So, according to the ES a P2P company is in trouble

Spot on.

Just a theory, but what if the difference in rates was because one platform was taking a smaller cut than the other, passing on to investors say 3% more of the interest rate paid by the borrower, and platforms that wished to take that business asserted that the platform offering higher rates was doing so because it was more risky rather than because it was passing on more of the returns to investors?

One of the negative aspects of the business is a near-complete lack of disclosure of the percentage split of borrower total costs that is paid to lenders, denying them this key information.

So, of all costs paid by borrowers, what is the percentage that is passed on by RateSetter to lenders?

Does RateSetter agree that costs are an important disclosure to investors to help them determine whether platforms paying more or less money to lenders are doing so because there is a risk difference or because there is a competitive charging difference?

Well timed question, and yes disclosure to important:

www.altfi.com/article/1389_fees_fees_fees

"...it appears that RateSetter’s fees are genuinely lower. There is no commensurately higher borrower fee despite the lack of an investor fee.


Lastly, given that RateSetter was the only platform to turn a profit over the period, we can infer that they had a lower cost base"

I think I started asking that charges split question before the P2PFA existed.

So, according to that story, RateSetter takes 3.46% of amount borrowed. According to the RateSetter site a lender can earn up to 6.2% and a borrower can borrow at 7.5%. That's a difference betwen borrower and lender rates of 1.3% so I surmise that the appoximate average time that a Pound is borrowed for is 3.46/1.3 = 2.7 years. It also appears that RateSetter is taking as its cut about 1.34 / 7.5 * 100 = 18% of the money paid by the borrowers. That doesn't appear so grossly different from my expectations about loan terms that I question the validity of the numbers.

On the Zopa site today I see a representative example of 7.9% APR by default, for five years, and 5% used as an example borrower rate over 6 years. That's a difference of 4.9%. Which would imply that average borrowing time for each Pound lent is 3.30 / 4.9 * 12 = 6.7 months. I have difficulty believing that this is true and rather than proceeding, I will surmise instead that Zopa is telling borrowers one thing and lenders something else. If I instead use their slider to change the amount borrowed from 10000 to 7500 to match the amount in the representative example I see that the APR given is 4.8%. Again I have difficulty reconciling this with what lenders are being told - lenders are told that they get more than the borrower is being told they will pay. So again it appears that there is inconsistency between what Zopa is telling lenders and borrowers about what to expect.

However, if I do use Zopa's rate to the lender example, of 4.8% over five years, the 3.40% would imply annualised 0.68% and that Zopa is retaining 0.68 / 4.8 * 100 = 14/1% of what the borrower pays. However, given the inconsistencies, I do not believe that this number can be considered to be reliable. If I instead use the implied borrowing duration of 6.7 months, Zopa is instead taking something like 3.30 / ( 4.9 * 6.7 /12 ) * 100 = 3/30 / 2.73 * 100 = 120% of what the borrower pays. Not possible, of course.

So it appears that lenders and borrowers should favour RateSetter over Zopa: RateSetter publicity material on its site appears to be closer to telling both parties the reality about what to expect than the corresponding Zopa material.

That's an interesting assertion. As you know, the normal expectation in financial services where the FSCS provides cover is that the rest of those in the sector are expected and required by law and regulation to pay for those who do less well and fail.

I'm far from sure that I would support any assertion that the members of what seeks to be an organisation of responsible players should take the view that it is better to break the usual expectation that consumers have of financial services markets as a whole.

Rather, it is likely that I would take the view that the major incumbent members of the organisation chose to act in a way that would be most likely to inhibit competition in the sector, by acting to make it more likely that the level of regulation and hence regulatory costs would be increased, to their benefit and to the detriment of new entrants. And to the detriment of consumers.

And for that and other reasons, I would probably seek to lead condemnation of the P2PFA and its members for failing to act in the responsible manner expected of major firms in the financial services sector.

I agree, it's not possible to tell for Zopa. And Zopa has been consistent over the years in refusing to tell lenders how much they are losing from their returns in costs for the service it is providing to them.

I don't know if this is the platform referred to by Mr. Hilton, but interesting (and not the platform i was primarily expecting):


www.trillionfund.com/StaticPages/FAQ.aspx 


Why is Trillion not offering any new renewable energy projects?



Most renewable energy projects in the UK are dependent on subsidies to provide returns to lenders. The level of subsidy is dropping rapidly and it is not clear what projects will be seeking funding going forward. As a business, Trillion incurs significant costs in marketing new loans and the Board has decided it is not prudent to continue to offer loans without visibility of future funding and project opportunities.



What direction will the business take in the future?



The board is preparing a revised strategy which will focus on continuing the white-label, technology and crowdfunding administration services currently provided by the business or alternatively pursuing a sale.