LFP112 – FCA Proposes Undemocratisation: Taking the “P” Out of P2P with Ryan Weeks Editor AltFi News

You may not be rich, you may not be “sophisticated” but what kind of Stalinism is it that means The State can order you re what you can and cannot do with your money?!?

The entire ethos of “P2P” – the heart and most successful sector of Fintech – was connecting ordinary people, enabling lenders and borrowers to meet via the internet and both get a better deal than they would going through the megabanks.

Now if current FCA proposals go through this is all but dead – Ordinary Joe can keep borrowing (the system loves people being indebted) but the lending will only be unrestricted for Ingsoc Party members (“rich”, “sophisticated”) – Ordinary Joe will be capped at 10% of his investable assets.

It is also a constitutional outrage. The FCA’s job is to regulate platforms and ensure the bad/dodgy ones get shut down. The FCA is undemocratic and unelected – unlike our MPs we cannot vote them out of office – how dare they “regulate the people”? Regulating the people is something that ought to go through parliament not an office in Canary Wharf.

This topic undermines everything we have seen since the Magna Carta in 1215 became the first piece of legislation to limit the arbitrary power of the monarch.  Are we to return in this area to early Medieval Monarchical powers?

Ironically it was the UK’s Zopa that invented the UK globally. For a long time the UK State as a whole was highly supportive of Fintech and P2P. Now with government distracted, over a dozen years of success (&the records of the leading platforms have been far far better than bank returns for a diversified portfolio). Now only Party Members can fully avail themselves of these excellent returns. “To them that hath shall more be given”.

Ryan Weeks is the editor of AltFiNews the longest running AltFi news site, a real insider in this area. He is also the host of the successful Millennial Money Matters podcast and author of a best selling book as we shall come on to.

He joins us to discuss the Proposals in the round. Its a long document after a long consultation. Some proposals are sound, some so-so but this one is just plain wrong.

We all make mistakes and these are proposals. I call on the FCA to rethink this marketing restriction proposal. Already we have seen plenty of platforms changing from being P2Ps to avoid increasingly Draconian legislation. Already we have seen institutional money flooding into the sector. The whole purpose of the Fintech revolution was to make FS something of the people for the people. Let us keep it that way.

Topics discussed on the show include:

  • Millennial Money Matters (on iTunes)
  • The phase change in people/society – those who grew up pre-internet, those who grew up post-internet and those who grew up post social media
  • Ryan’s novel Pimple currently getting an astonishing and impressive 20/20 5* reviews on amazon
  • researching his book
  • the history of P2P in the UK including the introduction of regulation in ~2016
  • the current “post-implementation review”
  • the disincentive for leading P2P firms to dare to oppose the regulator strongly
  • game theory regulators vs industry in general
  • how the topology of what used to be called “P2P” has decomposed into different regulatory segments
  • FCA proposals are 156pp long
  • relative impact on Ratesetter who are 100% retail and others who are more institutional (eg Funding Circle is now down to 31% direct individuals in their P2P model – the rest institutions, funds, etc)
  • the main problem is that the FCA proposes to apply the same criteria to P2Ps as apply to the super-risky equity crowdfunders. This is crazy as the chance of losing all your money in the latter is super-high, in the former (as long as diversified) super-low
  • P2Ps will have to ensure that their marketing only targets Ingsoc Party members and no longer can be aimed at The People
  • plenty of Joes already have >10% of their investable assets invested in P2P. Will The State force them to sell?!?
  • Ryan covers the historical position of the government which has led people to invest in P2P on a long term basis. This rug is now to be pulled from under their feet?
  • “This almost feels duplicitous”
  • “It feels like they are withdrawing access to ordinary people”
  • the timing of this move just as the industry is getting to scale and the first P2P is floating
  • the regulator should rather move against the bad eggs rather than regulating the people
  • the process of consultation going forwards
  • the consequence for regulators of over-using their powers in terms of generating strong push-back against them – cf the very changing regimes of regulators who have come and gone in the UK in the past 30 years
  • the category error of lumping equity and debt platforms together – the impacts of this on public perceptions of relative risk
  • our shock at doing this and how the report gives a free pass (effectively) to equity crowdfunding which we, as insiders in this whole area, find astonishing..
  • one of the good areas of the proposals is the focus is on how platforms portray their returns – the bank interest rate on an account is the rate you will get; with P2Ps its an estimated return – how to be clearer about this
  • three types of platform in the regulation:
    • conduit
    • pricing
    • discretionary – becoming most prevalent
  • how the government’s distraction on Brexit relates to this
  • the Friends of AltFi facility
  • AltFi’s November seminar in Toronto
  • AltFi’s research product
  • Ryan’s next book

And much much more 🙂

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