Can P2P Lenders Offer Better Banking Futures?

hard working smes demand better banking: can p2p lending help?

Crowdlenders are flexing their muscles on news that businesses want a better deal from banks. Can they seize the day and change SME lending for the better?

Another Crowd looks into the new Banking Futures report, which is creating a stir.

What is the  'Banking Futures' project?

Here's how the leaders of the project explain it on the Banking Futures project website.

"BankingFutures was a multi-stakeholder, structured dialogue designed to support the creation of a healthy, resilient and inclusive banking sector in the UK. It was run in partnership by Leaders’ Quest and Meteos, two non-profit organisations committed to improving the role of business in society,

"The reform of UK banking offers a unique opportunity to rethink what we need from the financial sector.

"To this end, Meteos and Leaders’ Quest ran the BankingFutures project to explore how to build a healthier, more resilient and inclusive banking sector. BankingFutures’ work on long-termism on the capital markets was run in conjunction with the Investor Forum."

What do businesses think?

The Federation of Small Businesses (FSB) praised the report, and called upon its members, and all banks to support its recommendations. In particular, the FSB asked that:

  • All banks to sign-up to  the Lending Standards Board (LSB)’s standards of practice for business customers 
  • Government should enhance the role of the British Business Bank (BBB), providing it with resources to undertake data collection on the supply of, and demand for, SME finance. FSB is calling for this research to take place at a regional level to support access to finance for small firms in all areas of the UK.

Mike Cherry, FSB National Chairman, was quoted in several outlets: “The LSB’s standards offer a win win for the small business community. Signatories are instantly more attractive to potential customers and small firms can rest easy when agreeing terms with adherents.

“We need to create an environment where small businesses are fully aware of all the finance options available to them and understand exactly what they’re signing-up to when they take out a loan. Information asymmetry is, quite simply, bad for business.

“With Brexit talks underway, we must ready the BBB to replicate the critical support that the European Investment Bank and European Investment Fund have provided to small businesses in recent years. The £400m boost for the BBB’s support of finance markets unveiled in last year’s Autumn Statement was welcome, but it will need further resources if we’re to see an improvement in the ability of small businesses to access finance.”

How can peer-to-peer lenders benefit?

The BankingFutures project is not specifically about peer-to-peer, alternative finance, or fintech. When we looked at the names of those involved in the report, and their institutional affiliations, (the list is appended at the foot of this article) the new generation of banking and financial services were conspicuously absent.

Money&Co picked up on the story, as did P2P Finance News. Both saw the study's findings as a business opportunity for the peer-to-peer sector, and both of them emphasised the strong response from the FSB.

Another Crowd recommends

We suggest three areas in which peer-to-peer lenders could align themselves with this initiative:

  • They need to take the recommendations to heart.
    Simple application forms, transparent process, and quick decisions.
    We imagine this will be much easier for alt-fi lenders than old style banks.
  • Peer-to-peer lending platforms need to reach more SMEs.
    Become the first choice, lender not just when the bank says no.
  • They need to 'scale up'. The SME Funding Gap is huge.
    Have peer-to-peer lending platforms got the funds to fill it?

Download the report

Banking Small Businesses: forging closer ties between banks and the real economy

BankingFutures Real Economy Action Group participants

Tony Baron, Chair of the Treasury Policy Unit, FSB
James Cliffe, Head of Business Banking UK, HSBC
James Corah, Head of Ethical and Responsible Investment, CCLA
Tony Greenham, Director of Economy, Enterprise and Manufacturing, RSA
Will Hutton, Principle, Hertford College, University of Oxford & Chair of the Steering Group, Big Innovation Centre
Neil Johnston, Chief Executive Officer, Paddington Development Trust
Martin McTague, Policy Director, FSB
Marloes Nicholls, Innovation Programme Manager, Finance Innovation Lab
Steve Pateman, Chief Executive Officer and Director, Shawbrook Bank
Stephen Pegge, Group Competitive Markets and Business Policy Director, Lloyds
Rebecca Pritchard, Head of Business Banking, Triodos Bank
Nick Robins, Co-Director, Inquiry into the Design of a Sustainable Financial System, UNEP
Jennifer Tankard, Chief Executive, Responsible Finance
Stephan Wilken, Managing Director, Head of Enterprise and Model Risk, Deutsche Bank AG