Figures showed 42 companies now have full permissions from HM Revenue & Customs to offer the Innovative Finance Isa, which lets investors tap into alternative types of investment such as peer-to-peer lending.
But just 14 of the Isas are currently on the market, of which eight are offered by peer-to-peer providers, data compiled by P2P comparison service Orca revealed.
By the time the new Isa launched last year, just eight out of 86 peer-to-peer providers were fully authorised, and HM Treasury later admitted the Isa had got off to a slow start.
Stuart Law, founder of P2P platform Assetz Capital, described the Isa launch as “a bit of a damp squib”, adding: “Frankly, it may as well not have started.”
While some smaller peer-to-peer providers now have full Isa manager status, the bigger firms, including the likes of Zopa and Ratesetter, are currently working with the FCA to get full authorisation.
A lot of advisers have incorrectly taken this as indication of the weakness of the underlying asset class and platforms. Jake Wombwell-PoveyMr Law admitted he was relieved that the bigger players had not been fast-tracked by the FCA, but said these larger platforms now need to be authorised to create a “meaningful effect”.
Assetz Capital has not yet received full permissions, which Mr Law said was “not holding the business back”, but added: “It’s not making us as competitive as we could be.”
Iain Niblock, chief executive of Orca, admitted there has not been the growth that many expected, but said this will be “back on track” when more Isas are launched.
The FCA has had to process a backlog of authorisations after its remit was extended to cover consumer credit firms back in 2014, adding an extra 30,000 companies to its books.
However, Mr Niblock said the industry has been left wondering why the big three P2P providers have still not been given full permissions, suggesting perhaps the complexities of their business models have caused the delays.
“It’s clear that the smaller P2P providers have simpler business models, meaning it could be quicker to get authorised.”
Advisers have also been reluctant to recommend the Isa to clients, citing high risk as the biggest concern.
But the Orca boss said the launch of the Isa has given the P2P sector more credibility, and said his business had seen increased interest from financial advisers.
Jane Dumeresque, chief executive of P2P lending platform Folk2Folk, which is now fully authorised and plans to launch its Isa before the end of June, said delays should be considered on an individual basis as each provider has a different set-up.
“I don’t think the delays are having any real impact on the industry in terms of growth,” she said, pointing out that some platforms have had to pause capital coming in.
“This suggests that demand on both loans and lending is still very high, and I expect this to increase over the next 18 months as more platforms launch their Isas.”
Jake Wombwell-Povey, managing director of P2P platform technology provider Goji, said the delays to authorisation will cause a “short-lived pause” in the uptake of the Isa.
“We have already seen this happen, and a lot of advisers have incorrectly taken this as indication of the weakness of the underlying asset class and platforms.
“When some of the bigger platforms receive authorisation and the number of Innovative Finance Isas surge then people’s opinions may change.”
katherine.denham@ft.com
