Many people are celebrating the wonderful things that crowdfunding and peer-to-peer lending can apparently do in financing small and medium enterprises, especially given that the banks have gone on strike as far as small businesses are concerned.

But one cannot but wonder if this celebration is a bit premature – that what we are in fact witnessing is a slow-motion car crash in which thousands, maybe tens of thousands, of people will suffer a horrible investment catastrophe. As the banks retreat from doing what they exist to do – lend money to, among others, small businesses – crowdfunding is one of the many new funding vehicles that have emerged to fill the vacuum.

This form of lending may be the new best thing in retail investments, but with a lack of proper regulation and a thick fog where due diligence should be, one wonders if many of these investors are buying a pig in a poke.

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On the other hand, crowdfunding fills a gap in the financing of start-ups and technology innovation. It is risk-taking at its most interesting, encouraging young and dynamic people to follow their dreams. It also meets the needs of investors looking for higher returns in a low-interest environment.

However, there ought to be an element of caution since crowdfunding and peer-to-peer investors do so dangerously, without taking any independent financial advice. Furthermore, their investments do not come under the umbrella of the Financial Services Compensation Scheme. One lender, Zopa, is reported to have lent £670m to 110,000 people, which is substantial for short-term, unsecured lending.

The reported returns on investments attract some of these investors, who jump at the chance to make higher returns than the measly sums they get from banks.

As April approaches, and deferred pensioners over the age of 55 have access to their entire pension pots, it is imperative that the City regulator climbs off the fence with its mixing and matching light-touch regulation, and bring all crowdfunding and peer-to-peer lending under tighter control.