Peer-to-Peer Finance Industry Calls for Regulation
Leaders in the peer-to-peer finance industry have today called on European and UK policy makers to provide greater regulatory clarity to boost the development of the alternative funding market. Their open letter coincides with a summit in London, facilitated by entrepreneurial law firm Keystone Law and The Finance Innovation Lab, for members of the industry to meet officials from the UK and the European Commission to discuss the appropriate regulation of peer-to-peer finance in more detail.
Economic growth is dependent on improving access to finance for entrepreneurs and SMEs. And with banks reluctant to lend, alternative finance options have never been more important. Peer-to-peer finance platforms enable the effective flow of money from savers and investors directly to individuals and small businesses, reducing funding costs and improving returns by cutting out the ‘middleman’.
But peer-to-peer platform operators have found that EU and UK regulations do not fit with alternative finance models, slowing the development of the market. In calling for a new regulated activity of “operating a direct finance platform” for loans and investments, the industry recognises that rapid growth brings with it the obligation to behave responsibly and properly manage the operational risks.
Simon Deane-Johns, a peer-to-peer finance expert and Keystone Law solicitor who co-organised the summit said:
“It’s great to see the industry has united to further explain the need for regulation to enable the growth and development of this efficient new funding model. Since co-founding Zopa, I’ve been aware of a strong appetite for innovation and competition in the provision of financial services to savers, investors and those seeking to borrow or raise funds. And as a lawyer in this area I’ve learned first-hand that it’s unrealistic to expect new business models to thrive under rules designed for banks and traditional investment firms. The nature of the regulation proposed will provide the certainty and the controls essential for peer-to-peer finance to grow responsibly.”
Chris Hewett, Fellow of The Finance Innovation Lab, and co-organiser of the summit said:
“The peer to peer industry is a great example of financial innovation that benefits society and the real economy, and the industry actively wants to be regulated to demonstrate its commitment to responsible finance in order to grow consumer confidence. It is surprising, therefore, that so far the government has refused to provide any regulatory framework, thus stunting the potential for growth. This summit will raise the profile of the issue with policymakers and provide a forum for detailed discussion over how proportionate regulation can be designed.”
The event on Friday 7 December is being attended by senior peer-to-peer industry figures, including Giles Andrew of Zopa, Darren Westlake of Crowdcube and Jeff Lynn of Seedrs, as well as key policymakers from HM Treasury, Department for Business, Innovation and Skill, FSA, Cabinet Office and the European Commission. A number of these individuals will be speaking at the event and the morning panel debate is being chaired by Stephanie Flanders, BBC Economics Editor.
The submission of the letter and the summit are part of a wider set of events in Paris, Warsaw, Berlin and elsewhere, being held for European Crowdfunding Week (Dec 7-14).
[box type=”download”]You can download the letter here.[/box]