The Innovative Finance ISA or IFISA has been heralded by many in the P2P lending sector as a boon for the industry. Investors now have the ability to participate in P2P loans while benefiting from the tax deferred nature of ISAs. Yet the Financial Conduct Authority has been slow to approve many peer to peer lending platforms leaving many platforms in limbo. According to a recent FT article, there are 22 platforms approved, or in the queue, to receive FCA approval to offer the IFISA but one fund manager was quoted on the fact that smaller platforms have received regulatory certification prior to many of the larger platforms. According to the article, the individual said, “it was ‘kind of bizarre’ that smaller companies with a shorter record would be able to launch an ISA before more established companies.”
Stephen Findlay, CEO of BondMason – a platform that works with a number of P2P platforms that pass their due diligence process, cautions against assuming a platform with FCA authorisation is wholly reliable.
“Just because a platform has FCA approval and is approved to offer an ISA it doesn’t guarantee quality. When investors are looking to deploy capital across P2P platforms, FCA authorisations will serve as a ‘badge of trust’, but even though a platform is FCA regulated that doesn’t guarantee good loans or good returns to lenders.”
BondMason enables investors the ability to easily diversify across a portfolio of online lending platforms and assets. According to their websit, BondMason can allow an individual to “effortlessly earn” 7.0% net return. BondMason is also one of the platforms waiting for FCA approval to get the “green light” to offer a bespoke IFISA.
“We look forward to continuing to support the FCA and hearing the outcome of their review into direct lending later this year, but frankly, regulation should not be solely relied upon to protect the industry. It also requires market participants to do their bit to ensure the highest quality and a responsible attitude towards investors and client money. At BondMason, we work together with the leading players to develop best practices – we’d like to see the same with other providers.”
Industry insiders have expressed their frustration with the approval process and the FCA is widely known to be a bit pressed on the resources necessary to expedite things. Simultaneously, some of the larger platforms have more complex lending platforms that may require more detailed scrutiny from the regulators. Basically, a smaller online lender may be easier to review.
Regardless, the FCA is churning through the approval process and by this time next year, the delay will be a distant memory for all platforms.