LendInvest to test investors

In December 2016, the UK's Financial Conduct Authority (FCA) published a report warning marketplace lenders that they don't explain how their products work effectively enough to consumers, making it hard for lay investors to assess the risks and returns associated with their platforms.

Some of these lenders have already begun making adjustments to stay on the regulator's good side ahead of any new, potentially tighter, regulations being introduced, and on Tuesday, LendInvest became the latest lender to introduce changes toward this end.

Here are the changes LendInvest is making to its model:

exams

These measures are likely to succeed at placating regulators, but may come at a price. By upping its consumer education and thereby potentially narrowing its investor base, LendInvest seems likely to rid itself of some of the regulatory problems looming for its marketplace lender peers. However, a consequence might be that the company locks out a proportion of its existing and potential customers. This is unlikely to significantly impact LendInvest's revenue — Faes estimates 90% of its investors will pass the exam — but it might tarnish the company's public image by making it seem too exclusive. Also, and perhaps more importantly, the UK marketplace lending industry is thought to have avoided some of the shocks sustained by its US counterpart precisely because it has catered to less-sophisticated investors, an unusual model in the US, as these investors tend to have longer-term investment strategies. As such, creating barriers for them could leave the company more vulnerable to industry scandals or market shocks.

We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.

No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.

The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:

Traditional Retail Banks vs. Online-Only Banks:
Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees 
Traditional Lenders vs. Peer-to-Peer Marketplaces
: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful 
Traditional Asset Managers vs. Robo Advisors
: Robo advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.

As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.

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Retail banking 
Lending and Financing 
Payments and Transfers
 Wealth and Asset Management 
Markets and Exchanges 
Insurance 
Blockchain Transactions

If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.

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