No – peer to peer lending and bank savings accounts are not direct substitutes. Whilst the interest rates that are available to peer to peer lenders are much greater than are presently available from the high street bank and building society Cash ISA accounts, the risks are relatively greater and lenders’ capital is at risk.
We have covered the key risk differences in our guide to peer to peer lending, though perhaps one of the key take away points from a risk perspective is that the peer to peer lending industry is not covered by the Financial Services Compensation Scheme (FSCS).
For most bank and building society account holders, the FSCS acts as a back-up guarantor of the first £75,000 in savings that any UK individual holds with that banking institution. At this time, the FSCS does not cover peer to peer lending activities.