Peer-to-peer lender Ratesetter eyes growth in car finance, renewable energy

Peer-to-peer lender RateSetter expects disruption in the car finance industry and growth in renewables to propel its business.

Daniel Foggo, CEO of Ratesetter. Picture: Hollie Adams

Peer-to-peer lender RateSetter Australia expects disruption in the car finance industry and growth in renewable energy lending will propel the business to $1 billion in loans in coming months.

RateSetter chief executive Daniel Foggo’s optimism comes after the group last week topped $500 million in lending, reflecting 70 per cent annual growth in its loan book.

Mr Foggo believes increased household demand for solar and battery energy, post Hayne royal commission sentiment against large banks and changes to dealership finance will create even stronger momentum.

“That is really a significant event in our mind in terms of opening up that (car) dealer channel,” Mr Foggo said of the royal commission’s recommendation that vehicle and other dealers are covered by the relevant credit laws, where they were previously exempt.

“We expect significant disruption in this space, driven by regulatory change and technology advancements by both broker firms and dealer groups.”

Peer-to-peer lenders connect borrowers and investors and create a marketplace for loans.

Locally, the race is getting fiercer in the industry though, as players seek more lending scale.

Rival and Westpac Bank backed SocietyOne became Australia’s first marketplace lender to reach $500m in originations in September across its personal loan, agricultural lending and marketplace business. At the time, the company said it was targeting $1bn by the end of 2019.

On the retail investor side, Mr Foggo has observed they are “starting to take much greater interest” in other asset classes including fixed income, due to Labor’s plan to scrap franking credit cash rebates.

“People are already thinking about it and we see that as a being a real boon for the business,” he said. Of RateSetter’s 50,000 customers about 15,000 are registered lenders on its platform.

Still, investors have to be mindful of any losses incurred by peer-to-peer lenders.

Mr Foggo said RateSetter’s overall loss rate was 1.4 per cent of its lending book, and well within its provision fund of 6.2 per cent.

“Consumer loans perform better in times of distress,” he added, noting he was comfortable with the outlook for loan performance given unemployment was tracking at its lowest level in more than eight years.

In energy, RateSetter last year signed a $100m funding deal with the federal government’s Clean Energy Finance Corporation for South Australia’s home battery scheme. It also has technology links to manufacturers and retailers in the sector, including Tesla and Sonnen.

But RateSetter, which was established in this market in 2012, is not yet profitable in Australia. It expects to be in the black when it is funding $40m in loans a month while still investing in technology and growth.

The company has about 105 employees and plans to add 50 people over 2 019. While there is no time frame for joining the ASX, Mr Foggo thinks public markets are a “natural place” for marketplace lenders to end up. “Longer term we would imagine that public markets would help us build that awareness.”

In December, the local group ruled off $17m in investor funding as part of its latest capital raising, with backers including investment manager Federation, Myer Family Investments and Five V Capital. They joined RateSetter UK and Carsales.com as investors. RateSetter UK has now originated more than £3 billion ($5.5bn) in total lending and is tipped to be seeking an initial public offering within 18 months.

It hasn’t, however, all been smooth sailing. RateSetter was in the spotlight on several instances in Britain over a lack of transparency in its lending practices. That was ahead of the group being authorised by the Financial Conduct Authority in 2017.