but there’s no estimate of when they might
be able to invest.
ASX-listed Wisr (wisr.com.au) is anoth-
er P2P lender that accepts retail investors,
although Andrew Goodwin, chief financial
officer, describes it as a “neo-lender” rather
than a marketplace lender. He says it has an
ecosystem model, offering genuine benefit
to its customers and promoting financial
wellness, for example, by showing people
their credit scores and providing tools to
enable them to pay off debt sooner.
TruePillars (truepillars.com), which boasts
an average annual return of 12.35%, offers
retail investors the opportunity to fund busi-
ness loans with as little as $100. You need to
register to invest and set up your investment
instructions, and the platform will invest
your funds in loans that match your criteria.
As the borrower makes their monthly loan
repayments, you will receive distributions
equivalent to your share of the loan.
Latrobe Financial (latrobefinancial.com.au),
which is a long-established and well-performing
mortgage lender, also labels products as P2P
investments. Its Select Investment Account
(P2P) enables investors with a minimum of
$1000 to select loans they want to participate
in. All loans are secured by first mortgages
over Australian property. Returns, which are
from 6% a year, are paid monthly.
Focus on retail investors
Former P2P lender MoneyPlace, which was
taken over by Liberty about 18 months ago,
no longer seeks retail investors.
“I’m very surprised there’s not more com-
petition [in the category],” says Daniel Foggo,
CEO of RateSetter, which set up shop in 2014.
It would be good to have more participants to
make P2P a bigger investment class, he says.
But, on the other hand, the lack of competitors
really helps RateSetter capture the types of
high-quality borrowers it is trying to attract.
A major reason for the lack of companies
in the space, compared with the situation in
other countries, is the high barrier to entry.
“It took us a lot of time and cost us a lot of
money to meet the requirements of the reg-
ulatory regime,” says Foggo.
But this does give investors in the relatively
new sector a degree of comfort. For borrowers,
including businesses, there are more options
including Harmoney, Marketlend, ThinCats
and Bigstone.
RateSetter is firmly focused on retail inves-
tors, says Foggo. The company has 15,000
registered lenders, both young and old, and the
average investment is $20,000 by individuals
and $100,000 by self-managed super funds.
By the time this article is published, Foggo
expects the lender will have passed a milestone,
with half a billion dollars in lending, meaning
the business is coming to scale after a period
of deliberate growth. “We’re now lending $20
million to $25 million a month compared with
$50 million to $90 million by the major banks.”
RateSetter is not sitting on its hands either.
Following the successful launch of its green
loan marketplace in May 2017 with $20 mil-
lion, the P2P lender has recently attracted
an extra $100 million in support from the
federal government’s Clean Energy Finance
Corporation. As a result, it’s now the largest
funder of consumer loans for the purchase of
renewable energy equipment, such as solar
panels and home batteries.
“What is maybe most surprising is that
our renewable energy lending markets have
attracted a lot of retail and SMSF investor
interest,” says Foggo. “Investors are clearly
attracted by the positive impact they can
have on the environment by supporting the
uptake of renewable energy, but also by the
strong credit characteristics [of the borrow-
ers] – homeowners improving their monthly
finances by reducing energy bills.”
To date, RateSetter has funded $25 million of
these loans at an average rate of 6.9% and it’s
growing at 10% a month, says Foggo. Returns
available to investors in these options at the
time of writing were 5% for investments in
South Australian renewable energy and 6.4%
for those in national clean energy.
Apart from the clean energy products,
RateSetter’s main point of difference is its
provision fund, which lowers the risk of any
defaults impacting investors. The money in this
fund comes from charges paid by borrowers,
and RateSetter is able to direct the provision
fund trustee to compensate a lender in the
event of a borrower’s late payment or default.
This fund now sits at $13 million, equating to
6.2% of the loan book, says Foggo.
RateSetter has also introduced a sell-out fea-
ture, partly aimed at younger investors saving
for a home deposit. It means that if you’re in the
three- or five-year lending markets and your
life circumstances change you can request an
early exit, paying an exit fee of 2%, says Foggo.The online lender’s next move is to improve
the customer experience, launching an app by
year end and improving education through
online tutorials and calculators. This should
help make the process of reinvesting early
repayments easier for investors.
Wisr’s retail product is deliberately much
less hands-on. It says its Personal Loan Fund,
which requires a minimum investment of
$10,000, has paid a 7.67%pa return (net of
fees) since inception in May 2015.Diversifying investments
Your investment is diversified across all loans
held in the fund, meaning the impact of any
individual borrower not paying is greatly
reduced. You aren’t required to select loans
or manage monthly reinvestment. And you
can choose to either receive your distributions
monthly or reinvest them. To date the fund
has made about $100 million in loans, says
Goodwin, but only about 5% to 10% have
been funded by retail investors, with the vast
majority from wholesale investors.
TruePillars’ platform provides investors
with the opportunity to vet each loan oppor-
tunity and make their own decisions. Starting
with as little as $100, investors can bid in the
TruePillars marketplace for a new loan or
invest in an existing one.
Prospective investors can view the details
of each individual investment online, includ-
ing the borrower rate, the time frame, the
estimated default rate and investor bidding.
Keep in mind that if you invest you will
receive the borrower rate less the 2% that
TruePillars retains on each loan.
Investors who don’t want to be so hands-on
can instruct the company to invest on their
behalf based on a set of fixed parameters.
Investors with loan units are scheduled to
receive payments on a monthly basis. But
as your payments depend on the business
borrower making repayments as they fall due,
the actual timing of payments will depend
on when the business does so. Investors who
want to liquidate their loan units early can
list these investments, which will be available
to other investors in the TruePillars market-
place. If they’re purchased, the incoming
investor replaces you, and your loan units
will be converted to cash units, less a 0.5%
conversion fee. M
Disclosure: Pam Walkley invests through
RateSetter.