2019 was the year that shook the P2P lending industry. It’s been an interesting year, to say the least.
It has been a strong year for us. We’ve innovated where others have rolled back usability improvements, we’ve grown where others have ceased completely and we’ve adapted during times of economic, political and regulatory uncertainty.
Here we review a few of the changes and highlights for us as a firm and the industry as a whole.
Innovations
BuyBack Guarantee
In the summer this year we launched the UK’s first P2P BuyBack guarantee. Allowing lenders to purchase microloans guaranteed by other experienced and sophisticated or high net worth investors, helping to share the risk and reward of lending to businesses.
In the event of a loan falling into arrears by 60 days (or defaulting) microloans carrying a buyback guarantee, will be bought back by the guarantor, who will then assume the capital risk during the debt recovery phase. To ensure guarantors have sufficient liquidity to buy back guaranteed microloans, the platform limits how much they can offer by way of guarantees and automatically facilitates the buyback of the guaranteed loans. There is no claims process, no hassle, no waiting for a provision fund payout etc.
Now, almost 6 months in, lender feedback on the BBG has been overwhelmingly positive from both the guarantors as well as those that have purchased the BBG loan parts. We’re seeing an increasing number of new lenders using the BBG to help diversify and de-risk their loan portfolio, whilst they get accustomed to the platform.
As a platform, we are closely monitoring the performance of this feature and look forward to watching it’s popularity flourish.
Director’s Loan ISA Account
Having worked with plenty of UK business owners both in the capacity as borrowers and lenders, we identified that often a business owner's biggest investment is into their own business, often in the form of a directors loan, and that, these directors loans are non-interest bearing, due to the tax on the interest.
With the introduction of the Innovative Finance ISA, business owners can now lend to their own businesses through their IFISA and benefit from the tax-free interest. Allowing them to invest in their own business, improve their EBIT and reduce taxes.
Product demand has grown well and we’ve seen a 99% renewal rate on the Directors loan IFISA accounts. The product is becoming increasingly popular with business advisors and accountants, that recognise the benefits the product can offer their clients.
BidpPal Improvements
Following your feedback and a review of the performance of the previous automated lending iteration, we made a number of efficiency and usability improvements to BidPal in Q1 of this year.
Lenders are now able to configure BidPal to both invest in new opportunities on the primary marketplace, as well as purchase loan parts for sale on the secondary marketplace according to their investment preferences.
Lenders can now narrow their lending criteria to business sectors, risk categories and even postcodes and can also configure the buy feature to include loans with the BuyBack Guarantee.
Following the improvements we’ve seen a significant uptake in the adoption of BidPal by both existing and new lenders, who use the feature to reduce cash drag on their account, helping to improve their returns.
Platform Makeover
Towards the end of Q2 we launched our new look site, updating the look and feel and signifcantly improving the usability of the interface for all platform users.
The feedback from customers on the improvements made, was very positive, with many customers saying that the new interface and design improved their overall experience and was far more intuitive.
Platform Performance
The past year has been one of best years in terms of returns for lenders, amount loaned to UK businesses, as well as new lender uptake.
At the time of writing, we've funded over £15,823,660 in business loans for businesses, with 2019 being our best year since 2015.
In addition, the second half of 2019 saw a significant increase in secondary market trading, with the majority of microloans being traded at a premium, indicating strong confidence in the platform as well as strong lender liquidity.
Furthermore, we forecast that (all being well) the lifetime net return for the platform as a whole, will come in at around 8.1% return overall for the year ending Dec 2019.*
The Industry as a Whole
It's been a turbulent year, that's seen a lot of shakeup in the P2P industry. Following the closure of Lendy, the regulator was very quick to release the long-awaited regulatory changes which came into force on the 9 December.
The changes sought to better protect retail lenders by putting marketing restrictions on restricted investors, and capping the amount restricted investors can lend, to 10% of their net investable assets.
These changes required many platforms to significantly overhaul and review their business models and compliance systems to ensure they stayed compliant, ultimately resulting in a number of firms taking the decision to terminate their retail investor offering.
A further high profile administration of a long-standing P2P platform has put further pressure on remaining firms as well as the regulator to prove that they are suitable for new investors and have sufficient resources and systems and controls to protect investors in the long term.
We've worked really hard over the last seven years to develop a strong reputation among lenders and UK businesses. Admittedly, we've made mistakes along the way, but have worked hard to learn from these and improve our overall customer experience, to ensure lenders continue to receive competitive returns and that borrowers are able to get the finance that they need to continue to grow.
Looking forward to 2020
We're optimistic about what lies ahead in 2020. We've got a number of new innovations and interface changes planned for Q1 which will continue to improve customer experience.
Thank you for your support and loyalty throughout the year.
Keep rebuilding
