Turner said in February that peer-to-peer lending would “make the worst bankers look like absolute geniuses” and claimed the sector could be a source of immense losses.

But during a speech earlier this week, Lord Turner was complimentary of the sector, even suggesting that online peer-to-peer lenders could perform credit underwriting.

“I don’t think the use of technology by peer-to-peer lenders or challenger banks will do anything fundamentally new. But they might be able to do credit underwriting as well as established banks and also aspire to offer better customer services,” he said.

Looking toward the future he said peer-to-peer lending could even act as a “spare tyre to the credit system, making credit crunches less likely.”

However, he still stood by the comments he made earlier in the year around peer-to-peer lending causing losses, but understood that this loss would only make up a “small part” of the peer-to-peer lending sector.

The comments come as the FCA announced last month that it had launched a consultation paper into peer-to-peer lending after concerns arose that inept investors were flocking to the sector.