The peer-to-peer industry received a boost this week, when former regulator Lord Turner said it is likely to become a stable, significant and useful part of our credit system and that platforms could “do well established forms of credit analysis as well or better than the incumbent banks".
The comments, which were covered in the Financial Times (subscription required), were part of his talk at LendIt, the world’s largest peer-to-peer conference, which took place on the 10th and 11th October in London.
A U-turn for Adair Turner? And why does it matter?
Adair Turner was head of the FSA from 2008 until its abolition in 2013. He made headlines earlier this year with some very unflattering remarks that questioned the capacity of peer-to-peer lending platforms to make prudent credit decisions (if you need a reminder of what he said, check out our February news round-up for the details).
“Remarks were taken out of context”
It turns out that Lord Turner’s views on the industry are far from what he was quoted as saying earlier in the year. In fact they were taken out of context and were made after he thought the interview was over.
And, he said on stage at LendIt, the good outcome was that this spurred him to find out more about the industry and its practices, and he outlined his thoughts in his talk, which you can watch in full on YouTube.
Here are the key points from his talk:
- P2P lending is stable and secure
Lord Turner’s February comments called in to question peer-to-peer platforms’ abilities to perform adequate credit risk management. However, this comment wasn’t about the highly sophisticated credit checks and analysis performed by companies like Zopa, and at LendIt he clarified that he believed peer-to-peer lenders might be able to “do well established forms of credit analysis as well or better than the incumbent banks, and they can certainly aspire to provide better customer service”.
- Our technology and customer focus are better than the banks
He commended our tech and customer focus, something he contrasted with the legacy IT systems of traditional banks and their aim to be all things to all people.
- P2P could play an important role in the resilience of the world economy
Finally, he explained the systemic benefits of peer-to-peer, in providing a diversity of lending sources. Something he said could provide a “spare tyre of credit” in the economy and reduce the likelihood of a credit crunch.
You can watch his talk in full on LendIt’s YouTube channel.
Picture credit: LendIt Europe official pictures