P2P Money Blog

RateSetter, one of the leading peer-to-peer providers within the UK (and abroad) have stated that their loans arranged through giffgaff have grown significantly and now represent half the loans arranged through the platform.  This commercial arrangement has been in place since November 2013 and is driving significant growth in RateSetter.

Here is the full statement from RateSetter:

Members of giffgaff are flocking to buy mobile phones online using peer-to-peer (P2P) loans as a ground-breaking initiative between the mobile company and leading P2P lender RateSetter gathers pace.

The first ever commercial partnership between a P2P platform and a mobile operator has driven a dramatic increase in the number of people taking out P2P loans in the UK. The number of giffgaff loans doubled month-on-month in April as the money handled by RateSetter smashed through the £200m mark.

The successful relationship is rooted in a number of shared values. Both companies are disrupting the market to ensure a better deal for consumers. RateSetter is democratising the savings and loans market by cutting out the banks, whilst giffgaff - with its strong focus on community - is cutting out costly long-term contracts and providing flexibility to their members.

This phenomenal growth through the white label partnership has been a major boost for RateSetter, helping it to match a record number of loans during April and ensuring that the platform is leading the charge in P2P. In March, it was announced that the company was the largest P2P lender in the UK by the amount of new loans originated.

Rhydian Lewis, CEO and Founder of RateSetter, said: “Our ground-breaking partnership with giffgaff shows the potential within the P2P sector to power a whole range of consumer services, starting with mobile phones, without the high fees and rates of a high street bank. This is a fantastic example of the boom in the ‘sharing economy’.

“The driving ethos behind launching RateSetter was our belief that there must be an alternative to financing loans that offers customers a better deal. Through this exciting collaboration, we are moving beyond the direct provision of loans to borrowers and emulating the freedom our values bring across multiple sectors. The future of consumer finance is bright - and it is powered by P2P.”

A spokesperson from giffgaff, said: “This initiative has been revolutionary for our member base. We are now able to offer mobile handsets through our website, based on the easy provision of cost-effective loans provided by other members of the public.

“This is a really exciting development for giffgaff and one that we have worked on closely with our members to bring about. Together with RateSetter we are disrupting the market, offering mobile phones without costly long-term contracts and thus meeting the needs of today’s consumers.”

RateSetter first launched its partnership with giffgaff in November 2013 as a response to the growing consumer demand for alternative methods of financing everyday items. Based on joint credit and fraud management technology, the move has enabled giffgaff to offer handsets to customers without an immediate upfront payment.

The partnership answers significant demand from consumers who want access to the latest mobile technology without the burden of a 24-month contract. By helping giffgaff to make these needs a reality, RateSetter is allowing consumers to take advantage of the best value tariffs without the trade-off that big mobile networks demand. This echoes their work in the finance arena, where they offer an alternative option for savers, allowing them to bypass the banks to benefit from higher savings by offering loans directly to other members of the public.

We recently reviewed Money&Co, one of the latest entrants into the peer-to-peer sector.  Despite some loans attracting individual bids in the tens of thousands of pounds, with one bid of £40,000, none of the loans reached their required funding by the time the auctions were due to close on Monday.  Money&Co have now extend these auctions by up to two weeks.

There have been additional bids today with one bid of £50,000 an the £1million loan, but that in itself only represents 5% of the required capital.  It is likely that Money&Co will now start actively marketing the site to attract both small and large lenders, and we'll continue to follow this with interest.

Funding Circle have announced they will be extending the 2% cashback on property loans.  The first property loan was very popular, partly due to the cashback offer.

Here is a copy of the email from Funding Circle.  We have redacted the company name, the full address and the link to the loan details, as this information was only shared with registered lenders.

Here are the details of the second formalised property development loan going onto the marketplace. It will be listed this week.

Property Development in South East London

The borrower is a father and son team who have reportedly developed 29 properties in the local area over the past 10 years. This loan is for £212,000 and is the first staged draw down of the full £1,004,445 that will be required for the project in South East London.  It is a property development loan with a 7% fixed rate (before fees) meaning that these loan parts will be auctioned on a first come, first served basis. You can download the full investor report [link removed], created by Funding Circle’s credit and property specialists.

Key features of the loan:

• A+ property development loan
• 7% fixed rate (before fees)
• 18 month loan term
• £212,000 loan value (1st staged drawdown)
• 47% Loan to value (Based on completed project value)
• 4 x 2 bedroom houses to be built in Forest Hill, London
• Borrower has reported track record of 10 years developing property schemes in the local area
• First charge security on the property
• The monthly repayments will consist of interest payments only, with the principal and any interest due paid back at the end of the loan term. Remember, you are lending to businesses so your capital is at risk
• Cashback at 2% for investors*

Autobid will continue to bid on all available loans on the marketplace, and should be turned off if you do not want to bid on these loans.

The mention of Wonga will stir strong emotions amongst people.  Some see them as a saviour for helping people obtain short term credit where their bank or building society may have turned them down.  Others see them as parasites, praying on the poorest in society, and charging them astronomical interest rates.  Perhaps both viewpoints are equally valid?

The company that brought us Wonga (who changed their name from Wonga.com Limited in May 2013 to WDFC UK Limited) have recently launched their own peer-to-peer lending site under the brand "Invest and Borrow".  The small print on the site states as follows:

Invest and Borrow is a trading style of WDFC UK Limited.  WDFC UK Limited is a UK based company that provides a number of innovative digital financial services.

It doesn't mention "Wonga" as one of those innovative digital financial services.

Rather than the representative 5853% APR on Wonga itself, Invest and Borrow charge borrowers a "lower" representative 75% ARP, but pay lenders an even smaller 7.35% AER.  If a borrower were to default, lenders are repaid the outstanding capital.  Invest and Borrow's margin of around 90% of the interest and fees is rather large, but without knowing their estimated default rates we cannot calculate determine how "large" this actually is.

Peer-to-peer lending has grown over the last few years for a variety of reasons.  Some are from lenders looking for higher returns than they can get in the bank.  Others want to diversify their portfolio to include assets such as these.  There are, however, a moderate number of lenders who chose peer-to-peer lending because they no longer trusted their bank or other financial institutional services such as Wonga.

Wonga has been, rightly or wrongly, hugely successful and is a well known brand.  Lending Well launched a payday peer-to-peer offering previously, but this only lasted a year.  How successful Wonga will be in peer-to-peer lending will be decided by the lenders and borrowers who choose to use their site.

Full story »

We believe that the Financial Conduct Authority (FCA), acting from information provided by P2P money, has shut down an unregulated peer-to-peer lending website.  The company in question had set-up a peer-to-peer lending site without registering with the FCA, which is now a requirement for all crowdfunding providers.  The company had also set-up a comparison site, under a different name, showing their lending rate higher than those of their competition, but the comparison was misleading as the rates quoted for their competitors were not correct.

The FCA were unable to confirm what action they had taken, but they pointed out that the firm's website was now offline.

Potential customers should check with the FCA if a crowdfunding company has registered with them.  The P2P money website also provides details on each of the peer-to-peer companies operating within the UK.