Interview with Nick Harding of Lending Works

Written by Karen Bryan

lending works logoI asked Nick Harding, the founder and chief executive officer of the peer-to-peer (P2P) lending website Lending Works, some questions about his company.

1. What attracted you to working in P2P lending?

I was attracted to the challenge of taking peer-to-peer lending to the next level – making it more suitable for the mass market by creating the safest peer-to-peer lender in the UK. We wanted to create an extremely safe platform which was still able to offer fantastic returns to our lenders. The Lending Works Shield is unique in that we have insurance against borrower default risk. Furthermore, Lending Works has been built on the foundation of providing a simple, transparent and enjoyable customer experience – being able to focus on our customers is a really refreshing prospect to a team who have predominantly come from banking and other financial services backgrounds.

2. What is unique about Lending Works?

Lending Works is unique in a number of ways. Our primary USP is our Lending Works Shield, which provides a market leading level of protection to our lenders. No other peer-to-peer lender offers default risk insurance to protect its lenders. Lending Works also offers highly competitive returns that are often up to three times higher than those offered by traditional financial institutions. Finally, the site and platform is extremely easy to use for both sophisticated and new customers alike. We believe in maintaining simplicity in everything we do.

3. What do you think will be the impact of ISAs being available on P2P lending?

This is undoubtedly a watershed moment for the industry. Our lenders are currently receiving pre-tax returns of up to 5.6%, whilst the average cash ISA pays just 1.54%. Then consider that £60bn per year is invested in ISAs and our industry is currently only c£800m a year. Just 1% of new ISA money would almost double the size of our industry, and 10% would be a dramatic increase.

4. Do you envisage P2P lending being covered by the FSCS, even if that meant a slightly lower rate of interest from lenders?

It is certainly a possibility, although I do not anticipate this happening anytime soon. Potentially after April 2017, when the FCA will have finished their inclusion of all consumer credit businesses under their regulatory umbrella, they will have the capacity to start looking at this sort of progression.

Although Lending Works is not covered by the FSCS, the Lending Works Shield offers a significant step forward for lender protection in our industry. We have provided a level of protection not seen before; borrower defaults, fraud and cybercrime are all insured against.

5. Do you believe that there is an optimum size for a P2P lending firm?

We believe that from the customer’s perspective the size of the firm is not highly relevant. Things like the stability of the company, track record, the strength of the processes and how long lenders have to wait for the their money to be matched are what is important. Fortunately for Lending Works, we have great systems in place meaning that lenders are matched quickly and the customer experience is very well received. Furthermore, the company is very well-funded, giving lenders confidence in the stability of our platform.

6. How much growth do you think there is in the UK P2P lending market?

The growth potential is huge. Andy Haldane (Executive Director of Stability at the Bank of England) is quoted as saying that peer-to-peer lenders may be as big as high street banks in 10 years’ time, and that we are at the start of an industrial revolution for financial services. Just one of many articles is: http://www.wired.co.uk/magazine/archive/2013/09/ideas-bank/a-financial-forecast-from-the-bank-of-england