It has taken over 12 months for DirectMoney to be granted a retail licence. The Australian regulators are still extremely cautious about granting licences to marketplace lending platforms. But the platform has now launched a retail fund called The DirectMoney Personal Loan Fund.
DirectMoney has structured the platform so that retail investors do not have exposure to individual loans. In order to participate, retail investors have to buy into the retail fund. The fund will invest in unsecured personal loans of 3 and 5 years duration for borrowers from across Australia. The loans vary in size from $5,000 up to $35,000. The minimum investment is A$50,000.
The only other option for retail investors wanting to invest in consumer-based peer-to-peer lending in Australia is RateSetter Australia. That is a very different model. The minimum investment is just $10 and the average amount invested is $4,999. The platform also addresses the retail investors as ‘savers’, obviously marketing this as an alternative to leaving your money in a bank account. Investors can also pick the rate they want to lend at rather than investing in a fund.
DirectMoney has also released its prospectus for its upcoming float on the ASX. The company first announced its intention to float at the end of March. DirectMoney is looking to go public at the end of June and is dong this via a reverse listing; it is being acquired by Basper Limited, a listed company. This method of listing is a lot faster and more cost effective than undergoing an IPO. The Basper board and management will be replaced by DirectMoney’s experienced team.
The company is looking to raise up to $15 million at an issue price of $0.20 per share. DirectMoney currently has about 350 borrowers and a total loan book value of approximately $6 million. The average loan size on the platform is between $10,000 and $20,000 with a 3 to 5 year term. Loans are targeted at prime retail borrowers. The use of a loan warehouse means that DirectMoney is able to fund borrowers immediately. The platform funds the loans and then holds them in the warehouse until they are sold on to loan investors.
The prospectus also states that in the long term the platform may expand its business to cover home mortgages, small business loans, and other finance products to borrowers.
It is not all plain sailing for the alternative finance industry in Australia. This week Mike Hirst, Bendigo and Adelaide Bank chief, made a dig at peer-to-peer lenders by saying local economies would suffer if “everything goes online”, and that traditional players are better equipped to serve local markets. He said that he was concerned about the “centralisation of credit decision-making”. Despite this it seems that there is demand for P2P lending in Australia and we expect to see this nascent market become more established over the course of 2015.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.