Mainstreaming social finance: The regulation of the peer-to-peer lending marketplace in the United Kingdom

Abstract

The paper provides one of the first political economy accounts of the regulation of peer-to-peer (P2P) lending in the UK, drawing on interviews with platforms representing the vast majority of the market at the beginning of the regulatory process. The article links the regulation of P2P lending with debates about regulatory capture. It challenges conventional understandings of its consequences by showing how the regulation of P2P lending displays characteristics of regulatory capture, but appears to have realised several aspects of regulators' visions for a 'socially useful finance', rather than facilitating the kind of rent-seeking behaviour that has been identified in the case of other areas of finance. P2P lending is found to represent one of the latest forms of consumer and small business finance that works towards so-called 'financial inclusion', with ambiguous social outcomes that necessitate further critical investigation.

Survival or die: a survival analysis on peer‐to‐peer lending platforms in China

“…Originating in the UK before then spreading to other countries, peer‐to‐peer (P2P) lending refers to online loan auctions where individuals lend money to other individuals without the intermediation of a bank or other traditional financial institution. Albeit that the concept of private loans is not a new business model (Rogers and Clarke, ), what makes online P2P lending a young phenomenon is a transfer to the Internet using online P2P lending platforms. It can be considered an example of financial markets undergoing disintermediation driven by information technology (Lin et al ., ).…”

Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing

“…Similarly, businesses may play off regulators against each other. A potential result of such activities is that some of the resulting regulation may be formed based on intellectual capture that privileges well-resourced interests resulting in collusion between powerful actors and institutionalized rent-seeking [17]. Conversely, a larger supervisor may be less dependent on and more distant from the supervised entities and therefore less prone to capture [15].…”

“…The GFC highlighted how regulatory responses in a crisis do not necessarily create systemic stability and that powerful financial actors have been able to intellectually and politically capture regulation in order to make profit [17]. Financial regulation can be said to be captured when a subset of actors, usually powerful elites, are able to strongly influence, if not determine, the regulations to which they may be subject [57].…”

“…Capture may be more likely in situations where the issues have low political salience, have a technical character (as most fintech does), and where there has been a relatively narrow supply of regulation [17]. In such situations, new products will often start off with a degree of self-regulation of their emerging market.…”

Platform lending and the politics of financial infrastructures

“…First emerging in the mid-2000s as a form of 'social finance', online lending platforms are increasingly significant players in finance (Aitken 2015a;Rogers and Clarke 2016). As a working group of the BIS and FSB (2017: 1) advises, official data on platform lending, what it calls 'FinTech credit', is limited primarily because quantitative analyses of alternative finance in general tend to be based on disclosures from platforms themselves and nonofficial sector surveys.…”