Peer to Peer platform failure

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  • badger09
    badger09 Posts: 11,211 Forumite
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    edgex wrote: »
    Where do the platform revenues come from?

    ZOPA used to charge a fee to both lender & borrower. I assume that's still their charging model.
  • edgex
    edgex Posts: 4,177 Forumite
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    badger09 wrote: »
    ZOPA used to charge a fee to both lender & borrower. I assume that's still their charging model.

    So if a borrower defaults, I assume they won't be paying any more fees.
    & it's unlikely that they will be accepted as a borrower again (or they've defaulted because they've gone bust)

    If a borrower doesn't default, & starts doing financially better so that they can access normal financing, then they won't be using P2P.

    Both of those lead to a shrinking customer base > shrinking platform revenues
  • Albermarle
    Albermarle Posts: 22,158 Forumite
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    Where do the platform revenues come from?
    Usually the borrower pays various fees and there is a spread between the interest rate the lender gets, and what the borrower has to pay .
    I think at Lendy , some riskier borrowers were paying over 20% , whilst 12% was usually the max for Lenders. However this brings two issues ; 1) the Lenders were not normally aware what the borrower was paying, and therefore not aware of how risky the loan was or how desperate the borrower must have been ( or not legit ) .; 2) Any borrower paying >20% is always going to struggle to repay , so a default is almost inevitable .
  • masonic
    masonic Posts: 23,277 Forumite
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    Quite often there is a high up-front fee, and a smaller ongoing fee that is charged against interest. Platforms are therefore incentivised to originate as many new loans as possible to maintain their income stream, with only a reputational incentive to ensure these loans are of a suitable quality. Defaults are of course inconvenient, but as long as the platform can convince punters to stump up the cash to write new loans, all is well. Until there is a crisis of confidence and the house of cards collapses.
  • itwasntme001
    itwasntme001 Posts: 1,145 Forumite
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    Bravepants wrote: »
    Lendy has recently gone into administration. I have about £700 stuck in there.


    And those loans are mostly asset backed property loans. Lendy had recently won an incompetenecy claim against a valuer for one of its loans. P2P is all a bit hit and miss for my liking.


    Yeh its game over for P2P. I would strongly not recommend P2P to anyone, its just not worth it.
  • MrO123
    MrO123 Posts: 5 Forumite
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    I would say i am invested in ratesetter and have had good experiences. Cash out of the rolling fund has been fairly quick and they have a back up fund.. I would not suggest putting in anything you cant afford to lose though.and i have reduced my exposure slightly. I feel they are one of the safer p2p. Some seem really risky, . There are some promo offers to invest which can make the return much higher if you are new to a site.

    Risk free (ie bank up to 85k) Interest rates seem to be dropping, and so the extra interest is supposed to "compensate" you for the extra risk. So the compensation is getting larger, but the current economic climate is making the risk increase.
  • itwasntme001
    itwasntme001 Posts: 1,145 Forumite
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    MrO123 wrote: »
    I would say i am invested in ratesetter and have had good experiences. Cash out of the rolling fund has been fairly quick and they have a back up fund.. I would not suggest putting in anything you cant afford to lose though.and i have reduced my exposure slightly. I feel they are one of the safer p2p. Some seem really risky, . There are some promo offers to invest which can make the return much higher if you are new to a site.

    Risk free (ie bank up to 85k) Interest rates seem to be dropping, and so the extra interest is supposed to "compensate" you for the extra risk. So the compensation is getting larger, but the current economic climate is making the risk increase.


    In my view none of the platforms i have seen or have been invested with offer rates that are worth the risks involved. I would avoid P2P entirely especially now.
  • quirkydeptless
    quirkydeptless Posts: 1,219 Forumite
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    I've only dabbled in P2P for the sign up bonuses which made the risk of not getting my investment back worth taking - £1000 in Ratesetter for £100 (which I've received and now down to £30 there), £2000 in Growth Street for £200, and £500 in Kuflink for £100
    Retired 1st July 2021.
    This is not investment advice.
    Your money may go "down and up and down and up and down and up and down ... down and up and down and up and down and up and down ... I got all tricked up and came up to this thing, lookin' so fire hot, a twenty out of ten..."
  • agent69
    agent69 Posts: 343 Forumite
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    edgex wrote: »
    So if a borrower defaults, ...... it's unlikely that they will be accepted as a borrower again


    If only! When a borrower defaults on one platform the rest will be queuing up to give them money.


    There appears to be a common pattern in P2P. A platform gets a honeymoon period for a couple of years after starting, when everyone loves them. Then the sticky brown stuff starts to hit the fan, when loans start defaulting. It happened with Lendy and Collateral, and now it appears to be MT's turn. Their RCC loans have just gone pop, with the normal associated horror stories.


    • documents pledging security may have been fraudulently signed
    • nobody carried out an HPI check on a Ferrari that was offered as security. A third party claims they have first call on it.
    • A boat was offered as security, but again there were disputes over ownership and a third party was allowed to take it away.
    And to put the icing on the cake we have the all too familiar "the company director is too ill to talk to anybody"
  • masonic
    masonic Posts: 23,277 Forumite
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    Indeed, past defaults and/or criminal convictions seem to be what drives many borrowers to take out P2P loans. Other financial companies wouldn't touch them with a barge pole and they are reliant on finding a lender who lacks the qualifications and experience to see through them.
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