“In an unsettling about face TrustBuddy, a peer to peer lending platform based in Stockholm, has shut down. The home page has transitioned from lending platform into a public statement (republished below) in both Swedish and English explaining a series of alleged misconduct”
A very good summary from Crowdfund Insider on what’s happening with TrustBuddy.
This is the first major p2p lender to fold in Europe, and there is much to learn from it. In a few words:
- Trusbuddy was an average-size p2p lender (EUR200m deployed), but one of the few to be listed (EUR 100m market cap last year)
- New management (ex Klarna) joined 2 months ago
- Have now discovered that there were frauds, all some of the money was not invested
My (cynical?) view is that this kind of behaviour will happen in any new and unregulated industries. Remember that we saw the same in China with thousand of p2p platforms folding or the $400m that disappeared with Mt Gox. But the fact that will happen doesn’t mean that it won’t have repercussions on the p2p industry.
- There will some pressure for more regulation on p2p lending. I don’t know the regulatory framework for p2p lending in Sweden, but there is already a decent one in the UK
- I don’t think that more regulation will help for p2p lending. For example, banking is highly regulated, but fraud and other problems still happen. At the same time, heavy regulation for startups is certain to kill the development of that industry
- There is much to do for the industry themselves in terms of a chart of conduct and ethics – and which shouldn’t be about mere marketing, but what the industry really believes in
- In general, it feels that p2p lenders should do much more effort in terms of education – and show the potential risks of p2p lending. There are clearly risk warnings on their websites, but more could be done IMO.
- Perhaps also some good business models for startups to rate and do due diligence on p2p platforms? In the same way that there are rating of online retailers – in that case from consumers themselves – I’m sure someone can think of smart ways to rate the p2p lenders themselves
I think that these kinds of events are bound to happen in any new industry. Actually, it also happens in old industries, but the difference is that it could create a credibility problem for the whole p2p industry. In my opinion, it is not life-threatening, on the contrary it could be the opportunity for the good platforms to differentiate.
Any nascent industry will go through these stages where some black sheep will compromise the credibility of the whole sector. But if the value proposition is strong enough, consumers will look past through it and go towards the most reputable companies. Remember the example of Pere-Noel.fr in France (yes it means Father Christmas!) in the early 2000. Thousands of people ordered on their site, didn’t receive any goods, and it was a huge scandal. This didn’t prevent however people from continuing to buy on the Internet, and there was a premium for the more reputable e-tailers.
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