Yesterday the NACFB announced that they have lifted of P2P (Peer to Peer) lending caps for its membership, presenting new onbarding challenges for providers and brokers.
Prior to yesterday’s announcement, the professional indemnity providers had placed limits on broker’s exposure. The belief was that peer-to-peer platforms placed onerous terms and conditions on repayment terms. This of course rang alarm bells, with brokers potential exposure to charges of mis-selling poorly understood products.
On the surface, this sounds like a transformational deal. As recently as last autumn, coverage across the newswires was that P2P lenders were closing their investing books as they were oversubscribed and struggling to find borrowers. Equally, brokers in the commercial space are always looking for new ways to offer competitive rates and products to their increasingly sophisticated clients.
For all of the numbers that have been suggested, there will inevitably be challenges and a bedding-in period that will see two different cultures come together.
Technology is likely to be a key challenge. A recent event held by the Legal & General Mortgage Club included a panel of industry experts taking questions from the delegation of brokers. Although this was a residential focused discussion, the core subject was a familiar one, technology. The overriding theme was one of brokers calling for more tech investments by funders.
More Technology, Please
The response though was one of muted awkwardness. The funders in the panel showed good intention, the underlying mood though was concerned with compliance to ever-shifting regulation and the watchful stare of the regulatory bodies. From the brokers perspective, new technology is a double edged sword – it will make them more efficient but it reduces valuable face-time with customers. In the commercial space though, the evidence suggests a more conservative approach to technology, more pragmatic perhaps.
Residential advisers have the luxury of sophisticated sourcing tools and back office systems, whereas commercial counterparts rely on relationships with funders to secure the most suitable deals for their clients. Whilst residential advisers face the spectre of so-called ‘robo-advice’, many commercial intermediaries are still churning paper. Often when asked about technology, the first line of defence for brokers is, ‘are the funders using it?’. That’s a telling measure of their appetite for innovation.
Where commercial funders talk about fast turnaround times, they’re mostly saying that they watch their inbox carefully. They’re not innovating with technology that provides for anyone outside of their four walls and often have strict document submission rules around document specification and protocols.
To be clear, to work with a peer-to-peer lender is first and foremost a technology play. Given that many of the lenders on the platforms are now institutional lenders providing the same funds through a new vehicle, then the only difference is the delivery. As a technology innovation, P2P platforms have customer access portals where forms and documents are distributed, actioned and completed, it’ll be interesting to see how the brokers find space for themselves in that cycle.
Software as a Service
An effective piece of technology in the intermediated lending space is Shuttle, created by David Williams and his team. The delicate balance between informing all interested parties, maintaining security and integrity in the documents is a key focus for the Shuttle offering.
Software as a service or SaaS as it’s more commonly known has become the chosen model for many companies across the breadth of industry and commerce for its ease of adoption, affordable pricing and range of integration options with legacy systems. It’s also the delivery model for Shuttle, of which David Williams says, “modern development methods mean that costly, drawn out technology adoption is a thing of the past. Now we build intelligent modules that address specific business challenges and work seamlessly with the existing stack”
There is little doubt that creative, adoptive brokers will be keen to pursue the wider opportunities now available in peer-to-peer lending. We’re interested to see how the lenders adapt their delivery and fulfillment models to meet the demands of this new, growing channel of business.