Peer-to-peer lender RateSetter has attributed its recent rapid growth to consumers actively rebelling against the big banks.
The company has just passed the milestones of 10,000 investors and $250million in loans and says it is thanks to the Royal Commission’s scrutiny of the four major lenders.
Research amongst RateSetter’s investor base has found that long-term customers of the big four, particularly amongst generation X, are diverting millions of dollars away from their savings accounts and term deposits into longer term P2P investing.
The amount invested by these investors has increased by 14% over the last 12 months, with average investment now sitting at close to $40,000.
CEO of RateSetter Australia, Daniel Foggo, said, “The Royal Commission has shone a spotlight on our big banks and encouraged both borrowers and investors to look at alternatives. Our rapid growth is proof that people, looking to earn investment returns or borrow money, are realising P2P lending can help put more money in their pocket.
“Our five-year market is proving extremely popular with all segments of our customer base but particularly mums and dads. Strong returns provide this group with a great alternative to bank offers including savings accounts and term deposits.”
Australian Broker asked other lenders whether they had seen the same pattern. General manager third party distribution at Homeloans, Daniel Carde, agreed that they had seen a shift away from the big banks, but puts it more down to products.
He said, "We have certainly seen an increase in volumes over recent times. Most notably we simplified our investment and interest only rates, an area of the mortgage market that has seen a lot of movement and confusion over the past 24 months.
"I put the increase in volumes down to a competitively priced product range that offers real solutions, backed by a professional and knowledgeable sales team dedicated to servicing our business partners."
According to an analysis of RateSetter data, millennials make up the greatest number of registered investors at just over 6,000 and are most likely to be focused on the shorter-term markets. The one-month market has proven very popular, with 27% of millennials looking to this market for a short-term safe house for their savings.
Gen X has also taken up RateSetter’s green loan marketplace in higher numbers than any other demographic since its launch in 2017.
RateSetter's $250m milestone follows a productive 12 months for the company. In June, it established a $20m green loan funding partnership with the Government's Clean Energy Finance Corporation (CEFC), in September it completed a $10.5m fundraising led by leading private equity investor 5V Capital and in December appointed former ING Direct CEO Vaughn Richtor as chair of board.