Over eight in ten (84%) of consumers would not invest their money with a peer-to-peer lender
Four in ten (39%) are worried about the lack of FCA regulation and half (49%) say it’s because they don’t know enough about them
A quarter (25%) don’t want to lend money if they don’t know where it’s going and one in ten (9%) are reluctant to use an online platform
With only one in four (25%) expecting to earn only £50 or less this year in interest on their cash ISA savings, consumers are looking elsewhere to stash their savings
43% are using current accounts, while one in ten (10%) are putting their money in a piggy bank or rainy day jar at home.
With interest rates on savings accounts remaining at a historic low, peer-to-peer lending has been hailed as another way to boost investments. However, savers clearly still need some convincing – the majority (84%) would not consider investing their money with a peer-to-peer lender, according to new research from Uswitch.com, the independent price comparison and switching service.
Although official figures show the UK’s peer-to-peer lending sector increased by 121% during 2013, only 2% of savers are currently using a peer-to-peer lending platform. Six in ten consumers (59%) are reluctant to use a peer-to-peer lender because the industry is not covered by the Financial Services Compensation Scheme, while four in ten (39%) say that it is because it is not regulated by the FCA. A further half (49%) are sceptical about using peer-to-peer lenders simply because they don’t know enough about them, and another fifth (22%) are weary about using a firm they haven’t heard of.
Some may argue that the introduction of regulation on the peer-to-peer lending market from April will boost consumers’ interest in the platforms, but barriers still exist. A quarter (25%) don’t want to lend money if they don’t know where it’s going, and one in ten (9%) don’t want to use an online platform.
Meanwhile, poor cash ISA rates have clearly taken their toll on consumers’ savings with one in four (25%) expecting to earn no more than £50 in interest on their savings. As a result, consumers are looking elsewhere to stash their savings with over four in ten (43%) using their current account. Worryingly, a further one in ten (10%) think keeping their money in a piggy bank at home is the best option when in fact this means their money is being eroded by inflation. Almost six in ten (57%) have opted for an instant access savings account, while a third (34%) have gone for fixed term savings accounts of between 1 and 5 years.
Jafar Hassan, personal finance expert at Uswitch.com, says: “While the take up of peer-to-peer lending has been low so far, regulation should provide additional peace of mind. But to encourage more widespread adoption, peer-to-peer lenders need to convince consumers that their money is safe, and they can’t simply rely on regulation to do this. The fact is that many consumers are still skeptical about lending money if they don’t know where it’s going; others simply don’t want to use an online platform.
“People fed up with poor ISA rates but nervous about peer-to-peer lending should consider keeping their money in a high interest current account. Nationwide’s Flex account offers rates of up to 5% while Santander offers up to 3%.
“But this doesn’t mean consumers shouldn’t write cash ISAs off – with normal savings products and current accounts, basic rate taxpayers hand over 20% of the interest to the taxman. And rates may still improve – last year, we saw a flurry of fixed-rate cash ISAs hit the market in the run up to the new tax year from providers such as NatWest, so everything is still to play for.”
Alexa Wheeler
Phone: 0207 1484 661
Email: alexa.wheeler@uswitch.com
Twitter: @uswitchPR
Research carried out online with the Uswitch.com Consumer Opinion Panel in January 2014 amongst a sample of 1,613 GB adults
When asked ‘Peer-to-peer savings firms like Zopa, Funding Circle and Ratesetter can let you earn up to 6% on your cash, but are not regulated and come with no safety guarantee. With this in mind, would you consider investing your money with a peer-to-peer lender?’ 84% said ‘No’ and 16% said ‘Yes’.
When asked ‘You said that you would not consider using a peer-to-peer firm for your savings. Why is this? (Tick all that apply)’ 59% said ‘Peer-to-peer is not covered by the Financial Services Compensation Scheme (meaning you could lose your money)’, 49% said ‘I don’t know enough about them’, 39% said ‘Peer-to-peer is not regulated by the FCA’, 25% said ‘I don’t want to lend money if I don’t know where it’s going’, 22% said ‘I don’t want to use a firm that I haven’t heard of’, and 9% said ‘I don’t want to use an online firm’.
When asked ‘How much do you expect to earn in interest on your current ISA savings?’ 12% said ‘Less than £10’, 13% said ‘£11-50’.
When asked ‘Which of the following do you currently use for your savings? Please tick all that apply’ 43% said ‘current account’, 57% said ‘Instant access savings account’, 115 said ‘Fixed term savings account – 1 year’, 8% said ‘Fixed term savings account – 2 years’, 45 said ‘Fixed term savings account – 3 years’, 1% said ‘Fixed term savings account – 4 years’, 5% said ‘Fixed term savings account – 5 years’, 10% said ‘a piggy bank / rainy day jar’, and 2% said ‘Peer-to-peer lending (e.g. Zopa, Ratesetter, etc.)’
Source: Peer to Peer Finance Association (P2PFA) - http://www.p2pfinanceassociation.org.uk/wp-content/uploads/2011/08/2013-Q4-press-release-VF1.pdf
The FCA takes over regulation of consumer credit from the Office of Fair Trading (OFT) in April 2014.
Source: This is Money - http://www.thisismoney.co.uk/money/article-2295161/The-new-Isa-season-Is-fixing-really-best-option.html
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