P2P Platforms: What is the Best Location to Launch a P2P Business?

Р2Р lending is the mechanism of money lending to individuals through designated online platforms, enabling people to borrow funds without the involvement of financial institutions: banks, credit unions or microfinance organizations.

P2P lending is typically done online. Borrowers raise money on dedicated websites – P2P platforms. The lending terms there are more favorable than those offered by traditional banks. Besides, P2P platforms are popular with investors. This article will be appreciated by those who intend to set up a P2P platform and get into the details of launching one.

Choosing a country for P2P lending

Today’s volumes of P2P lending are estimated at tens of billions of dollars, and the figure grows annually. This is especially relevant for European and Asian P2P lending markets. So what is the best jurisdiction for creating a P2P platform?

Jurisdictions requiring a license:

• Great Britain

P2P lending is governed by the Financial Conduct Authority (FCA). It requires an authorized capital of £50,000.

The terms and conditions, interest rates, marketing materials and website information must be absolutely transparent and should not mislead customers. Furthermore, customers must be made aware of all the risks. P2P platform investors have the right to contact the Financial Ombudsman Service with complaints. Borrowers are entitled to a 14-day cool down period starting on the day of loan issue. During this period, they can rescind the loan without any penalties or fees.

Do remember the exceptions: FCA authorization is not required for P2P platforms operating under a tipping or donation model.

• Lithuania

P2P lending is regulated by the Bank of Lithuania. The required authorized capital is EUR 40,000. The Bank of Lithuania is considered one of the most forward-thinking and friendly FinTech regulators so it is much easier and quicker (1 month) to get a license in Lithuania.

One can subsequently use the passporting option and operate, with a combination of the EMI or PSP license, in other EU countries.

• Estonia

Starting March 2016, P2P lending platforms are bound to obtain the EFSA license. Companies may get it in the capacity of a credit intermediary or a lender. Entities operating under a tipping or donation model are exempt from the licensing obligation.

• Finland

P2P lending is regulated by the Finnish Financial Supervisory Authority (FSA). The required authorized capital is EUR 50,000. Any transactions with customer money must be conducted jointly with a partner bank or payment service provider, or the company has to obtain its own payment service provider license.

• Germany

There is no P2P lending legislation in Germany but the lending activities are subject to the Banking Laws. Therefore, market leaders and other platform operators work as intermediaries with partner banks.

The same regulatory regime is implemented in France and Italy.

• Portugal

P2P lending is regulated by the Portuguese Securities Market Commission (CMVM). Lending-based and investment-based crowdfunding platforms are also subject to regulation. The required authorized capital is EUR 50,000.

P2P platform registration: required documents

The following documents are generally requested by the regulator:

• Information about the entity organizing the P2P platform;
• Details of the directors, including their education, experience and business reputation;
• Financial statements for the last 3 years;
• Organization’s business plan and structure;
• Business model, description of financial flows and assets;
• Description of internal policies and anti-money laundering procedures (AML/KYC policies).
• This is a baseline document list which may vary depending on the local regulator’s requirements.

SBSB Law Firm has an extensive portfolio of P2P platform launches in various jurisdictions. SBSB’s FinTech lawyers will be happy to assist with your project implementation. Do not hesitate to join our Telegram chat for a free online consultation from our experienced lawyers.