LendIt Europe 2016: Why the right kind of corporate governance is vital for lending platforms

At the LendIt conference last week, I was surprised to enjoy a panel discussion about the importance of the right kind of corporate governance in the P2P lending space.  I wasn't expecting to hear major players in the fast-paced fintech market waxing lyrical about the importance of corporate governance, but that's exactly what happened!

However, this was not an attempt to force digital platforms into a traditional corporate governance mould; all of the panellists recognised that the particular challenges of the fintech world mean that a more bespoke approach is necessary.  In fact, all the speakers were in agreement that tailored corporate governance is crucial to the success of alternative finance providers.

In practice, many boards in the fintech space are made up of the entrepreneurial founders and the business angels or venture capitalists who have invested in them. This combination is not conducive to identifying risk or cultivating independence. In an area which is increasingly under the regulatory spotlight, the panel discussed how alternative finance firms have much to gain from the right kind of corporate governance. Done properly, it can provide a P2P company with:

  • independent oversight;
  • experience from a wide range of sectors;
  • contacts;
  • the ability to deal with issues separately from the management team; and
  • structure for the board.
We look forward to seeing how fintech firms start to use corporate governance. No doubt it's only a matter of time before the FCA insists on it.

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