Why partnerships could be the future of peer-to-peer lending (1)
This could be the year that partnerships between peer-to-peer lenders and banks come of age.
All the signs are there; banks, peer-to-peer lenders, academics and advisers have all confirmed in recent months that this trend will take an upward trajectory.
For some borrowers deprived of access to credit by the mainstream, it might be just the news they’ve been waiting for, at just the right time.
In just one example NatWest’s launch of a new partnership with alternative lenders, at the end of 2016, will at least broaden SME customers’ options.
NatWest’s business and commercial customers are now benefitting from a new, expanded panel of alternative lenders to which they can be referred if their application for finance is declined by the bank.
The panel, Capital Connections, builds on NatWest’s existing partnerships to signpost small business customers to alternative sources of finance.
Capital Connections includes two peer-to-peer platforms which are already working with NatWest to support business customers; Assetz Capital and Funding Circle.
They will be joined by Iwoca, which offers working capital financing to small businesses, RBS Social and Community Capital for social enterprise and charity lending, and Together, a secured lender.
Providers have been selected to cover different funding products and include a mix of speciality finance and peer-to-peer lending. More partners will join Capital Connections in the first quarter of 2017.
Customers can choose to contact any of the funders directly or be referred to a provider on the Capital Connections panel by their relationship manager. There will be no commission paid as a result of any referrals.
At the time Alison Rose, chief executive of commercial and private banking at NatWest, said that referring businesses to a panel will give them access to platforms with a wide range of lending appetites.
Andrew Holgate, co-founder and chief credit officer at Assetz Capital, said the collaboration between high-street banks and peer-to-peer lenders means small businesses will have more funding options to meet short and long-term goals.
Just as this seminal partnership was announced, with other lending referral networks likely to follow, Credit Strategy’s own conference for alternative lenders demonstrated another trend with similar traits.
At the F5 Conference in December Rolf Hickmann, the founder of analytics firm the pH Group which is now part of Experian, indicated that some major retail banks are moving directly into peer-to-peer lending.
He explained that banks are looking at acquiring or even creating their own platforms.
Hickmann explains that this is not just happening in the UK;, some banks in Germany have already started doing so.
He told delegates: “I’m sure that’s a trend that’s going to come over the next 12 to 18 months. Banks will begin to see how expensive it may be to acquire these platforms.”
Perhaps the litmus test for success will be whether credit-deprived businesses or individuals start to feel that referrals, or even bank-owned platforms, are really working for them.