Hargreaves Landsdown to enter P2P lending sphere
Ian Gorham, the firm’s chief executive, said adding peer to peer lending to its service stable would improve the options available to hard-pressed savers, who have tolerated six years of low interest rates.
Gorham went on to pledge that the move would take the firm ‘mainstream’; “we want to make Hargreaves Lansdown the centre of people’s financial lives,” he said in a presentation to City analysts.
Hargreaves plans to turn its 675,000 customer base into an internal market in which some customers will be able to borrow money secured on assets held in funds and shares on the company’s Vantage platform. Gorham cited research by the company which showed that “up to 70 per cent of people are uneasy about investing but want to do something interesting with their cash.”
“When they buy a car rather than taking money out of their ISA they can borrow the money instead,” he continued.
The loans would come from other customers (‘peers’) who, as with other marketplace lending schemes, would gain a higher interest rate than they could get from the banks.
Gorham said Hargreaves would also look outside the company for borrowers for its customers to lend to. He said there would be no credit risk for the company as it would simply match borrowers with lenders. However, it would set up a ‘buffer’ to insulate lenders against bad debts.
The announcement came as Hargreaves Lansdown unveiled a rare fall in first half profits, prompting its shares to tumble more than 5 per cent.
Hargreaves said the fall in profit was due in part to the continued decline in profits it makes from customers’ cash balances, which the savings portal and P2P push are meant to reverse. But it also reflects the re-pricing that it – and other investment platform providers – were forced into a year ago by regulators.
Building the new platform is scheduled to take the company two years.
Reaction from other areas of the peer-to-peer sector were generally positive. “We’re pleased to see Hargreaves Lansdown have now recognised the significance of this relatively new asset class and have decided to embrace it,” Kevin Caley, managing director of P2P lender ThinCats said. “The peer to peer lending industry has lent over £1.2 billion over the last year, doubling in size every six months, as investors seek fair returns on their savings, so it’s no surprise that Hargreaves have shifted their stance and woken up to the demand.”