Funding Circle to no longer allow investors choose loans individually

Last post: Aug 22, 2017

Funding Circle have announced from Sept 18th investors will no longer be able to select what loans they invest in and must instead cede this decision to an AutoBid system

In quite possibly the biggest announcement in the history of Peer to Peer Lending, Funding Circle – by far the largest provider of selectable loans – have broken the news that they are going to remove the facility for investors to bid manually from 18th September onwards.

From that date investors' funds will be distributed solely via an "improved" AutoBid system. These improvements will actually result in a tool which is less configurable than the current facility which allows funds to be distributed across any combination of the site's 6 risk bands.

The new Autobid will only have 2 options. Conservative (which invests in A+ and A rated loans) and Balanced (which distributes funds across all the platform's offerings). These will offer projected returns of 4.8% pa and 7.5% pa respectively. Presumably these figures are based on the revised interest rates for each risk band which were also announced today.

These options seem remarkably similar to Zopa's two accounts although the returns of 3.9% and 6.1% over at the fellow market leader, which specializes in lending to individuals rather than SMEs, are significantly lower.

Clearly, Funding Circle are chasing volume in the shape of "casual" investors rather than the hard-core enthusiasts who have been supported the P2P concept from the outset and wish to take a hands-on approach to managing their portfolio. The site may be paving the way for their IFISA.

The Secondary Market will also undergo a similar dumbing down. In future, investors will only be able to choose the amount they wish to withdraw, they won't be able to select the loan parts that will be sold. This will be done at random.

My initial reaction was to withdraw my funds from the platform as I am uncomfortable about not having control over who my funds are lent to and do not wish to invest in unsecured loans with less than double digit returns which I have no way of avoiding in the brave new world.

I was considering switching my entire £21k holding over to Assetz Capital where loans often have multiple items of security and there is a Provision Fund but the drawback with AC is a lack of throughput restricting diversification.

Dividing such a large sum across many loans to spread the risk is going to take time therefore I have decided not to switch AutoBid on when 18th September arrives, instead I will allow funds to accrue in my Funding Circle account as my current self-selected portfolio of loans are repaid and move them across to other platforms.

From an investor's point of view, this seems to provide rival sites that do offer selectable loans, such as Lending Crowd, with a great opportunity however with no bidding taking place over at Funding Circle, loans are sure to fill even faster to the joy of borrowers. Will this mean the lenders FC reject are the only ones that appear on other platforms? …I may even consider moving away from P2P.

These are indeed changing times… as the P2P industry grows to become more mainstream perhaps it was inevitable that it would change to resemble the banking world. For those who want greater control over how their money is used, this is not necessarily a good thing.