UK peer-to-peer lender RateSetter launched its first site outside Europe on Tuesday morning, pitching it at "savers" in Australia who can lend via the site at interest rates above recent hybrid bond offers.
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The site is the first in Australia to allow anyone with a local bank account to lend online, as long as they are 18 or over.
Local rival SocietyOne also offers P2P loans, but so far only "sophisticated investors" with incomes of more than $250,000 or net assets of $2 million can lend on its platform. However, it is planning to open its platform to retail investors soon.
RateSetter allows Australians to borrow between $2000 and $35,000. Lenders, which RateSetter calls "savers", can loan between $10 and $35,000.
Terms are between a month and five years and rates are set by lenders. Borrowers set how much they want to borrow and the term.
RateSetter founder Rhydian Lewis said they chose Australia as its first market outside the UK because it had a wide range of creditworthy borrowers, investors looking for better returns and banks here had not seen much competition.
"Australia's financial system is ripe for disruption – for too long banks have been offering below-par savings and loan deals in the absence of real competition," he said in a statement.
Australian chief executive Daniel Foggo, an ex banker from Rothschilds and Barclays Capital, said he believed they were the first lender to offer borrowers quotes without the application affecting their credit score, which banks use to assess creditworthiness.
INDICATIVE ANNUALISED RATES
Indicative annualised rates on its website range from 6.4 per cent to 9.5 per cent return for lenders and between 9.5 per cent and 51 per cent interest for borrowers.
Borrowers' rates are at or above existing personal loan offers from banks.
But these are likely to change considerably once the market has higher volumes.
The site also calculates rates based on individual risk assessments, and will match the borrower with lenders offering similar rates.
Commonwealth Bank's recent PERLS VII hybrid issue which was offered to retail investors was paying about 5.45 per cent when it completed on October 1. The bank should be less risky than an individual lender, but PERLS VII terms say it can also choose not to make payments if certain conditions are met.
A spokesman for RateSetter said its licence allows it to let retail investors make loans on its site because it provides a full product disclosure statement.
PROVISION FUND
It also has a "provision fund" held by The Trust Company in Australia, which borrowers finance with fees set according to their risk profile. This can help compensate lenders if a borrower is late with a payment or defaults. But RateSetter said this had nothing to do with it being granted a retail credit licence.
Its provision fund in the UK has so far accumulated £9.04 million, which the company said has meant every lender has so far received all money owed to them.
Since it started in 2010, it has facilitated 70,000 loans totalling $700 million in Britain. Average loan size is $10,500.
On Monday evening 248 users had registered on ratesetter.com.au. Borrowers had applied for more than $3.9 million in loans, but only $22,000 had been approved with a further $25,000 pending.
Lender balances were $227,510, with the average amount invested $27,693.
Two thirds of borrowers were women, all lenders were men.
