FMA publishes P2P and crowdfunding returns snapshot for 2020

The FMA has released its annual sector snapshot for peer-to-peer (P2P) lending and equity crowdfunding for the year ending 30 June 2020 (Report). The Report shows steady growth in the P2P lending and equity crowdfunding sectors over 2019-2020.

The Report covers activity by licensed P2P and crowdfunding providers so does not include activity by P2P and crowdfunding providers that operate solely in the wholesale space.

For P2P lending – registered investors on P2P platforms has now passed 34,000, with 12,800 open investments and outstanding loans of $624 million. This is up from around 31,000 registered investors, 12,100 open investments and $547 million of outstanding loans in the 2018-2019 reporting year.

For crowdfunding – total capital raised from licensed service investors was around $16.5 million, there were 25 successful offers, and total raised from both retail and wholesale investors was around $34 million. This is up from around $13.7 million of total capital raised from licensed service investors, 19 successful offers, and $22.3 million of capital raised in the 2018-2019 reporting year.

Links to the FMA’s report and media release are available here and here.

Who needs to read it?  Why?

Market participants in the P2P lending and crowdfunding sectors. The FMA’s report gives an overview of the size of New Zealand P2P lending and crowdfunding industries as a whole for the year ended June 2020.

What does it cover?

The FMA identifies several key statistics about P2P lending and crowdfunding for the year ended June 2020 in its report.

P2P lending

  • The majority of P2P lending providers saw increases in the value of their outstanding loan books.
  • Trend of new loans towards businesses rather than individuals.
  • Harmoney remains the largest P2P lending provider, with more than half of all outstanding loans.
  • The sharpest increase was investors investing up to $1,000, which increased around 29% from 2019.

Crowdfunding

  • Crowdfunding investors are generally first-time users of a platform, with the sharpest increase in investors being those investing up to $1,000 (which increased by around 49% from 2019).
  • There are six licensed equity crowdfunding providers, which is one less than 2019 with Crowd88 no longer holding a licence.
  • Snowball Effect ran the most successful offers (15 out of 25 of all successful offers).

Our view

The FMA’s report shows the strength of the New Zealand P2P lending and equity crowdfunding sectors, with the trend continuing from previous years despite COVID-19. Another interesting trend for both P2P lending and crowdfunding is the increased participation from P2P lending and crowdfunding investors investing small amounts of less than $1,000.

The flexible licensing regime in the Financial Markets Conduct Act 2013 for P2P lending and equity crowdfunding has no doubt in part contributed to this growth, and New Zealand is seen internationally as an example of a successful regulatory regime for P2P lending and equity crowdfunding.

However, with market participants like Harmoney pulling out of the retail market in 2020, there is still scope to review the regime to make it more attractive for offering to retail investors. In 2020, 48% of all capital raised from equity crowdfunding was from retail investors, compared with around 62% in 2019.  This shows a shift towards the wholesale end of the market. One possibility, often raised by the equity crowd funding sites, would be to reconsider the $2 million cap on retail investors.  The ability to raise a higher amount from retail investors could entice larger and more profitable companies to use crowdfunding.

Compared to Australia, New Zealand’s crowdfunding market is more mature but has a stronger focus on wholesale investors. Based on ASIC’s latest results for the 2019 year, AU$26.33 million of capital was raised through crowd-sourced funding in Australia, of which 66.5% was from retail investors. ASIC has not yet released data for the 2020 year.

What next

If you have any questions in relation to the FMA’s report or the P2P lending and equity crowdfunding sectors, please contact one of our experts.

Who can help