bear operating costs such as traditional banks.
Dozens of new lenders have sprung up allowing people to lend to small businesses, and to invest in property. Nicola Horlick, one of the City’s most high-profile figures, launched a P2P lender for businesses in 2014.
And Christine Farnish, who chairs the P2PFA, said Turner’s views ignored the industry’s record and that default rates on loans were low at 2%-3%.
“We only lend to creditworthy consumers and established small and medium sized enterprises. Strict credit underwriting rules apply to all our members and this should not be confused with higher risk forms of crowdfunding or lending to sub-prime customers,”
So one could conclude that the doubters who predict a downturn are probably correct to a point. Every finance industry has its downturns, it’s economics after all. However plenty of evidence suggests P2P is built on solid foundations and the first downturn will be a test rather than crash and P2P will be here to stay long after.