This week saw ex-regulator Lord Adair Turner speak at the peer-to-peer industry’s leading conference, LendIt, where he was invited to give a keynote to explain comments he made about the sector back in February to BBC Radio 4 Today. In the interview Lord Turner made some off the record remarks highlighting that future losses by P2P lenders would make the banking industry look like geniuses. This obviously resulted in the industry defending its track record as well as driving more awareness and shining a spotlight on the sector.
At LendIt, Lord Turner seemed to make a significant U-turn in that he highlighted how P2P platforms could actually help reduce the risk of a future financial crisis. He told the audience that “banks are dangerous” to the financial eco-system due to their reliance on maturity transformation, where banks borrow short and lend long. He went on to say that P2P platforms do not suffer from this systemic risk due to the model being simple, transparent and delivering a fixed term maturity.
He went on to confirm his change in attitude as he believes online lending has the potential to avoid the complexities that created the most recent financial crisis but platforms must maintain robust credit models to ensure quality of lending. It would appear Lord Turner is now more an advocate than a detractor based on platforms ability to deliver better customer service and specialise on one form of the banking sector.
“A platform lender, or a challenger bank, totally focused on this customer segment, may be able to do credit writing underwriting at least as well as a major bank, while providing better and faster customer service.” Lord Turner, October 11, 2016
Our CEO Jane Dumeresque, was in the audience at the time of Lord Turner’s speech and had this to say about the change in his attitude towards the P2P industry.
“As a hugely influential industry figure, it is very encouraging to see Lord Turner change his position on the P2P sector by advocating the benefits of the operating model. He is correct in highlighting platforms like Folk2Folk offer a simpler and more transparent form of finance by matching borrowers and investors directly, avoiding the complexities of maturity transformation. At Folk2Folk we believe that this direct lending model secured with our borrower’s property helps to reduce the risk to investors and will lead to a more stable financial eco-system in the future.”