The FT is reporting that P2P lender Wellesley looks to be in financial trouble and has to raise more capital this year, according to its auditor, BDO. The accounts look shocking and the business has lent millions to mini-bond investors.
Neither P2P nor mini-bonds are protected by the FSCS.
This resonates with the FCA’s recent paper which highlighted poor practice amongst peer to peer platforms which I wrote about last month.
More importantly, it highlights the dilemma consumers and wider society face when seeking new and alternative means of accessing loans or investing money, where it involves going outside traditional financial institutions. It’s easy to poke fun at lumbering dinosaurs like banks and building societies, and be swayed by disruptive, tech-savvy alternatives. However, it’s hard to spot the good ones from the rogues. Many P2P lenders were given interim FCA permissions without any real scrutiny because the FCA didn’t have the resources to approve each one at the time, and probably don’t have the resources to closely monitor them now.
Even if we could eliminate the genuine bad guys, there are businesses run by people with the best of intentions, who might be great at app development, but haven’t got a scooby-do when it comes to running a bank or a financial institution.
Financial innovation is all well and good, but unless you can afford to stand in the shower tearing up £20 notes, you’d be best sticking to the tried and tested on most occasions.