Balancing the risks – can your business afford not to go P2P?
2014 was the year of P2P lending, and now the phenomenon is developing rapidly in other domains — not only currency exchange, but also such areas as invoice finance, direct payments and indeed the broader sharing economy, the latter illustrated by hot-desking portals such as LiquidSpace and ZipCube.
At the heart of each model lies the same principle — as with consumer models, business P2P enables multiple parties to conduct a transaction directly with each other, rather than involving an intermediary. It stands to reason that costs would be lower; it also makes sense that the transaction can take place more quickly and efficiently.
All the same however, the parties involved have to trust each other. One of the main reasons we still involve intermediaries in our business dealings, rather than ‘going direct’ is that they add confidence to the transaction. That’s why we, as consumers, get solicitors involved when we move house for example; and it’s no different in business.
Indeed, corporate organisations can tend to be more risk averse than individuals, therefore more likely to stick with traditional means. Unless, that is, the parties and mechanisms involved can clearly show themselves to be trustworthy.
With P2P currency exchange we are fortunate, in that the actual FX transaction takes place using a traditional, and therefore robust banking platform. Plus, once the transaction is complete, that’s pretty much the end of the matter.
Other business-based P2P models require more careful diligence to take place on the transaction. In P2P lending for example, the lending party needs to be confident that the loan will be repaid; even desk sharing requires background checks on both sides. Such areas require new forms of governance which are, as yet, still nascent.
Even with such protections in place, businesses will need time to gain confidence in P2P models — as a consequence we expect market growth to be more linear than exponential.
Smarter organisations will recognise that, with a small amount of self-education and due diligence up front, they can tweak their working practices and start saving money almost immediately, directly impacting the business bottom line.
To be risk-averse may be the most comfortable option for the time-strapped executive, but it is certainly going to be the more expensive. Which is, dare we say, a business risk in itself.