Is Peer To Peer Lending Going Big Time?

On the day, Sarv Girn, the Chief Information Officer at the RBA gave a speech entitled Digital Disruption – Opportunities for Innovation and Growth to the Committee for Economic Development of Australia (CEDA), the AFR reports that Peer-to-peer lender SocietyOne has attracted the interest of James Packer and Lachlan Murdoch, although nothing is signed yet.

This is on top of the  $5 million investment Westpac Banking Corporation equity stake in the business made through its venture capital fund, Reinventure Group. The Australian head of global private equity giant KKR, ­Justin Reizes, has also invested in SocietyOne in a personal capacity.

In a recent article, SocietyOne is said to have made almost 150 loans, totalling $2 million. About 11% of applications are accepted. SocietyOne’s default rate at June 30 was 2.3 per cent. The market place includes auction functionality like ebay to match borrowers and investors.

You can read our recent article on P2P lending here. We included a summary of SocietyOne. Recently SocietyOne introduced a personal loan rate for prime borrowers at more than 5 per cent lower than the major banks. For example, borrowers with excellent credit that translates to a comparison rate of 9.80 per cent per annum which is 5.48 per cent lower than the average personal loan rate from the big four banks.

We think P2P Lending has the potential to be a disruptive force and could change the face of regular banking, quite soon. As the AFR concludes:

Westpac’s interest in SocietyOne was partly driven by a desire to be close to the development of such technology. Investor interest in SocietyOne also illustrates the extent to which banking is fast becoming a technology business. The winds of change may have arrived late to an industry historically defined by high barriers to entry and oligopolistic structures, but they now blow hard.

 

 

 

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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