RateSetter

Last updated

Retail Money Market Ltd
RateSetter
Founded2009
FounderRhydian Lewis, Peter Behrens
FateAcquired in UK by Metro Bank, September 2020, listed on ASX in Australia
Headquarters
London
Area served
UK, Australia
Products Financial services
Parent Metro Bank
Website www.ratesetter.com OOjs UI icon edit-ltr-progressive.svg

RateSetter was founded in 2009 as one of the pioneers of peer-to-peer lending.

Contents

The London-based company traded in the UK and, from 2014, in Australia.

The UK business was acquired by Metro Bank for a value of £35m and the Australian business listed on ASX for a value of £110m.

RateSetter was recognised for having introduced a number of innovations to peer-to-peer lending, such as a provision fund which mutualised risk, in order to make the product more accessible to the retail investor. RateSetter won the Queen’s Award for Enterprise and its founder was awarded an OBE.

RateSetter’s narrowed the spread between what investors earned and what creditworthy borrowers paid: in this way it provided an alternative to the traditional banking model of deposits and loans and was an early pioneer of the private credit industry.

Multiple billions were lent via the platform between over 750,000 investors and consumer and business borrowers, and investors always received a positive return above the rate for savings accounts. [1] [2]

History

RateSetter's holding company, Retail Money Market Ltd, was incorporated in October 2009 by Rhydian Lewis, an investment banker from Lazard, and he was joined by co-founder Peter Behrens, a lawyer turned banker formerly of Royal Bank of Scotland. [3] The private limited company was funded initially by angel shareholders. [4] [5]

In July 2014, it was announced that the British Business Bank would begin lending through RateSetter to support borrowing for business purposes.[ citation needed ]. RateSetter also had other institutional lenders, although its focus was always on retail investors.

RateSetter was active in the lobbying of government to introduce a regulatory framework to peer-to-peer lending and this came to fruition in late 2014 with the announcement that the industry would be regulated. This materialised in 2017 with the first set of regulations which were to be reviewed after a couple of years in order to ensure they were appropriate, which indeed happened with the second round of regulation in late 2019. This second round anticipated investing via these platforms to become a mainstream investment. The regulatory framework enabled the launch of the Innovative Finance ISA which took place in 2018. Peer-to-peer lending was in effect one of the first new regulated financial products for some time.

RateSetter ended 2014 as the largest P2P lender in the UK by volume (the other major players being Funding Circle, Zopa and LendInvest). In spring 2015, RateSetter attracted investment from UK fund managers and a global family office. Later that year, RateSetter moved to offices in the City of London on Bishopsgate, London. [6]

In 2017 City heavyweight Paul Manduca became chairman of RateSetter; [7] [8] he was at the time also chairman of FTSE-100 Prudential plc. RateSetter also raised further equity investment from shareholders, valuing the business at over £200m. [9] [10]

With its continued focus on the retail investor, RateSetter became the largest provider of the Innovative Finance ISA. The business was growing and preparing for a potential IPO in the UK. [11] RateSetter's investors were earning a premium to bank savings rates, while its loans were some of the most competitive on the market. [12]

RateSetter was planning a pre-IPO equity raise in the first half of 2020. The company had been valued over £200m in its most recent funding round. The company was positive on the regulatory framework that had been put in place in the UK with effect from December 2019, which it believed would be the foundation for the industry maturing after its first decade. This equity raise was disrupted by the immediate aftermath of the first lockdown in March 2020 which caused widespread financial panic.

In May 2020, as a contingency for the widespread expectation of increased risk across UK lending COVID-19 pandemic, RateSetter halved the interest rate paid to lenders. [13] Liquidity was also temporarily delayed but had returned by October. [14] Full payment of interest resumed on 28 January 2021. [15] [16]

Acquisition by Metro Bank

In May 2020, it was announced that RateSetter had been approached by Metro Bank, a British challenger bank. Agreement was reached in August, for an initial payment of £2.5m and a total price of £12m conditional on meeting certain performance criteria. [17] The purchase was subject to regulatory and shareholder approval, and completed on 14 September 2020. [18] The Australian unit was not part of the sale and continued to be owned by its shareholders. [17]

Metro Bank said it intended to continue the RateSetter brand and operations, with new lending funded by the bank's deposits, not through peer-to-peer. [12] The bank went on to use the platform and brand for some of its savings products.

In February 2021, Metro Bank bought out the P2P investors at par, valued at £384m. [19] Some among the 45,000 then investors objected to the inclusion in the transaction of the "provision fund", which had been bolstered by interest diverted from investors in recent months. [20] Metro Bank's focus was on consumer lending and therefore RateSetter's property lending business was sold in 2021 to Shawbrook Bank. [21]

Towards the end of 2023, Metro Bank ceased using the RateSetter brand for savings accounts and new personal loans. [21]

RateSetter Australia

RateSetter Australia commenced operations in November 2014. [22] The Australian business, based in Sydney, is managed and majority-owned locally, and was the first peer-to-peer lending platform in the country open to retail customers. [23]

In December 2017, it was announced that over AU$200m had been lent via the platform. [24] By mid-2020, lending had grown to AU$800m and the company was preparing for a stock exchange flotation. [25]

In 2019, 14% of the company was owned by Retail Money Market Ltd; [26] this holding was not included in the 2020 acquisition of the UK business by Metro Bank. [12]

In August 2020, RateSetter Australia was renamed Plenti [27] [28] ahead of an IPO which took place in September 2020. [29]

Related Research Articles

Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Peer-to-peer lending companies often offer their services online, and attempt to operate with lower overhead and provide their services more cheaply than traditional financial institutions. As a result, lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates, even after the P2P lending company has taken a fee for providing the match-making platform and credit checking the borrower. There is the risk of the borrower defaulting on the loans taken out from peer-lending websites.

<span class="mw-page-title-main">Financial market participants</span>

There are two basic financial market participant distinctions, investors versus speculators and institutional versus retail. Action in financial markets by central banks is usually regarded as intervention rather than participation.

LendingClub is a financial services company headquartered in San Francisco, California. It was the first peer-to-peer lender to register its offerings as securities with the Securities and Exchange Commission (SEC), and to offer loan trading on a secondary market. At its height, LendingClub was the world's largest peer-to-peer lending platform. The company reported that $15.98 billion in loans had been originated through its platform up to December 31, 2015.

<span class="mw-page-title-main">Zopa</span> British financial services company

Zopa Bank Ltd. is a British online bank which offers deposit accounts, personal loans and credit cards. It began as the world's first peer-to-peer lending company in 2005 and gained a full banking licence in 2020. The peer-to-peer side of its business closed in December 2021.

Bluestone Group is a financial services and technology business with offices in the UK and Ireland.

<span class="mw-page-title-main">La Trobe Financial</span>

La Trobe Financial is an Australian credit asset management firm specialising in asset management and credit. It offers real estate credit, investment account offerings and private wealth management. The CEO is Mr. Chris Andrews. La Trobe Financial's head office is located in Melbourne, with corporate offices in Sydney, Shanghai and Hong Kong.

<span class="mw-page-title-main">Funding Circle</span> Commercial lender

Funding Circle is a commercial lender. Originally it was a peer-to-peer lending marketplace that allowed the public to lend money directly to small and medium-sized businesses. Through this exchange businesses access lower costs of financing than they would get at a bank and the public are able to become lenders and in doing so make a return on their capital. It closed its lending option to "retail investors" between 2020 and 2022, and then announced, in March 2022, that it had made the closure permanent.

<span class="mw-page-title-main">La Trobe Financial</span>

La Trobe Financial is an Australian credit asset management firm specialising in asset management and credit. It offers real estate credit, investment account offerings and private wealth management. The CEO is Mr. Chris Andrews. La Trobe Financial's head office is located in Melbourne, with corporate offices in Sydney, Shanghai and Hong Kong.

Rebuildingsociety.com is a Leeds-based peer-to-peer lending platform, founded in 2012 by Daniel Rajkumar, to facilitate the online arranging of finance between lenders and small and medium-sized enterprises. The first loans were completed in February 2013.

<span class="mw-page-title-main">Assetz Capital</span>

Assetz Capital is a British company which makes property-secured loans to businesses. It was established in 2012 as a peer-to-peer or "marketplace" lender which allowed private and institutional investors to lend money directly to small businesses (SMEs) and property developers. In December 2022 it became solely funded by institutional capital for new lending.

ThinCats UK business lender

ThinCats is an alternative lender that provides business loans to mid-sized UK businesses using capital from institutional investors including pension schemes and asset managers. Founded in 2011, ThinCats operates throughout the UK with offices in Birmingham, Manchester and London.

LendInvest is a British non-bank mortgage lender which provides a property lending and investing platform. As an alternative fintech lender in the property market, LendInvest provides finance to property professionals and small and medium-sized businesses (SMEs) around the UK. It also makes it possible for individuals, corporates and institutions to invest in secured property loans originated and underwritten by its mortgage team.

Harmoney is an online direct personal lender that operates across Australia and New Zealand. The company was established in 2014 to introduce peer-to-peer lending to New Zealand. Harmoney provides risk-priced, unsecured personal loans up to $70,000 and has issued NZD $2 billion worth of loans as of March 2021.

Peerform is a peer-to-peer lending company based in New York City, which matches prime and near-prime qualified borrowers in the United States to accredited high net worth and institutional investors on its online platform. Its algorithm to determine loan eligibility focuses on a variety of factors including but not limited to FICO scores. In January 2011, Peerform raised $1.3 million during an angel funding round. In April 2014, Peerform raised $1.1 million in a seed funding round led by Corporest Development, a European investment firm.

<span class="mw-page-title-main">The House Crowd</span>

The House Crowd was a British peer to peer lending and crowdfunding platform that allowed people to invest in bridging loans and property development loans from £1,000. In 2018, the business achieved authorisation from the Financial Conduct Authority and launched their Innovative Finance ISA. As of January 2019, The House Crowd had funded 368 properties, raised over £93 million and paid investors returns in excess of £38 million. The House Crowd was placed into administration on 24 February 2021 and subsequently wound-up.

<span class="mw-page-title-main">Folk2Folk</span>

FOLK2FOLK is a Marketplace lending platform (MPL) specializing in secured lending for business owners across the rural and regional parts of the UK. It matches businesses looking for capital with individual (retail) and institutional investors who receive a fixed interest rate from 7.5% p.a. secured against UK land or property. Investors receive the same interest rate that the Borrower pays, with FOLK2FOLK making its profit from an arrangement fee and annual renewal fee charged to Borrowers.

LendingRobot is an automated investment service for Peer-to-peer lending for retail investors. It is based in Seattle, Washington, and was the first SEC-registered Investment Advisor in the Peer to Peer Lending industry.

Ezubao was a peer-to-peer lending scheme based in the eastern Chinese province of Anhui. It was set up as an online scheme in July 2014, attracted funds of about 50 billion yuan from 900,000 investors, and ceased to trade in December 2015. On 1 February 2016, the scheme was closed down and 21 involved people were arrested. Zhang Min, the president of the parent company, Yucheng Global, told investigators that the company operated as a Ponzi scheme. Following its establishment, Ezubao grew rapidly, masquerading as a legitimate investment opportunity while operating under the guise of peer-to-peer lending. Revelations about the fraudulent nature of Ezubao’s operations emerged after an exposé in late 2015, leading to public outcry and intensified scrutiny by regulatory authorities. The scale of Ezubao’s Ponzi scheme, which orchestrated a sophisticated ruse involving fake projects and returns, was unprecedented in China, contributing to an estimated loss of billions of yuan for investors. The scandal not only devastated the finances of nearly a million individuals but also prompted a nationwide tightening of regulations on the peer-to-peer lending industry, aiming to close loopholes and restore investor confidence.

LandlordInvest is a peer-to-peer lending platform that enables people to invest in residential, commercial, and semi-commercial bridging and development loans. The platform's target audiences are professional property investors and landlords. It was the first residential property-backed Innovative Finance ISA made available to UK savers.

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References

  1. ↑ "Data Hub". RateSetter. Retrieved 4 June 2018.
  2. ↑ Lloyd, Michael (9 October 2020). "Many happy returns! RateSetter marks its 10-year anniversary". Peer2Peer Finance News. Retrieved 15 October 2020.
  3. ↑ Hurley, James (7 October 2010). "Ratesetter aims to tap social lending growth". The Daily Telegraph. London. Retrieved 10 September 2011.
  4. ↑ Titcomb, James (19 September 2015). "Peer-to-peer lender Ratesetter doubles sales as it targets listing". The Daily Telegraph. Retrieved 3 November 2015.
  5. ↑ Hazlehurst, Jeremy (9 October 2013). "New Generation Moneylenders". Management Today. Retrieved 10 September 2011.
  6. ↑ Lucy Bott. "We are moving". RateSetter Blog. Retrieved 7 December 2015.
  7. ↑ Williams-Grut, Oscar (15 May 2017). "Fintech lender RateSetter lands FTSE 100 heavyweight as new chairman" . Business Insider. Retrieved 4 June 2018.
  8. ↑ Elizabeth Pfeuti. "Ex-Deutsche funds chief joins Woodford-backed fintech". Financial News. Retrieved 4 June 2018.
  9. ↑ Nair, Praseeda (1 June 2017). "RateSetter hits highest valuation at £200m after recent funding round". Growth Business. Retrieved 4 August 2020.
  10. ↑ Martin, Ben (30 May 2017). "Peer-to-peer lender Ratesetter valued at £200m in latest fundraising" . The Daily Telegraph. Retrieved 4 June 2018.
  11. ↑ Greenland`, Martin (19 June 2018). "RateSetter Isa attracts £100m". bridgingandcommercial.co.uk. Retrieved 21 February 2022.
  12. 1 2 3 "Acquisition of RateSetter". Metro Bank. 3 August 2020. Retrieved 3 August 2020.
  13. ↑ Collinson, Patrick (5 May 2020). "UK's biggest peer-to-peer lender cuts rates 50% to prepare for loan defaults". The Guardian. ISSN   0261-3077 . Retrieved 30 December 2020.
  14. ↑ Jones, Rupert (17 October 2020). "Peer-to-peer lending: 'I'm 19,050th in the queue to get my savings back'". the Guardian. Retrieved 30 December 2020.
  15. ↑ Lloyd, Michael (27 January 2021). "RateSetter to return to full interest for investors". Peer2Peer Finance News. Retrieved 7 February 2021.
  16. ↑ Shoffman, Marc (8 March 2021). "RateSetter prepares investors for P2P account closures". Peer2Peer Finance News. Retrieved 21 February 2022.
  17. 1 2 Hurley, James (6 August 2020). "Metro Bank secures new platform in Ratesetter". The Times . ISSN   0140-0460 . Retrieved 15 October 2020.
  18. ↑ "RNS announcement: Metro Bank PLC: Completion of Acquisition". Investegate. 14 September 2020. Retrieved 15 September 2020.
  19. ↑ Shoffman, Marc (2 February 2021). "Metro Bank to purchase remaining RateSetter P2P portfolio". Peer2Peer Finance News. Retrieved 7 February 2021.
  20. ↑ Jones, Rupert (6 February 2021). "RateSetter savers claim investments are being sold off 'on the cheap'". the Guardian. Retrieved 7 February 2021.
  21. 1 2 "Whatever happened to RateSetter?". www.themarketingeye.com. 9 February 2024. Retrieved 21 March 2024.
  22. ↑ Shaun Drummond (11 November 2014). "RateSetter targets Australian 'savers' with new lending website". The Sydney Morning Herald. Retrieved 11 November 2014.
  23. ↑ "About us - RateSetter Australia". www.ratesetter.com.au. Retrieved 4 April 2017.
  24. ↑ "RateSetter passes $200m | RateSetter Australia". www.ratesetter.com.au. Retrieved 26 January 2018.
  25. ↑ Lloyd, Michael (25 June 2020). "RateSetter Australia reports growth in lending ahead of IPO plans". Peer2Peer Finance News. Retrieved 17 August 2020.
  26. ↑ "Annual Report and Consolidated Financial Statements". Companies House. Retail Money Market Ltd. 31 March 2019. Retrieved 3 August 2020.
  27. ↑ Shoffman, Marc (10 August 2020). "RateSetter Australia rebrands as Plenti". Peer2Peer Finance News. Retrieved 17 August 2020.
  28. ↑ "Plenti RE Limited". Australian Securities and Investments Commission . Retrieved 17 August 2020.
  29. ↑ Shoffman, Marc (23 September 2020). "Plenti enters Australian stock market after completing IPO". Peer2Peer Finance News. Retrieved 15 October 2020.
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