DirectMoney has dubbed its model ‘warehouse lending’ – employing a fund structure to lend money to individuals. David Doust, CEO, explained that it’s not strictly peer-to-peer or marketplace lending in as much as investors do not enter into direct contracts with borrowers, although does allow investors to gain direct exposure to a portfolio of consumer loans. In that way the risk characteristics and returns profile is very similar to a more traditional marketplace lending model. The platform only launched in October 2014 but has already exhibited strong growth in lending volume for an early stage platform (although David would not give precise figures at this stage). Currently only sophisticated investors are able to participate and the firm is targeting a ratio of institutional:individual investor involvement of 3:7.
Similar to RateSetter and Society One, DirectMoney also targets prime borrowers but, unlike the other platforms, they also lend to near prime borrowers. Borrower rates are slightly higher at 10.75% to 18.75% with an estimated default rate similar to that of the big four banks. Lender returns will ultimately depend on credit performance but are expected to be in the same range as the other Australian peer to peer lenders.
The ethos behind the DirectMoney credit process is to use an ‘old school’ credit model combined with intense automation. Services such as Yodlee, which enables direct sight of bank accounts, are employed. They also use innovative ID verification processes - using a ‘selfie’ that also includes the borrower’s driving license and an ATM receipt from their bank account.
DirectMoney has big plans for 2015 including the launch of a retail investment product early in the year (currently only sophisticated investors can participate). Definitely one to watch.
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