How Much Should You Trust “Award-Winning” P2P Lending Companies?
You'll have noticed that P2P lending companies sometimes win awards, which are usually awarded by some sort of publication, with or without an independent judging panel.
4thWay, too, regularly wins industry awards for which I am truly very grateful and glad that we get recognised. And I do feel some pride about that.
Yet to be honest it's too good a starting point to educating you into the pitfalls of individual lenders relying on awards when deciding whether to lend through a specific P2P lending provider.
What do they know?
I've been on the P2P Power 50 list every year since it started. As it's written by P2P Finance News, this award is one of those more likely to be meaningful.
But most of the time it's impossible to guess just how much an award panel genuinely understands the companies they are awarding.
I'm very grateful to SME News and its panel for giving 4thWay the winning place in the UK Finance Awards 2022 as well as its Greater London Enterprise Awards 2023.
But they do leave some small doubts. The award in both these cases was for the category “Best Peer-to-Peer Lending Company”. They do say they conducted research and have a panel, but 4thWay isn't a P2P lending company.
So was it an honorary victory that they forgot to explain to us, or perhaps shorthand for “Best Company In Or Related To P2P Lending? Or, worryingly, did they just not really get it?
A case in point
Wellesley & Co, which went down in some disgrace, had won awards. And not just any old awards.
Many years ago, a popular magazine about stock-market investing awarded Wellesley & Co with “Best Peer-to-Peer Lending Provider”. This happened at about the same time that Wellesley lost its 4thWay PLUS Rating, dropping to unrated, and as we provided a strong sell recommendation on it.
We continued this recommend for the several years leading right up to its exit from P2P lending, and its eventual crash and demise.
How much did the awards panel in that stock-market magazine really understand about assessing the risks and rewards of investing through Wellesley?
How much time did they spend?
When a publication issues awards, how long did its panel spend assessing the nominees?
It's in everyone's interests – those making and receiving awards – to all be supportive and positive. So I don't recall ever hearing a company that has received an award actually asking critical questions about it.
But the fact is that, for all the awards we've ever received, I don't know how extensively they investigated us, or what skills and knowledge about the industry they applied, or often even what their criteria were.
These questions aren't normally asked.
I myself have been on judging panels. Although I think I did a reasonable job under the circumstances of the framework I had to work in, I didn't get to do full due diligence on all the companies I was judging.
It's not impossible, by any means, that some of my picks in some categories that I was less familiar with were not the ones I'd have chosen had I been able to conduct detailed interviews with the company, its customers and suppliers, and have access to their files. If I had the spare time to do that or was paid to do it.
Who are these judges?
In most cases when 4thWay has received awards, I don't know who the judges were. And I know that panels aren't always independent.
I also know that, when there's an independent judging panel – which is supposed to be the experts – they don't always get the final say.
Take, for example, when one company would run away with half the awards. A publication might instead make itself the final judge, treating the independent panel's picks more as recommendations.
So it then chooses to spread the awards out across more providers, in order to be able to sell more advertising packages and to stay on good terms with more providers.
Recent 4thWay awards and nominations (yes, I'm proud of these, but you can't take them seriously anyway)
Winner of Investment Service of the Year in the Corporate LiveWire Innovation & Excellence Awards 2023.
Wealth and Finance International awarded 4thWay the Best P2P Lending Advisory Service 2023 in the FinTech Awards.
SME News (part of the same media group as Wealth and Finance International) gave 4thWay the winning place in our industry in the UK Finance Awards 2022 as well as its Greater London Enterprise Awards 2023.
Shortlisted by Business Chief's Insight Magazine as one of the Best Companies To Watch 2023.
Shortlisted to be part of 20 Companies Who Are Escalating Innovation In The Market In 2022 of Global Business Leaders Magazine.
When it might get really shady
I'm reminded of those science paper factories that have been in the press a lot lately, whereby scientists churn out thousands of fake papers, because it gets them and their institutions more kudos and ultimately more money.
My experience with finance and investment awards over the past couple of decades has given me the distinct impression that, in some cases, new award categories are created with the sole purpose of selling more advertising packages to the awards winners, and so that the award winners draw more attention to the companies making the awards.
Some awards providers come across to me as basically just awards factories.
I believe a salesperson, with a different title such as “business analyst”, contacts hundreds of companies in dozen of countries to ask them if they want to take part in their awards.
They then offer awards in a variety of categories, often, I'm guessing, made up on the spot to fit a hot lead. And then they try to get the awardee to pay a fee for being written about on their website or in their print publication.
I've been contacted by a few of those and have avoided responding where I had the strong impression that this is what's going on. But, in the end, I don't really have the time to investigate all these publications. I'm busy grilling P2P lending companies most of the time.
I've never heard anyone else express this concern about awards, but who would really want to admit it? Everyone wants the awards to be taken very seriously, as it's in everyone's interests.
I suspect it's the elephant in the room, much like cheating with computers in chess or doping in cycling.
It's also hard to speak openly as an awardee, because no-one wants to appear ungrateful (I don't either), as researchers, publishing staff, as well as a judging panel have possibly put in quite a lot of time and sometimes even expense for an award that is often given freely.
Paying for the award
Since I've just mentioned expense: in some cases, you can only earn an award if you agree to pay a fee once the award is earned.
While 4thWay has never paid any awards fees, I don't think fees are necessarily a problem in and of themselves, but it can be if they offer the award to their top choice, and then they move onto their second, third, fourth or fifth – until someone pays.
At some point, one category of award is potentially going to go to a company that isn't deserving of great praise and attention.
I doubt the majority of best-known awards providers do that, as they have a reputation of their own to maintain. But obviously not everyone prioritises reputation and honesty all the time, for a large variety of reasons, so you just don't know.
Is this really how you want to choose P2P lending accounts?
Using awards as one of your selection criteria is possibly a little bit like saying: “I don't know if I can trust this P2P lending company myself, so let's base my decision on the awards they've received from other companies who I also don't know if I can trust”.
That's a bit too black-and-white, and not fair on awards providers, as on average in my experience awards do go to the better P2P lending providers.
But my point is that you really need to spend your time looking into the P2P lending provider itself, rather than look at awards. Learn for yourself how to conduct a reasonable assessment of them, so that any overall basket of lending accounts you pick gives you excellent prospects.
Update on 28th November 2023: as a case in point, 4thWay somehow just won an award for “Telecommunications Company of the Year”. That's not the only unsoliticited, inappropriate award we've received since I first wrote this page in June 2023, but it's certainly the most ridiculous.
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