What does ECSPR mean for UK P2P platforms?
Summary
The newly introduced European Crowdfunding Service Providers Regulation (ECSPR) presents an opportunity for UK P2P lending platforms, but could also lead to increased competition. Oliver Gajda, executive director of the European Crowdfunding Network (Eurocrowd), believes P2P platforms should make sure they understand the likely impact of the new regulations.
‘The opportunity should be clear,’ Gajda says. ‘A significant market has just been harmonised under a highly innovative capital market law. It will take some time to play out fully, but you need to understand that it is already happening while you are still considering expanding locally.’
ECSPR enables all EU-based P2P and crowdfunding platforms to operate across the entire trading bloc. This is likely to lead to a rapid expansion of European platforms, some of which have their own lending and borrowing operations in the UK. A British firm, Crowdcube, was the first platform to obtain the new European licence. This means that it can now market European investments directly to European citizens and finance European businesses more easily, significantly increasing its potential market.
Another UK investment crowdfunding platform, Seedrs, is also getting ready to take advantage of the new rules. German lending platform Kapilendo merged with Finland’s Invesdor earlier this year, and then with OnePlanetCrowd in the Netherlands. France’s largest business lending platform, October, acquired its nearest competitor Credit.fr last year in preparation for the new market.
ECSPR was created to allow European companies easier access to European investors. But the regulations also affect UK platforms and their future operations. Dutch platform Lendahand was among the first ECSPR licence holders. While its investors are mostly European, Lendahand is able to finance businesses in non-EU countries like Mexico, Moldova and Kenya. This paves the way for other EU-based platforms to offer loans from countries such as the UK, potentially encroaching on the UK’s business lending and property lending markets.
Under ECSPR, a platform can offer direct investment or loans to businesses. Specifically, this covers ‘the joint provision of reception and transmission of client orders and the placement of transferable securities or admitted instruments for crowdfunding purposes without a firm commitment basis’ and ‘the facilitation of granting of loans, including services such as presenting crowdfunding offers to clients and pricing or assessing the credit risk of crowdfunding projects or project owners’.
These definitions make clear that an ECSPR licence holder can finance any ‘project owner’, or, in other words, ‘any natural or legal person who seeks funding through a crowdfunding platform’. ECSPR was designed to open the doors for non-EU based businesses to be ‘project owners’ able to access financing on ECSPR-licensed platforms.
Links: https://p2pfinancenews.co.uk/2023/01/17/what-does-ecspr-mean-for-uk-p2p-platforms/