While some banks have sought out partnerships with P2P lending platforms, one specialist bank has warned that such collaborations must “be fully aligned with benefits for both sides”.
Alternative finance providers have piqued the interest of banks leading to a number of multi-million-pound investments in the industry.
Portuguese bank Banco BNI Europa recently partnered with crowdfunding platform Fellow Finance to invest in the European SME loan market.
Last year, mobile banking platform Revolut teamed up with Lending Works to offer instant credit through P2P finance.
Speaking about collaborations between banks and P2P finance platforms, Jon Hall, managing director at Masthaven, said: “The specialist banking sector has grown hugely over the past few years, and this brings with it opportunities for collaborating with other firms.
“However, this collaboration needs to be fully aligned with benefits for both sides.
“The best customer outcome is likely to come from firms with aligned values offering solutions that marry the combined expertise of each business.
“For example, it is more likely that Masthaven would offer saving accounts through a platform, rather than aping another provider’s product range.”
Government-backed British Business Bank has supported P2P finance since March 2014, when it announced a partnership with lender Funding Circle.
The alliance saw £40m of investment to support further lending to SMEs via the P2P platform.
In January 2017, the bank committed a further £40m to UK small businesses through the lending platform.
In 2015, Zopa announced a partnership with Metro Bank, whereby the challenger bank could lend to UK consumers via the platform.
Two years later, Zopa announced that it had begun to prepare to submit its own banking licence application.
As part of the expansion plans, the platform completed a £32m funding round.
Frazer Fearnhead, CEO at the House Crowd, believed that as the P2P market matured, there would be more institutional and alternative lender partnerships.
“Firstly, we think retail investors will look elsewhere – why lend to a debt-based P2P platform with no provision fund, when you can secure your investment against bricks and mortar and earn more in the process?
“And secondly, the bigger P2Ps like the convenience of dealing with banks – challenger or otherwise – so will welcome that kind of capital with open arms.
“These burgeoning institutional relationships also mean P2P – in a lot of cases – becomes I2P [institution to peer], which doesn’t sit easily with me.
“One of the reasons I founded The House Crowd was because I felt the democratisation of property investment was the only way to give most people a realistic way to save for retirement.
“And it didn’t seem right that only the super wealthy could make money from property as an asset class.
“We won’t reject institutional investment outright – and we do have a minimum £1,000 retail investment limit – but we are currently exploring ways to reduce the amount retail investors are required to invest to make our service even more accessible.”
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