Not all P2P sites are born equal

The goal of Explore P2P is to help investors find the best P2P investment opportunities that exist in the UK and Continental Europe. We list more than 50 sites on our comparison tables, and  feature interviews with the CEOs of some of the best and most interesting sites. However one thing we feel it is important to make clear  is that other P2P sites exist, which we have chosen not to list (despite repeated requests in many cases). Why do we do this? Our goal is to help you find the best opportunities, rather than simply list every single P2P site that exists. Quality over quantity. 

So why do we exclude some sites? There are many reasons. We have listed the most common ones below. By publishing this list, we hope it might give you some insights into why some P2P sites can be riskier than they appear, and what to look out for.

Sites that look like they are dead, or going to die

One of the risks of P2P investing is that the site goes out of business. P2P investments are structured to be bankruptcy remote (i.e protected from creditors) but the closure of a site can lead to significant complications, delays to getting funds back, and potential losses. That’s why it’s important to assess whether a site is being successful.

P2P sites need volume to generate significant revenues to cover their costs. There are different business models, but revenues are closely linked to the number of transactions and the volume of assets that are being managed. That’s why it is important to look at the volume statistics that most P2P sites publish. Altfi also produces very good data on P2P volumes that we check regularly. We like to see strong growth rates in loan volumes. The higher the loan volumes, the better. Flat or declining volumes are a concern.

It is clear from looking at this data that some sites are effectively ‘dead’. They may still have a functioning website, and may be willing to accept your money, but there is virtually no activity taking place. That’s not a sustainable business model, and that’s why we exclude these types of sites from Explore P2P.

New sites that lack credibility

New sites can offer interesting opportunities, and we sometimes feature them on Explore P2P. But there are many more that we have decided to just monitor, and delay featuring on the site. It all comes down to credibility. How confident are we that the management team have the experience to become successful? Is the site filling a gap in the market? Who are the shareholders, and how much have they invested? When will the site reach break-even? These are all important considerations. If there’s any doubt, it’s best to not get involved and monitor how they do. They will still be more than happy to accept your investments in 12 to 24 months once they have built more of a track record and there is less risk surrounding the viability of the site.

Sites that are involved in crypto schemes

We’ve seen several P2P sites launch that have been heavily promoting their own crypto-currency. These sites appear extremely suspicious to us and we don’t consider them ‘investible’. One of these sites raised significant amounts of funds from an initial coin offering (ICO) last year. These coins have now fallen 90% in value and the volume of P2P transactions on the site is close to zero. We expect this pattern to be repeated on many other sites. Crypto-currency and blockchain is in our view simply not necessary in the P2P investment space. We suggest steering away from any P2P sites that are promoting their own crytpo coins and tokens, even if you plan to only invest in fiat currency (Euros etc).

Sites that do not cater to foreign investors

Some sites do not properly cater to our readership, which consists of investors that reside throughout the world. Some sites have regulatory rules or internal policies that prevent them from excepting investors from outside their home country. In other cases we have assessed that they are not suitable for other reasons, such as not supporting non-domestic languages such as English.

Low quality sites

Some sites simply have too many deficiencies and are too low quality. For example, we reviewed a business lending P2P site recently. It had a very slick website but it failed to provide very basic information about the companies that were seeking financing. This is just unforgivable and it suggests that the management team running the site could be offering risky loans, or just don’t know what they are doing. Either way, it’s not a site that we can feel comfortable listing right now.