As a business model, peer to peer lending (or P2P lending, as it’s known) is relatively new in Australia, although the number of P2P and P2B platforms has increased significantly over the past 12 months. Here is a quick rundown of the current the main providers:
SocietyOne. SocietyOne was the first peer to peer (P2P) lender to launch in Australia, back in August 2012. Investors provide SocietyOne with an investment mandate to select individual loans for their portfolio based on their personal risk-return horizons, stated loan purpose, borrower risk grade, income, demographic, geographic and other credit criteria. They can also invest across secured and unsecured loans; typically a SocietyOne investor should be diversified across more than 100 loans. Borrowers can apply to up to $35,000 for a period of 2, 3 or 5 years.
Ratesetter. Arriving in Australia in November 2014, Ratesetter has pedigree, being part of the Ratesetter group, which launched in the UK in 2010 and which has since then attracted around half a million customers and more than $700 million in loans. Ratesetter offers personal loans of up to $35,000 for up to five years and interestingly, Ratesetter is the first P2P lender to release its loan book data in Australia, describing this as demonstrating their commitment to developing real trust with borrowers and lenders.. Ratesetter is the first P2P platform to win a 5 star ratings for Outstanding Value for personal loans from Canstar.
ThinCats Australia. ThinCats Australia is an offshoot of ThinCats – a UK-based online peer to peer lending platform that was established in 2011 and which offers loan of up to three million pounds. In Australia the brand is targeted at small to medium enterprises (SMEs) and offers secured business loans of up to $2 million, for up to five years. It recently celebrated its first birthday in Australia, announcing that during that time it has accumulated 250 lenders and finance brokers on its platform and has rranged loans aggregating close to $2 million to date at interest rates ranging from 11.5 per cent to 14.5 per cent.
DirectMoney. Recently listed on the ASX, DirectMoney was the first P2P business model to float, via a reverse takeover of Basper Limited. The IPO priced shares as $0.20, reaching a trading high of $0.24. At time of writing (3/12/15) the share price is $0.095. For investors, the minimum investment amount is $50,000 for a minimum of three years.
MoneyPlace. Founded by a small group of former NAB executives, MoneyPlace has recently completed a two-year process to get to market. It is newest P2P lender on the block, having launched at the start of November 2015. Borrowers can borrow up to $35,000; on the investor side, MoneyPlace fractionalises the loans to enable an investor to gain exposure to 100+ loans.
OnDeck. OnDeck is a technology-enabled small business lender that can evaluate, approve and fund small business loans as fast as the same day. Headquartered in New York City, the company has originated more than $2 billion in loans to small businesses in more than 700 industries across all 50 U.S. states and Canada. In April 2015 US-based P2B lender OnDeck announced a strategic partnership with MYOB – Australia’s leading business accounting software provider, and commenced lending on Wednesday 2nd December.
Marketlend Relatively new to the scene, marketplace lender Marketlend offers business loans for purchase of vehicles, equipment or for business expansion. Marketlend puts its money where its mouth is, reducing investor risk by taking a stake in each loan itself, for a minimum of 2.5% and to date average 12.43% per loan. Marketlend investment is ranked below the investors and will take the first loss. Marketlend will not lend to borrowers who are unable to get credit elsewhere, and as Marketlend invests its own money as well, it will not offer a listing on the marketplace if it is uncomfortable with the risk profile. Furthermore it will not list or invest in startups, borrowers with defaults.
Harmoney Harmoney recently celebrated its first birthday in New Zealand, reporting that it facilitated 70,000 loan applications and settled $100 million in personal loans during the first 12 months. It has gained its license in Australia and plans to launch in late December.
You may be wondering how peer to peer lenders make money? Well, similarly to other peer to peer business such as Uber (which takes a percentage of driver earnings) and Airbnb (which charges a percentage fee), P2P lenders also take a cut in the form of a platform fee. It is already factored in to the loan costs that borrowers pay. SocietyOne, for example, notes in a 2014 FSI submission that it takes 1.25% p.a. commission fee from the interest paid by borrowers and passes the remaining to investors. P2P platforms may also charge an application fee.