P2P lending boosted by new FinTech rules?
P2P lending is a promising area of FinTech that might lead to new opportunities, also thanks to the new rules issued by the Bank of Italy.
What is P2P lending?
P2P lending is defined as “the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers“. Basically, rather than having a bank lending money to individuals or businesses, there is an online platform that enables the lending of funds from one of its users to another.
According to Morgan Stanley, marketplace lending will reach $290 billion by 2020, averaging 51% growth a year. But in the more optimistic scenario, the sector is seen exceeding $490 billion by 2020.
This is a particularly interesting part of FinTech for lenders because of the potentially high returns that however come with risks because of the lack of guarantee (or limited guarantee) that the amount will be repaid.
The rules issued by the Bank of Italy
After an initial conservative approach by the Italian banking authority towards PsP lending platforms, they authorised a few of them in the last years. And the new rules recently issued have the purpose of providing an outline of their current position on the topic which can be summarised as follows:
- There is no collection of savings from the public (which is an activity mainly reserved to banks) by the platform manager if the platform collects funds to either hold them on payment accounts that can be used only to provide payment services or issue electronic money. Under such scenario, the platform does not require a banking license, but can be operated – depending on the peculiarities of the case – under an authorisation as e-money or payment institution; and
- There is no collection of savings from the public by borrowers if they obtain funds on the basis of personalised negotiations with single lenders which are merely supported by the platform manager to enable the entrance into the agreement. This conditions can be considered met if the manager of the platform merely provides a standard contract which is then open to negotiations between the parties and changes. But this aspect might be “tricky” if either in practice there is no negotiation between the parties and all the customers accept the standard terms or if the potential additional terms/clauses are indicated by the platform itself limiting the freedom of choice left to the parties. The matter is relevant since it would impact on the role (and the consequential required authorisations) of the parties.
The Bank of Italy refers also to the need to set a maximum limit to the amount that can be lent through such platforms. This is in line with the goal of keeping main lending activities under the control or regulated entities like banks.
The above mentioned rules leave some grey areas that will need to be filled in on the basis of the peculiarities of each P2P platform. However, a detailed debate with banking authorities is often requested to avoid any type of misunderstanding which might lead to heavy sanctions.
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WRITTEN BY GIULIO CORAGGIO
IT, gaming, privacy and commercial lawyer at the leading law firm DLA Piper. You can contact me via email at firstname.lastname@example.org or email@example.com or via phone at +39 334 688 1147.