AltFi met with Daniel Foggo, CEO, and Ben Milsom, Head of Marketing, at the headquarters of the newly launched RateSetter Australia. When it launched on the 12th November 2014, RateSetter was Australia’s first (and is currently the only) marketplace lending platform to offer retail investors the chance to participate. It took the team nearly 2 years to clear all of the regulatory hurdles to make this ground-breaking feature possible. The user experience (both borrower and lender) is virtually identical to that of its parent company in the UK. Lenders do not choose individual borrowers to lend to, rather they choose a term for which they want to lend and the lending rate is then set by the market. A provision fund operates to cover losses that stem from defaulting borrowers. There are, however, subtle differences in the way the back end and the documentation works to comply with Australian regulation. Another difference is that the one year market on the Australian platform pays i
Just as RateSetter started in the UK, the platform’s borrowers consist of individuals and the target borrower is at the ‘premium’ end of the credit spectrum. Borrower rates are between 9 and 14% which compare favourably to the rates offered by banks - 15%+. Lenders can currently earn around 10% after fees in the 5year product and around 6% in the one month product. This compares favourably to savings rates of around 3%. As in the UK, the platform has a provision fund. This fund was seeded with A$200k of RateSetter’s money and now stands at A$225k, more than sufficient to cover the A$560k currently on loan.
The platform’s credit processes are described as being more manual that those of its UK parent, mostly down to the poorer quality of credit data available from third party agencies. This has led to a very cautious approach initially. The team have now made just over A$720k of loans, however they have fielded $32m of applications!
Looking forward to 2015, the platform is cautious about growth expectations, understandably wanting to nurture controlled and sustainable growth rather than going all out. They see their second and third years as the years which will see the most growth. The key challenge to overcome is to increase public awareness of the industry’s existence (with both investors and borrowers).
To learn more about the Australian AltFi market, check out our roundup here.