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P2P consolidation predicted as hunt for scale begins

P2P consolidation predicted as hunt for scale begins

The peer-to-peer market will start to see consolidation as smaller players struggle, a regulatory expert has predicted.

Gillian Roche-Saunders, head of compliance at Bates Wells Braithwaite, predicted this would start to happen in the next couple of financial years.

She said: “This financial year the theme will be getting through authorisation and the first Innovative Finance Isa push and next year firms will try to capitalise on the results of that.

“After another financial year we will start to see some consolidation in the market.

“The business models are not hugely profitable and they have to work at scale in order to work at all and I am not sure that scale is there.”

She predicted the consolidation would take place by P2P lenders merging or buying each other, rather than by existing large companies, such as investment management firms, buying them up

Ms Roche-Saunders said any firm looking to get into P2P would need “big pockets” because they would need to build up scale, possibly by buying several firms.

The Innovative Finance Isa allows retail consumers to invest their entire Isa allowance of £15,240 in peer-to-peer loans within a tax-free structure.

It was officially introduced in April 2016, with 30 lenders now authorised to offer the product to customers.

However, as of February just seven providers have live Innovative Finance Isa offerings on their sites.

According to the P2P Finance Association, by Q4 2015 platforms had enabled lenders to provide more than £4.4bn of funds to UK consumers and businesses.

It has predicted that the sector will continue to double in size every six months.

damian.fantato@ft.com