One in four people in the UK would consider loaning money to SMEs by joining a peer-to-peer (P2P) lending scheme in 2014 when the sector will be fully regulated by the Financial Conduct Authority, according to a new study peer-to-peer lending website rebuildingsociety.com.
The research also shows that 17 per cent would consider P2P lending over the next 12 months without the need for additional regulatory protection. However, the added security should reinforce the sector given money lent through P2P is currently not covered by the Financial Services Compensation Scheme (FSCS) and lenders could lose cash if borrowers default.
Peer-to-peer lending – also known as person-to-person lending, peer-to-peer investing and social lending – is the practice of lending money to businesses or individuals online.
The study also underlines the attraction of P2P schemes to small firms as around 24 per cent believe they will struggle to access finance in the next 12 months. Given this, 16 per cent of small businesses would consider applying for a P2P loan over the next year. The research suggests the biggest obstacle to the growth of P2P lending is low awareness with six in ten (59 per cent) consumers not understanding what the term meant. Furthermore, more than half (54 per cent) highlighted a lack of knowledge as the principle reason reason as to why they wouldn’t invest in a P2P scheme, followed by the fear of borrowers not repaying the loan (46%).
Daniel Rajkumar, managing director at rebuildingsociety.com, said “This research shows P2P lending is well on its way to entering the financial mainstream with strong levels of interest from consumers and SMEs alike.
“The FCA’s regulatory oversight from next year will provide consumers with an additional layer of protection and our study shows this is very likely to boost take-up.”