10 UK-Based FinTech Startups for Higher Returns Through P2P Lending

P2P lending is a hybrid form of investment and savings that can offer higher returns than traditional methods. By locking up their money for several years in high-risk loans, P2P lenders can draw a higher rate of interest compared to corporate bonds and gilts. Targeted rates usually range from 3% (low risk) to 10% (high risk) loans. Here’s a look at 11 UK-based P2P lenders and their product offerings:

  1. Zopa, a London-based company founded in 2005, has raised $190 million in total funding. Zopa provides an online lending platform that matches people looking to invest with the people who are looking for personal loans. It has over 60,000 active lenders and offers up to 5% in average returns.

  2. LendInvest, a London-based company founded in 2013, has raised $98.5 million in total funding. It is a marketplace lending platform for residential and commercial mortgages in the UK. Lend Invest offers 5–8% in net returns per year on average.

  3. RateSetter, a London-based company founded in 2010, has raised $83.7 million in total funding. RateSetter is a peer-to-peer (P2P) lending exchange that enables people to lend and borrow money directly with each other by setting their own interest rates instead of being forced to take rates set by banks. It offers 2–7% in average returns.

  4. MarketInvoice, a London-based company founded in 2010, has raised $87 million in total funding. MarketInvoice is a peer-to-peer lender for businesses based on outstanding invoices. Market invoice allows businesses to selectively sell the invoices of large business customers to raise flexible working capital. In 2018, it delivered 4.7% in annualized returns on total funds after fees and losses.

  5. Landbay, a London-based company founded in 2013, has raised $13.2 million in total funding. Landbay is an online peer-to-peer (P2P) lending platform that offers lenders the opportunity to lend money directly to property investors. It offers 3–4% in returns.

  6. Lending Works, a London-based company founded in 2012, has raised $13.4 million in total funding. Lending Works is a peer-to-peer (P2P) lender that matches underwritten personal loan borrowers with shrewd lenders. It offers 4.5–6% in returns.

  7. Lendable, a London-based company founded in 2014, has raised $4 million in total funding. Lendable makes borrowing money effortlessly. Using technology, they have ‘trimmed the fat’ from the traditional loan application process. The result allows it to make instant decisions, offer personalized rates, and transfer funds within minutes. They look beyond credit scores, offering loans to people with less-than-perfect credit histories and charging them less than banks. It offers 10–18% in annual returns.

  8. Candex, a London-based company founded in 2010, has raised $3.5 million in total funding. Candex is an enterprise payment startup that enables businesses to engage, track, and pay for various services. It leverages a private blockchain to help businesses ensure compliance and streamline their financial system records.

  9. CapitalStackers, a Stockport-based company founded in 2013. CapitalStackers offers an online P2P lending platform for real estate investment and development. It provides financial modeling, analysis and professional advice from different external firms for values, cost consultants, and project monitors. According to a July 2017 report, its returns ranged from 8% to 23%.

  10. ThinCats, an Ashby-based company founded in 2011, is an online market-place for secured business loans. The ThinCats platform connects investors with business borrowers to provide an alternative investment to develop borrower’s business. Borrowers can get loans of up to £15 million over periods ranging from a few months to five years; lenders get attractive rates of interest with security even if the capital is at risk. In 2018, its weighted average return was 9.36%.

In 2018, the FCA’s consultation paper spurred a debate by proposing some restrictions on P2P lenders that fall under the high-risk platforms category. If accepted, investing in P2P loans will be limited to sophisticated investors along with a cap that limits investments to 10% of one’s net assets. Industry bodies offered a mixed response to the FCA’s consultation paper. Interestingly, the Peer-to-Peer Finance Association welcomed the proposal to tighten rules on investor disclosure; on the other hand, a number of plans on a platform raised concerns about its impact on competition. With cases such as Lendy (which was put on an FCA watchlist), not only would the investors be careful while investing, the regulatory oversight is likely to increase on the UK’s P2P market.

Source: Company websites & media sources

Note: This is an illustrative, non-exhaustive list of startups. It does not constitute professional financial advice.