American economist Paul Allen McCulley coined the phrase ‘Shadow Banking’ during the financial crisis of 2007-2009. The former managing director at PIMCO first used the term to describe certain non-bank lending institutions that were undisciplined and opaque in their approach to borrowing money and approval rates.
For organisations that have grown to become successful, the term ‘Shadow Banking’ has stuck and carries negative connotations with it. Large institution banks have warned the general public about the dangers of using unregulated ‘Shadow Banks’, however, the public’s perception of these types of financers is beginning to shift to become more positive.
Changing Perceptions with Technology Based Platforms
Nowadays, the use of the term ‘Shadow Banking’ has expanded and is now used frequently to categorise types of non-bank lending institutions. Technology based platforms, in particular, have experienced an astronomic rise in popularity. Some of these organisations include; Investment banks, Hedge funds, Mutual funds, Crowdfunding and Peer-to-Peer Lending Platforms.
Peer-to-Peer lending has witnessed a significant increase in popularity and appeal over recent years. As Peer-to-Peer lending platforms offer straightforward models, the connotations of being ‘dark’ and ‘in the shadows’ should not apply. This level of transparency represents why the public’s perception of alternative lenders is changing and therefore encouraging people to pursue alternative lending methods.
Peer-to-Peer Lending on the Rise
Peer-to-Peer lending offers a range of appealing factors; such as attractive rates, straightforward models and fund availability. The chances of securing a traditional bank loan are tightening, whilst Peer-to-Peer lending platforms and other shadow banking institutions are filling the gap to meet the needs of borrowers. Peer-to-Peer lenders are offering individuals and companies options, although these choices involve risks.
Wellesley & Co Offer an Innovative Alternative
Wellesley & Co. is an asset backed online Peer-to-Peer lending platform that offers a straightforward alternative with increased rates of return on offer and actual fund availability without the banking intermediaries. Each application is judged on its own individual merits, providing an alternative to the traditional tick-box application process offered by high street lenders. Every application also needs to be approved by the Wellesley Credit Committee that operates an exceptionally strict credit policy. This is to ensure only the most appropriate applications are selected and approved.
Investment through Wellesley & Co Limited involves lending to companies and individuals, which leaves your capital at risk. Interest payments are also not guaranteed if the borrower defaults. Peer-to-Peer lending is not regulated by the Financial Services Compensation Scheme (FSCS) but Wellesley & Co are regulated by the Financial Conduct Authority (FCA).