Australian youth drive P2P revolution

By David Tuckwell on Monday 1 May 2017

OpinionAlternative Lending

They love smashed avocado and PC. They also love P2P.

From “snowflakes” too PC for debate, to epicureans too in love with smashed avocado to save for a house - millennials cop a hard press.

But its millennials that are driving the P2P revolution. They’re turning away from banks and property in droves and creating space for fintech disrupters, according to new research by RateSetter Australia.

“Millennial investors certainly don’t have it easy,” said Daniel Foggo, CEO of RateSetter Australia.

“Facing low rates on savings accounts, pricey property and stock market volatility, they’re short on options. 

“So it didn’t surprise us too much that when presented with a product like RateSetter, that there would be strong interest from this investor segment.”

The company has seen the number of millennial investors using its platform increased a startling 250 percent the past 12 months.

They also found that two-thirds of millennials chose RateSetter in preference to savings accounts and term deposits, and one in five used the platform as an alternative to property.

“Millennials face an environment where… property and bank deposits offer poor value,” Mr Foggo said.

“They’re the first generation to have access to P2P lending, which gives them access to strong and stable returns by investing in the previously hard-to-access asset class of business and consumer credit.”

The average investment from millennials was only A$10,000, much smaller than the A$50,000-plus averaged by baby boomers and the ‘silent generation’. 

But the company suggests it is exactly this — that the barrier to entry is lower — that makes P2P so attractive an asset class to (relatively) poorer millennials. 

“We wanted to be an investment option available to all retail investors, regardless of their wealth… That’s why investors can start investing… from as little as $10,” Mr Foggo said.

“We think that the naturally conservative millennial investors really value this flexibility and the ability to trial RateSetter with a smaller investment before investing a larger amount.”

With millennials fanning the breeze, RateSetter sees itself and other P2P lenders as well-placed to profit from technology-driven changes that are unfolding rapidly in Australian lending. And as millennials grow older and wealthier, carrying P2P lending into centre-stage.

“Millennials will be the first generation to see P2P lending as a mainstream investment option. To them, it won’t be an alternative investment, but an ordinary part of the investing landscape and a typical component of many investment portfolios,” Mr Foggo said. 

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