Mark my words. These guys are taking the P2P industry by the scruff of the neck and we're going to have access to their wonderful platform.
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The rush to take a chunk of banks' $55 billion personal loan revenue will accelerate in November when NZ peer-to-peer lender Harmoney starts operations in Australia with $NZ200 million ($180 million) in new funding behind it.
It will join three other "marketplace lenders" doing personal loans – SocietyOne, RateSetter Australia and MoneyPlace, which is due to start operating in October.
So far Harmoney has facilitated $NZ100 million in the year since it started, mostly to middle aged people consolidating higher interest personal loans or for home improvements, out of about NZ$1 billion worth of applications. This is well above P2P rivals in Australia so far.
Three-year old SocietyOne – backed by equity investments from the likes of Westpac, James Packer and News Corp – has "matched" about $40 million and RateSetter Australia has just reached $11 million, with current "demand" running at close to $39 million.
Marketplace lenders crave high volumes to get the best rates for borrowers and lenders, just like a stock market needs liquidity. Some see this will naturally mean just a few will be able operate in any one market.
However, Harmoney's Australian chief Ben Taylor said P2P lending is "embryonic" in Australia and there is room for all to take a share of the banks personal loan books.
"Our competitors are the banks. There is $55 billion of personal lending in Australia – I am hopeful we will take a portion of that," he said.
He put the speed of its lending growth down to the ability to attract large amounts of debt as well as equity funding from institutional investors. That is more like a typical bank model, where money is raised first and then loaned. But Harmoney is not the lender, it earns its money from fees it charges borrowers and lenders.
Other P2P lenders are also looking to get more institutional investors such as banks themselves on their platforms to increase volumes.
Mr Taylor also cites more than a decade of experience in finance as another factor. Mr Taylor and co-CEOs Brad Hagstrom and Neil Roberts all worked at consumer financier FlexiGroup.
He would like to replicate the lending growth it has done in NZ. That should be possible in a market with five times the population and a much higher propensity to borrow, but competition is greater in Australia and regulation less supportive of alternative lending.
In April, the Key government in New Zealand introduced P2P lending licences that make it easier to get approval to allow retail investors to lend online. RateSetter is the only platform in Australia that the corporate cop has granted a retail investor licence.
Harmoney will start out with "sophisticated investors" lending alongside its large institutional backers. it will have a minimum interest rate of 8.99 per cent in Australia, which could range up to more than 20 per cent for high-risk borrowers.
Start-up funding for loans of $NZ100 million came from Heartland Bank and Blue Elephant Capital Management, with equity from NZ eBay equivalent Trade Me and Heartland. On Friday it said it had an extra $NZ200 million from international investors, including Marshall Wace and P2P Global Investments.
The latter will provide another $NZ200 million in lending capital over the next three years across NZ and Australia by buying loans on Harmoney's platform.
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