Funding Circle has permanently barred new investors from its retail platform, the business lender announced Thursday (March 10).
As the Financial Times reported, the decision was announced as the company shared its results, and is an indication of how the peer-to-peer (P2P) lending sector has struggled amid stronger oversight from regulators and the results of the pandemic.
\”There's been a big shift; the industry have reduced severely,\” chief executive Lisa Jacobs said, adding this have been \”quite a difficult decision.\”
P2P lending has faced regulatory crackdowns in the U.K. in recent years, with the Financial Conduct Authority (FCA) unveiling tougher rules in 2022.
\”We believe that loan-based crowdfunding can play an invaluable role in providing finance to smaller businesses and individuals, but it's necessary that regulation stays up to date as markets develop,\” the FCA's Christopher Woolard said at that time.
The pandemic didn't help either, with capital markets declining and retail investors withdrawing funds.
Jacobs said Funding Circle's retail investment declined 80% because it was halted in March 2022 to focus on government loans, and now made up under 5% of loans under management.
With this move, Funding Circle joins other P2P lenders in exiting the marketplace. Included in this is Zopa, considered the very first P2P lender, which exited the market this past year after you have a banking license in the U.K. in 2022.
Last year, Funding Circle announced the debut of their first payments facility, FlexiPay, a buy now pay later (BNPL) option that lets businesses make installment payments over 3 months for any U.K. invoice or supplier payment.
FlexiPay uses Funding Circle's Instant Decision Lending program, which analyzes risk models, shrinks application time for you to about six minutes and gets to financing authorization inside of nine seconds. The organization said we've got the technology serves about half its term loan borrowers.
