Last week RateSetter lent its one billionth pound, becoming the third UK platform to achieve the feat and also the third to do so over the past 5 months. In reaching £1bn, RateSetter also becomes the fastest UK platform to hit the mark, beating Funding Circle by a mere 3 days! RateSetter’s 1,949 day record almost halves the time that the pioneering Zopa took to get to £1bn in cumulative lending. The phenomenon of newer platforms growing faster looks set to continue – earlier this month LendInvest passed the £500m mark in a little over 981 days. By comparison RateSetter took just over 1,600 days to originate its first £500m.
Figure 1: Time taken to lend first £1bn
In much the same way that we did when Zopa lent its billionth pound, we have taken a look at some of the key themes that can be taken from the data that RateSetter provides. This also gives us a good excuse to explore some of the new fields that RateSetter added to their loanbook earlier this month.
Figure 2: Monthly Origination Volume
RateSetter’s origination volume has grown steadily and despite a period of limited growth in mid 2015, its growth trajectory certainly appears to have picked up with a record month in December 2015 and a strong start to 2016.
Figure 3: Weighted Average gross interest rate
After some variability in the early days after launch the weighted average gross interest rate that RateSetter’s lenders have achieved has remained in a tight range between 6.8% and 8.5% over the last 20 months.
Figure 4: Quarterly origination broken down by lending term
The term over which RateSetter originates loans has diversified as the platform has matured. The platform now has 30% of its monthly origination in loans of less than 13 months. This is likely to be as a result of RateSetter seeking to match the length of time that lenders lend money with the length of time that borrowers borrow money. RateSetter is unique amongst UK P2P platforms in offering lending terms from as short as 1 month all the way up to 5 years. In order to facilitate this, the platform does not always match lenders with exactly the same duration of borrower resulting in what is known as ‘maturity transformation’. One thing that is not possible to determine from the loanbook is whether there is a significant mismatch between the length of time that that investors opt to lend for and the length of time for which the borrowers are borrowing.
Figure 5: Quarterly Origination broken down by Loan Purpose
In the latest publication of their loanbook RateSetter have added a field that outlines the purpose of each loan. Figure 5 shows a breakdown and illustrates the increasingly diverse lending that RateSetter is facilitating. Some intriguing categories are the four ‘Loans to lending business for…’ categories. Since the second quarter of 2013 these categories have accounted for increasingly large amounts of RateSetter’s origination. We know that RateSetter has partnerships with several companies, for example GiffGaff and Commuter Club, perhaps these loans are included in these four categories? Given that together this lending amounts to around 20% of RateSetter’s quarterly origination for the last 8 quarters perhaps there are further tie-ups with other lending businesses as yet undisclosed. When asked, RateSetter did not want to elaborate on these loan purpose categories.
Figure 6: Loan Purpose by origination amount and by principal outstanding
Congratulations RateSetter! And here is to the next Platform over the line – contenders below…