The New 'Access' and 'Growth' type products

The key characteristics of the Flexible Product are:



(a) Your money will be invested in loans for terms from 2 months up to 5 years

(b) You can sell your loans and withdraw cash with no early access fees, provided we can find new investors to purchase your loans

(c) You will not be able to make any new lending offers for a period of 28 days after selling loans within this product

Matthew , could you please clarify what happen to the accrued interest when you sell a loan part in the flexible and growth product?

Leaving aside the concerns I've raised already re: the PF, I'm a bit surprised they've moved in the direction of making lending more easy access. Although I can see how it'd be more appealing for some investors, I'd been half-expecting platforms such as this to move in the other direction to be honest. They'll now introduce the potential for a run on their funds, something I'd imagine other platforms are a bit nervy about with No-Deal Brexit possibly on the horizon.

I suppose the other benefit for them in the medium term is that they can probably get away with offering 3.5-4% a'la RS rolling on this product, and improve their margins a bit.

Still, a funny time to do it IMV.

Hi r00lish67

Just to provide some clarity on the reasons for the product change, these include:

- Providing a more accessible option for new investors (minimum 3 year term with exit fees deterred many customers from getting started)
- Removing term-based liquidity issues (the previous products restricted our lending on loans up to 3 years as the 3 year investment product was becoming significantly less-used than the 5 year product)

In our opinion, there isn't really an increased risk of a 'run' with this product - if we are ever in a situation where investors are withdrawing on mass, due to some extraordinarily negative event, I'm not sure a 0.5% fee would prevent investors exiting. On a side note, a traditional bank run is technically not possible with 1-2-1 matched contracts i.e. it's slightly different to a bank not holding sufficient funds to satisfy withdrawal requests from depositors. Instead, P2P investors would simply be required to wait until loan repayments are made to draw down their investment. The obvious risk here though is in relation to new investments/reinvestments drying up, which would restrict new lending/damage revenue etc.

Thanks

Hi zlb

Thanks for your post. 

With both products, Flexible and Growth, there is a requirement for investors to be available to purchase your loans. There is no mechanism for a buyback guarantee, so as with most investments of this nature, you should be prepared (in non BAU circumstances) for it to be longer term i.e. not instant access. If you absolutely need guaranteed access to your funds, then I would say P2P is probably not the right home, for that money at least. The Flexible product provides flexibility in that you can enter and exit your investment without penalty, in whatever timeframe suits you, but this as mentioned above is not guaranteed. We've never had a situation where a loan sale/withdrawal has taken longer than a day or so, but that's not to say it could never happen.

Regarding the Shield/PF - probably best to review the other thread on this topic, but in high-level terms we are continuing to strengthen our risk, credit and underwriting teams, our credit modelling and de-risk strategies and are regularly reviewing Shield contributions, both from new loans and from the spread on the existing portfolio, to bring coverage levels into line with where our long term intentions are. As mentioned in the other Shield thread, the Shield is a fluid mechanism rather than a static one, so we will continue to manage coverage levels on an ongoing basis.

Many thanks