What are P2P investors looking for in 2017?

We believe we are the only peer-to-peer lending (P2P) platform providing an overdraft alternative to businesses in the UK, and recently we opened our doors to individual P2P investors alongside businesses looking for better ways to invest their money. We reflect on what lessons we have learnt from taking on our first 200 individual lenders. 

Focus on yield

It almost goes without saying, but yield remains at the forefront of investors’ minds. With the Bank of England interest rate at a new historic low of 0.25%, and inflation on the rise, investors remain focused on the earning potential of P2P investments.  At Growth Street, investors can earn up to 6.5% AER*.  We have also provided additional incentives to early adopters in the form of a £100 welcome and referral bonus which have proved popular: a new lender that agrees to lend £1,000 for one year could earn up to 6.5% AER* in their first year with Growth Street, and even more if they refer others**.

Minimise cash drag

Of course, simply depositing funds with a platform doesn’t mean you start earning straight away. It’s been reported to us that some P2P platforms can take weeks to fully deploy investors’ cash, and some platforms (e.g. Zopa) have even turned investors away due to a surplus of lender supply versus borrower demand. At Growth Street, we usually match lender funds with borrowers in their entirety within 48 hours. This can help lenders achieve close to the advertised headline rate, as they minimise the time their money sits idle in their holding account.

Simple to use, easy to understand

When you study the evolution of P2P in the UK, it’s obvious that investors want a reliable product that is simple to use and easy to understand. We have designed the product and user interface to be clear and accessible. We continue to monitor how investors use Growth Street, and seek feedback regularly to identify ways to improve our product and processes to make investing with Growth Street hassle free.

Once activated, our investors appreciate that they do not need to actively manage their investment, as matching is automatic, and all underwriting work is performed by Growth Street’s experienced credit team.

Downside protection

A crucial part of an investor’s decision process when choosing which platform to lend through is determining the risks involved. At Growth Street, we have taken risk mitigation into our own hands as much as possible through several different mechanisms. For example, we monitor borrowers’ financial stability on an ongoing basis, rather than just at the point of application, and we provision for losses to reduce the impact of borrower defaults on lenders and to diversify credit risk across the whole portfolio, even if an investor starts with the £10 minimum amount.

Access to funds

Investors typically don’t like to tie up their cash for long periods of time if they can avoid it. Many platforms offer investors a range of loan lengths, at varying interest rates, but our customers seem to value the simplicity of just having one short loan length: 30 days. This means that investors can request to withdraw funds at 30 days’ notice. The flexibility and control that this provides is one feature of our product. If funds aren’t withdrawn, investors can set preferences to re-invest their funds automatically, minimising cash drag.

Clear communication

Investors appreciate clear communication, particularly with regards to the risks involved in P2P. At Growth Street, we have focused on making it explicit to lenders that P2P investments are not covered by the Financial Services Compensation Scheme, and that capital is at risk.  New investors must pass a short test before joining Growth Street to make sure they understand the risks involved, and that an investment of this type is appropriate for them.

* Annual Equivalent Rate.

**Terms and conditions apply. See Growth Street website for more details.

Please note that Growth Street is an investment product and not a savings account. Your capital is at risk if you lend to businesses and lending is not covered by the Financial Services Compensation Scheme. 

Growth Street Exchange Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (no. 574048).

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Investor Relations