By David Tuckwell on Thursday 30 November 2017
'AutoInvest' will allow investors to recycle coupons into new loans
TruePillars is launching an automated reinvestment platform for its investors.
Aussie peer-to-peer lender TruePillars is rolling out a first-of-a-kind platform feature that will allow its lenders to automatically reinvest their earnings into new loans.
The new feature, called ‘AutoInvest’, will give the company’s time poor investors an easy avenue for growing their investments.
“Our investors are busy people who’ve told us they don’t want to miss opportunities just because they couldn’t log into the website at the right time,” John Baini, CEO of TruePillars, told AltFi.
“This new feature provides an easy solution for that.”
AutoInvest will allow investors to set up their own unique instructions on the loans they want to invest in - like a standing order to invest a certain amount at a certain return based on relative risk weightings. It provides a simple way for investors to build the portfolio they desire.
TruePillars provides loans to small businesses. It was founded by former banking and technology executives John Baini and Dennis Hakme who saw an opportunity in Australia’s still-nascent fintech industry to start an online SME lender.
In order to get the business of the ground, Messrs Baini and Hakme put up a “significant” amount of their own money and raised more through friends and family. They then formed a partnership with tech specialists at DiUS to build the platform before recently completing a $5m funding round with professional investors.
Like other Aussie P2P lenders, TruePillars’ website offers a two-way marketplace where lenders and borrowers can meet and decide fair rates on loans. It offers loans 1-5 years in duration which are repaid monthly.
“We run a retail investor compliant managed investment scheme which means we can accept all investors not just sophisticated who pass income and asset tests,” Mr Baini said.
“Every time we approve a loan we list it in the marketplace. The investors then decide for themselves which loans they wish to invest in.”
What makes TruePillars different from other P2P lenders is that it offers a secondary marketplace, where investors can list their positions in existing loans and allow other investors to replace them. This feature is helpful because it gives investors a potential pathway to liquidate their holdings if they need to.
“Our investors have to commit their money for up to five years. But if an investor wants to get it back earlier what this enables them to do is list their position in an existing loan. If another investor is willing to take them out they can replace them. This has been a massively popular feature with over 5,000 separate transactions facilitated since we launched the secondary marketplace in November 2016,” Mr Baini says.
TruePillars makes its money though establishment fees charged to borrowers, which range from 3 – 6% of the loan. Perhaps uniquely among Aussie fintechs, TruePillars allows its investors to know the exact interest rate the borrower is being charged.
“Our investors always know what the borrower is paying, so we don’t intercept anymore spread other than the flat 2% per annum margin that is fully disclosed. So investors always receive the interest rate the borrower is paying less 2%. Other platforms don’t disclose how much spread they are taking,” Mr Baini says. He adds that the transparency on interest rates and fess helps prevent borrowers from being overcharged. It also helps build trust.
Like other fintech entrepreneurs Mr Baini believes that there will be market consolidation in Aussie fintech lending in the near future.
“These businesses are not cheap to run so there definitely will be consolidation. That’s supported by bigger markets overseas that are ahead of us. It tends to be only three or four truly large non-bank lenders who emerge, usually with focus on slightly different niches. I don’t see why Australia will be any different.”
But he believes that TruePillars occupies an important market niche, given that it targets SME loans of a longer duration than most other players.