SocietyOne: Identifying niche markets

Australia?s first peer to peer (P2P) lender, SocietyOne, will celebrate its third birthday this year. CANSTAR spoke with Co-founder and CEO of SocietyOne Matt Symons, about why the Group chose Australia and what attracted him to the industry.

Q: P2P lending would seem to be a prime example of the consumer benefits of digital disruption. What makes personal lending a good target for disruption?

In Australia, Consumer Finance (personal lending and credit cards) is one of the most profitable segments of retail banking, in what is already the most profitable banking system in the world.

So we think the potential for disruption and disintermediation in Australia is quite large. By connecting creditworthy borrowers and investors directly in a secure and more cost-effective online environment, we can share our lower operating cost and the margins that banks have traditionally captured for themselves with both sides of the marketplace.

Also, by pioneering risk-based pricing, we can reward good quality borrowers with lower rates based on their unique credit history. We can therefore save borrowers a considerable amount of money and help them reduce debt and for the first time, offer investors access to an attractive, diversified portfolio of loans.

The financial disruption driven by changes in technology and consumer behaviour are challenging our notions of credit and investing as well as of the institutions that control these functions, including banking. As a financial disruptor and innovator, we are helping shift the power dynamic away from the big credit institutions back to the individual: we put borrowers and investors at the centre of the process to achieve the best possible outcome for them.

This shift from institutional trust to peer trust where people can and want to empower each other, is leading the disintermediation of the traditional institutions we associate with capital creation.

P2P lending for example, is a simple and secure way for borrowers who want a loan and meet certain credit criteria, to connect directly with investors with capital to invest. But it?s only made possible by using a powerful technology platform in the middle, which allows borrowers to register and apply directly online, at their convenience, typically during hours when banks are closed.

Q: Personal loans are a start – what other financial products are currently in your sights?

What sets SocietyOne apart from other P2P lenders is our unique ability to offer investors access to multiple asset classes, not just unsecured personal loans.

Our goal is to identify underserved niche markets where large pricing differentials can create opportunities for a product that delivers greater value for its end users.

Such opportunities exist in rural lending, for example. Livestock agents typically finance a farmer?s stock purchases using their own overdraft or agribusiness finance facilities. This limits their ability to scale their business and properly manage succession planning.

SocietyOne?s Livestock Lending Program simplifies the financing from the agents by moving the loan facility onto our P2P lending platform. We free up capital for the agents while providing the farmer with a more cost-effective and expedient financing solution to fund trading stock purchases. And it allows farmers to what they do best – look after their cattle.

The Program also gives investors on the SocietyOne platform the opportunity to invest in a new, secured fixed income asset class they didn?t previously have access to.

Like this, we?re developing other secured and unsecured asset classes for our product catalogue that can provide investors with real fixed income diversification on a single P2P powered marketplace.

What are the main benefits to both borrowers and lenders in using a P2P platform?

P2P lending is an opportunity for borrowers and investors to bypass the traditional bank and connect directly with each other, all in a secure and anonymous way. Facilitated by a secure online technology platform, the entire process can be done faster, cheaper and in a paperless environment.

Borrowers with good credit typically get much lower rates than they would otherwise achieve with a bank or a credit card, and investors get exposure to a diversified asset class with attractive returns.

For investors, our value proposition is:

  • Diversification across multiple asset classes (secured and unsecured) not readily available to all investors through a single platform.
  • Access to asset classes that are the most profitable in a bank?s portfolio and strong returns that are not strongly correlated to RBA cash rates, the share market or unemployment (in the case of our secured livestock lending program).
  • Predictable, fixed monthly cash flow in the form of Principal & Interest repayments that can be reinvested or withdrawn.

For borrowers, our value proposition is:

  • Risk-based pricing that rewards good credit history with a lower rate.
  • A competitive environment where investors actively bid for loans, ensuring they get the lowest possible rate. We think this is radically empowering proposition.
  • Flexible loan terms and fixed rates

You can find out more about SocietyOne here and about Matt Symons here.

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