P2P lender RateSetter sees decline in net lending volumes

By Ryan Weeks on Thursday 13 July 2017

Alternative Lending

Latest market data shows MarketInvoice has caught up to RateSetter in monthly originations for the first time.

Two of the UK’s “big three” peer-to-peer lenders are authorised, and will soon launch their Innovative Finance ISAs. The other, RateSetter, is not yet authorised, and has had to make a few changes to suit the requirements of the regulator in recent months. Mostly notably it has had to put a stop to its wholesale lending business.

It’s impossible to say exactly why RateSetter hasn’t yet been authorised. Both Zopa and Wellesley & Co. have dropped their provision funds recently. Zopa was authorised shortly before the move. Wellesley has currently paused its peer-to-peer lending business, allowing it time to make changes in keeping with FCA demands. Co-founder Andrew Turnbull said that this move reflected the desire of the regulator to see the exact dynamics of P2P loans passed through to investors. However, Lending Works continues to run a provision fund, and it became one of the first peer-to-peer firms to be authorised back in October of last year. 

RateSetter’s provision fund been fundamental to the investor offering to date (how many times have we heard the phrase: “no investor has ever lost a penny”?). The platform dynamically matches investors and borrowers, with interest rates set by demand. The return received by investors is fuelled by a wide array of loan and risk types.

Whether or not RateSetter continues to make changes at the behest of the regulator is unclear. But what is clear, using the latest figures from AltFi Data, is that its lending is slowing down significantly. RateSetter posted its first negative month of net lending (new loans net of repayments and defaults) in April, and continued in the same direction in May, with a net lending figure of around -£5m for the month. In June, its net lending fell to almost -£15m.

MarketInvoice is a very different platform to RateSetter, focused as it is on facilitating invoice finance for small businesses, with money coming from institutional and high net worth investors.

MarketInvoice recently sought to boost its monthly lending figures – in tandem to widening its options for borrowers – with the recent launch of MarketInvoice Pro, an open funding line secured against a business’s outstanding invoices. The company then enjoyed a record quarter in terms of lending volumes in Q2, with June coming in as its biggest ever month at £64.2m in invoices funded.

Until now, RateSetter and MarketInvoice’s monthly lending volumes have never been close, with RateSetter typically lending at least double that of its fellow P2PFA member each month. But in June, for the first time ever, MarketInvoice lent ever so slightly more than RateSetter. The two company’s lending volumes have been trending in opposite directions since roughly the start of the year.

To reiterate, RateSetter and MarketInvoice are very different businesses. But a comparison of their lending volumes is nevertheless indicative. RateSetter may well bounce back in the next few months, but for now it appears to be struggling through a period of suppressed volumes.

“Our lending volumes have increased year on year: in the first six months of 2017, we lent £336m, which compares to £314m in the first six months of 2016. To date, RateSetter borrowers have repaid more than £1.27bn,” said Luke O’Mahony, PR manager at RateSetter.

RateSetter spreads the majority of its fees over the lifetime of loans, meaning that the company has a sustainable source of income and does not need to write new loans in order to generate revenue. That means we can focus on sustainable growth, rather than short term volumes.”

“We are working to increase lending volumes in a measured way over the long term: we have diversified our lending across several sectors, and are continuing to invest in new channels of origination – for example, we recently announced that we intend to launch a hire purchase product.”

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