Credit: William Warby/Flickr

Hundreds of P2P lenders are battling for supremacy

A surge in new peer-to-peer lending startups raises the prospect of an M&A war.

by Jack Torrance
Last Updated: 30 Oct 2015

The Financial Conduct Authority’s decision to regulate the peer-to-peer (P2P) finance industry has led to a surge in new startups competing to offer the service, new figures suggest - raising the prospect of a fierce battle for market share. 

P2P lending platforms allow consumers who want to make a greater return on their savings to lend (almost) directly to those looking to borrow on more competitive terms than those offered by the bank. Last year the FCA created a new ‘regulatory regime’ for P2P lenders. That was seen as a badge of honour for the industry, which has been keen to look as legitimate as more established members of the financial services sector.

Now figures obtained by regulatory consultants Bovill suggest that P2P lending is booming as 114 providers have sought full authorisation from the regulator, while 178 have been given ‘interim permission to operate’ – far more than the 56 platforms the FCA estimated to be in operation at the end of last year.

Read more: Meet the entrepreneur who pioneered P2P lending

‘Everyone feels it’s a bit of a land grab now there’s more certainty about the regulatory regime,’ Gillian Roche-Saunders, Bovill’s head of venture finance told the FT. ‘There are an awful lot of new entrants to the market.’ The FCA faces a massive backlog of applications to process as it has so far authorised just seven P2P platforms.

The surge in numbers brings with it the possibility of market consolidation. While the big players like Zopa, Funding Circle and Ratesetter, and niche operations specialising in property and other sectors look well-established enough to cope with the competition, it seems unlikely that there is room for hundreds of players to peacefully coexist. Don’t be surprised to see a big run of P2P M&A in the coming months and years.

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