The future of crowd-sourced funding in the UK
24 October 2012
Peer-to-peer lending and equity crowdfunding platforms provide online marketplaces which link individuals and businesses to small-scale investors. These fast-growing online marketplaces for equity and for loanable funds offer the prospect of an alternative source of funding for small businesses as well as new business opportunities for the digital firms that create and run them. But there is concern that users of the sites are not adequately protected. As well as leaving users open to fraud and mismanagement of their money, the growth potential of responsible and useful platform operators could be stifled if potential users are put off.
This policy briefing has three aims. Initially, it is intended to provide information about innovative new financial services. Secondly, it aims to explain the implications of the current regulatory system on the operation of such platforms. Finally, it makes the case for greater formal oversight of the emerging sector, in order to safeguard its future growth. As such it focuses on peer-to-peer lending and equity crowdfunding as two areas which have proven growth potential and generated policy debate both in the UK and overseas.
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