Peer to Peer lending-The modern alternative to traditional lending

What is Peer to Peer (P2P) lending? 

Peer-to-peer (P2P) lending allows financing to be obtained directly from other individuals, without involving a bank or building society. P2P is essentially an online finance marketplace connecting those who want to lend money with those in need of financing.  

Traditional lending 

Traditional Lending

P2P lending 

P2P Lending

How P2P evolved 

When P2P was introduced in 2005 it was used by high-risk borrowers who were likely to be rejected by traditional lending institutions. However, in recent years use of P2P has expanded to provide mainstream financing for: 

  • Paying off credit card debt at a lower interest rate; 

  • Home improvements; and 

  • Purchasing a new car. 

With expansion comes regulation 

Although P2P was introduced in 2005, the first regulations were not published until 2014. As the sector continues to grow and expand, boosted by the higher returns for investors in an apparently permanent low interest environment, further regulations have been published to reflect the changing nature of the sector.  

On the 4th June 2019, the Financial Conduct Authority (FCA) announced their proposed changes to the regulations, which will come into effect on the 9 December 2019.  

What are the changes? 

The changes are intended to protect borrowers and many of the changes focus on: 

  • greater transparency; 

  • clearer communication; 

  • robust credit risk management; and 

  • standardising the process in the event of default.  

What is the future? 

Innovative lending options will continue to expand as investors seek yield. The Scottish environment often depends upon different methodologies in achieving the same ends sought South of the border. McVey & Murricane are market leaders in advising on the new opportunities in lending. 

Get in touch 

For further information on P2P or any other area of specialist lending, please contact Fallon Sara Spencer (  

Article written by Fallon Sara Spencer

Head of Specialist Lending