P2P firms can thrive on robust business strategy and risk controls

Research by Bovill shows that high numbers of those who applied to be authorised as a P2P firm have withdrawn their applications in recent years. Frank Brown argues that P2P players need the right business strategy and an effective control framework, not only to get established in the industry but also to endure.

Frank Brown is a managing consultant and head of risk and transformation at financial services regulatory consultants Bovill (www.bovill.com). Contact him on enquiries@bovill.com ‘attention Frank Brown’.

In December last year at Bovill, we conducted analysis that showed a marked slowdown in the application process for P2P authorisations. Reasons for this were twofold. Firstly, there was reticence for new firms to enter the market in the back end of 2019, just as the Financial Conduct Authority was introducing significant, and potentially market-altering, regulation. Secondly, in light of a number of high-profile cases of peer-to-peer platform failures, the FCA is scrutinising any application to the P2P sector to ensure the underlying business model and risk controls are robust. As a result, applicants to the sector are having to take more time in the preparation of their submissions and in some cases they are being compelled to withdraw their application, either through the firm’s own volition, or because of the regulator’s decision.