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FOLLOW OUR JOURNEY IN THE PEER-TO-PEER LENDING INDUSTRY

  • Peer-to-Peer lender SocietyOne announces new market-beating rates

    by SocietyOne Team | Apr 01, 2014

    Sydney, Australia, 1 April 2014SocietyOne, Australia’s only peer-to-peer (P2P) lending platform, has today introduced a new market-beating offer for its unsecured personal loans. The platform that seamlessly connects borrowers and investors has launched a $0 fee, 1.25% rate discount offer with an indicative headline rate of 9.80%pa fixed/9.80%pa1 comparison. 

    Matt Symons, CEO and co-Founder of SocietyOne said: “We are excited to introduce this special offer and live up to our promise of offering creditworthy Australian borrowers a better deal. With absolutely no fees of any kind until the end of April and a rate discount from our already competitive rates, we think this really shows that Peer-to-Peer lending can go head-to-head with the big banks and be an exciting and cost-effective financial alternative.”  

    Hailed as a major step forward in the world of banking, P2P lending is rapidly revolutionising credit markets worldwide, with considerable success in markets such as the United States and the United Kingdom. 

    As Australia’s only active P2P lender, SocietyOne uses a proprietary technology platform to connect creditworthy borrowers looking for better priced credit with investors looking for better rates of return. By cutting out much of the complexity and cost associated with traditional lending, SocietyOne is able to offers borrowers loans at attractive rates and provide investors with access to a profitable new asset class. 

    SocietyOne’s rate discount and zero fee offer will be in market starting 1 April 2014 and be valid for anyone who applies and successfully qualifies for an unsecured personal loan before 30 April 2014.  

    About SocietyOne 

    SocietyOne is Australia’s leading Peer-to-Peer technology platform where high credit quality borrowers can connect directly with sophisticated investors to get a better deal. The SocietyOne ClearMatchTM platform reduces the cost of originating and managing a consumer or small business loan portfolio. SocietyOne is able to share this operating cost advantage with borrowers and investors. SocietyOne’s unsecured personal loan has been recognized as one of the Top 10 most Innovative Banking Products of the year in Australia and its SmartLoan mobile app was awarded “Best of Show” at Finovate Asia in November of 2012.

    To learn more about SocietyOne, go to http://www.societyone.com.au 

    For further media information about SocietyOne contact:

    Abey Malouf 
    M: +61 (0) 414 716 100
    abey.malouf@societyone.com


    1. Based on a 3-year, A-rated, $10k personal loan. 

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  • SocietyOne on Financial Review Sunday

    by SocietyOne Team | Mar 17, 2014
    Financial Review Sunday and host Deborah Knight take a closer look at the biggest change sweeping Australia's Privacy Laws in the last 25 years and how small and large companies are preparing for the challenge.

    In this interview with Matt Symons, they focus on the new credit reporting rules and how SocietyOne's unique Peer-to-Peer lending platform is able to use better credit information to provide good borrowers with a better deal. 

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  • Deal or No Deal: Balance Transfer Offers

    by SocietyOne Team | Mar 11, 2014

    Credit Card 0% transfers

    Thinking of getting rid of credit card debt by taking out a new credit card? 

    Balance Transfer (BT) card promotions seem to be back in vogue and banks are again aggressively touting balance transfer interest free periods, some for as long as 18 months. But before you dive in, carefully consider the pros and cons of what’s involved. 

    Balance Transfer offers are credit card accounts that feature a promotional rate, usually 0%, during a specific period of time that applies to balances transferred from competing credit card providers. 

    If used sensibly, BTs can be a good deal and a cost-effective way of saving money on interest payments. However, to get the most out of the offer, the debt on this card needs to be completely quarantined. One of the biggest mistakes people make is to use the BT card as a regular credit card for new purchases or cash advances. Remember that the low rate offer only applies to the balance transferred, not to new purchases or cash advances made with the card, all of which carry standard interest rates. 

    Any repayments you make on the card will go towards paying your more expensive debt first. In other words, if you’re using the card for cash advances or new purchases and then only making minimum repayments, you’re not really taking advantage of the 0% offer and getting rid of debt. 

    Here are a few other pitfalls to watch out for with balance transfers:

    1. To make a balance transfer worth your while, first figure out how long it will take you to pay off your debt completely. Switching or transferring balances more than once will have an impact on your credit score. So if you thought you could make balance transfers in perpetuity – think again. Applications for credit affect your credit rating, and may lower your credit score. 

    2. BTs are profitable for the banks because they generate new business and many people don’t pay off the full balance within the promotional period. The clock on the offer generally starts ticking from the date the card is approved, as opposed to when the card is issued, so read the Terms and Conditions carefully and mark the promotion end date. 

    3. At the end of the balance transfer period, the interest rate on any outstanding transferred balance will revert to the cash rate, the standard purchase rate, or in some cases, the rate for cash advances, which can be as high as 21% p.a.

    4. To qualify for balance transfers, you need to have a relatively good credit rating in the first place. No bank wants to be left holding the outstanding debt of a less than stellar borrower. 

    5. In some cases, balance transfer fees are applied as a percentage of the amount transferred. There may also be annual fees payable. Understand the fees associated with the account and compare to ensure that you’re not paying more in fees on the new card than you would pay in interest on your first card. 

    6. In order to qualify for any interest free days on purchases, you need to pay your account in full, including any balance transfer amount, by the statement due date.

    Postponing repayment of debt is never a great idea. However, balance transfers can offer welcome respite and if used appropriately and with discipline, they can actually serve as a useful tool to reduce debt and save on interest. 

    But if misused as a way of rotating debt, BT accounts can lead to a revolving debt nightmare and potentially damage your credit rating in the process. Ultimately, making fixed, structured repayments over time is one of the best ways of reducing and paying off debt. This is why consolidating debt with a product like an unsecured personal loan - and especially a low interest Peer-to-Peer personal loan - can be so effective. 

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  • AFR: Westpac innovates disruptively with Reinventure

    by SocietyOne Team | Mar 10, 2014

    Innovation Venture Capital Fund Reinventure
    Venture Capital investment SocietyOne

    Westpac’s $50 million Reinventure venture capital fund has invested in peer-to-peer lender SocietyOne. Photo: Glenn Hunt

    JAMES EYERS

    In November, Simon Cant and Danny Gilligan brought Clayton Christensen to Australia. Westpac Banking Corp sponsored the event.

    Christensen, a Harvard Business School professor, spoke to groups in Sydney and Melbourne about the “innovators dilemma” – a theory familiar to Cant and Gilligan, who have built their careers advising some of Australia’s largest companies about digital disruption.

    Christensen’s philosophy is that companies won’t prosper in the new digital future with internal innovation alone. But if established companies are aware of the circumstances of disruptive innovation – and, to some extent, embrace them – they will be able to leverage off newcomers for their own benefit.

    To some Westpac bankers in the room, the words were revolutionary. The bank had big teams of people working on innovation, but could Westpac develop faster if it used some of its financial firepower to take small, minority stakes in outside start-ups?

    Fast-forward four months, and Westpac has launched its $50 million venture capital fund, Reinventure Group, which is managed by Cant and Gilligan. And its first investment, in peer-to-peer lender SocietyOne, is an example of Christensen’s theory in action.

    SocietyOne has been built on the failure of banks like Westpac to provide risk-adjusted pricing in personal loans (all customers pay about the same interest rate, meaning good ones subsidise bad ones) and a lacklustre online customer experience. Now the investment will give Westpac an inside view of its cutting-edge technology that is revolutionising the assessment of credit.

    “It is important for incumbents to be partnering with start-ups as well as doing their own internal innovation,” Cant says. “I don’t think any company wants to disrupt its own business, but astute companies can see that if there is the potential for disruption, they need to prepare for that.”

    FINANCIAL SERVICES AN OBVIOUS CHOICE

    Cant and Gilligan have worked together recently advising APN News & Media on its digital strategy. Wanting to keep the creative sparks flying, they talked about a move into venture capital and devised the Reinventure Group mandate, which was not initially made specific to banking. But examining the industry structures that could be best exploited by a corporate VC fund, financial services was an obvious choice.

    “If you look at the start-up landscape globally, where the deals are getting done and where the investment dollars are flowing, fintech is still a relatively small slice of the whole pie,” Gilligan says.

    Cant figured Westpac would be receptive to a pitch. He knew Westpac’s head of retail and business banking Jason Yetton from his time at ?What If!, the global innovation company that worked with Westpac’s BT Financial Group. Yetton, along with Brian Hartzer, CEO of Westpac’s financial services division, understood disruption is not something that just manifests itself but rather is a confluence of technologies and consumer trends. In banking, change is very much a constant; the question the banks have been asking is: how do you position yourself relative to disruption?

    Yetton and Hartzer became internal champions for the fund, taking the idea to the Westpac board, which resolved to seed it with $50 million. True to the principles of Christensen, Reinventure would make decisions independent from Westpac, although Yetton and Hartzer would sit on its investment committee. Established as an ESVCLP under the Venture Capital Act of 2002, the fund has long-term investment horizons and won’t have to divest for 15 years.

    Reinventure’s mandate is based around four core principles: it will seek to invest in relatively proven business models, which have inherently regional characteristics, and proven entrepreneurs. It will also look for investments that can benefit from Westpac’s knowledge.

    Cant and Gilligan say SocietyOne ticked all four boxes. Westpac’s intellectual property and distribution networks will allow Reinventure to scale up the peer-to-peer lender, although it is not yet known precisely how that will occur. “What we are doing is creating the opportunity for relationships to be built,” Cant says.

    LIVESTOCK LENDING

    Initially, SocietyOne will use Westpac’s capital to ramp up growth by developing new credit products designed to exploit niches of mispriced risk that create small pockets of profitable opportunity. One example is livestock lending. SocietyOne has recently established a program, in partnership with Ray White Rural, offering agents a financing solution for funding trading stock purchases. Agents typically borrow through overdraft facilities on bank deposit accounts to help smooth volatility in farmers’ rural earnings but interest rates are hefty. The SocietyOne product effectively securitises animals, allowing individual investors to buy animals (securities can be created over them thanks to the national livestock identification system), freeing up capital for agents and farmers. More new credit products are on the drawing board.

    One of the key attractions for Westpac is SocietyOne’s technology platform, ClearMatch, which runs algorithms over data from customer bank statements to determine spending habits and form credit assessments. “There are very few quality fintech companies in Australia that also have a technology the substance of SocietyOne, which has the potential of being exported into international markets,” Cant says.

    Westpac is set to gain more insights into the future of data, as Reinventure expands its portfolio.

    It wants to make between a dozen and 20 investments over a three-to-five-year horizon and data-related start-ups are on its watchlist.

    Evidenced by Woolworths’ strategic acquisition of a stake in data analytics company Quantium last year, Cant reckons the evolution of data as a value-adding layer to media and retail companies is also of interest to banks, which are wanting to morph from being traditional movers of payments from point A to point B to capturing and analysing information and intelligence sitting around the payment to help customers use cash flows more efficiently and to get a more holistic view of what they are doing. It was this model that was attractive to Spanish bank BBVA, which paid $US117 million for Simple, an online bank that tracks spending habits, co-founded by Australian Joshua Reich.

    The key challenge for Cant and Gilligan will be harnessing the power of Westpac to propel their investments’ growth without stifling their innovation. To navigate this balance, they will be guided by Christensen – whose writing provides insight for those standing at the interface of disruptive growth businesses and mainstream ones, guiding their decisions on when an incumbent’s resources and processes should be imposed on the new business and when the start-up should be left to its own devices.

    A PERFECT MATCH

    The rise of peer-to-peer lending in Australia could help alleviate the mismatching risk that lies at the heart of banking.

    As the global financial crisis starkly illustrated, because banks borrow short (with deposits) and lend long (with mortgages), a shock to the system that results in large numbers of depositors wanting their money back simultaneously can cripple a bank, which only holds a small proportion of their total deposits as collateral. This can force governments to step in to safeguard deposits. The G20 agenda is moving to a “bail-in” system, where losses are put on bank-bond holders and ultimately the depositors themselves.

    But peer-to-peer lenders match borrowers and investors precisely. Investors on P2P platforms are not making a deposit – but they are agreeing to fund a loan of a known duration. Though they receive regular interest payments, their principal remains tied up for the duration of the loan.

    Seen this light, P2P lending not only injects competition into personal lending markets, but can help dilute the risks of fractional reserve banking.

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  • Matt Symons on Sky News Business

    by SocietyOne Team | Mar 10, 2014
    Sky News Business' Carson Scott invited Matt Symons to talk about Peer-to-Peer lending, the technology behind the process and SocietyOne's future plans to expand in Australia with competitively priced loans.

    Watch the segment below as Matt explains the technology and key advantages behind SocietyOne's innovative P2P lending platform. 

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  • Peer-to-Peer Lender SocietyOne Closes $8.5M Round With Tier One Australian and Global Investors

    by SocietyOne Team | Mar 10, 2014

    SocietyOne, Australia’s leading Peer-to-Peer (P2P) lending company, today announced it has successfully completed an $8.5 million Series A round that includes investments from the newly-launched Australian venture capital fund Reinventure, Munich-based Global Founders Capital (GFC) as well as a private investment from Justin Reizes together with a number of existing investors.

    Matt Symons, CEO and co-Founder of SocietyOne said: “This is a clearly a significant milestone in the development of our business. It’s extremely exciting for SocietyOne to be partnering with the Reinventure Fund and GFC. We have found their approach and thinking around innovation and technology disruption to be very aligned with our own. In practical terms this partnership will allow us to accelerate our rate of growth and that’s exciting because it means we will be able to offer more borrowers a better deal and give more investors access to attractive fixed income asset classes.”

    Hailed as a major step forward in the world of banking, P2P lending is rapidly revolutionising credit markets worldwide, with considerable success in markets such as the United States and the United Kingdom.

    “SocietyOne is an excellent investment for the Reinventure Fund.  The Peer-to-Peer lending model is showing strong growth globally and SocietyOne has a significant first mover advantage in this market.  Founders Matt Symons and Greg Symons have strong track records as entrepreneurs.  Further, their unique and proven P2P technology platform not only gives them a real advantage locally, it has significant licensing potential globally and already they have numerous inbound licensing inquiries,” said Simon Cant, Co-Founder and Joint Managing Director of Reinventure, which also officially launched this week with an investment of $A50 million. 

    “In line with our strategy for the Reinventure Fund, we have already built strong engagement with SocietyOne and are actively exploring potential synergies,” said Danny Gilligan, Co-Founder and Joint Managing Director of Reinventure. 

    Oliver Samwer, Founder of Global Founders Capital, noted: “Online marketplaces have already transformed consumer travel, retail and entertainment.  Peer-to-Peer lending is set to completely change the way we think about banking.  Matt and the team at SocietyOne are incredibly well positioned to lead this emerging revolution in consumer and business lending.”

    As Australia’s only active P2P lender, SocietyOne uses a proprietary technology platform to connect creditworthy borrowers looking for better priced credit with investors looking for better rates of return. By cutting out much of the complexity and cost associated with traditional banking, SocietyOne is able to offers consumer and small business loans at attractive rates and provide investors with access to a profitable new asset class.

    About SocietyOne:

    SocietyOne is Australia’s leading Peer-to-Peer technology platform where high credit quality borrowers can connect directly with sophisticated investors to get a better deal. The SocietyOne ClearMatchTM platform reduces the cost of originating and managing a consumer or small business loan portfolio. SocietyOne is able to share this operating cost advantage with borrowers and investors. SocietyOne’s unsecured personal loan has been recognized as one of the Top 10 most Innovative Banking Products of the year in Australia and its SmartLoan mobile app was awarded “Best of Show” at Finovate’s Asia in November of 2012. To learn more about SocietyOne, go to http://www.societyone.com.au

    For further media information about SocietyOne contact:

    Abey Malouf 
    M: +61 (0)414 716 100
    abey.malouf@societyone.com

    About Reinventure Fund:

    Reinventure is a newly-launched Australian venture capital fund whose largest investor is the Westpac Banking Corporation, one of Australia's largest banking and financial services companies. Reinventure's primary objective is to bring great entrepreneurs together in a partnership opportunity  with Westpac. As a result Reinventure believes it can help ventures to scale more rapidly than they could do on their own.  Reinventure makes investments from seed through to Series A and up. Co-founded and managed independently by Danny Gilligan and Simon Cant who are also co-investors in the fund, Reinventure will be investing $50 million in Australian technology ventures. To learn more about Reinventure and Westpac's investment go to: http://reinventure.com.au/

    For further media information about Reinventure Fund contact:

    Simon Cant
    M: +61 (0)412 483 621
    simon@reinventure.com.au

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  • AFR: P2P pioneer SocietyOne presses advantage

    by SocietyOne Team | Mar 06, 2014
    Australia Peer-to-Peer lending
    Symons Peer-to-Peer lending

    SocietyOne Co-founder Matt Symons says P2P lenders like SocietyOne are placed to offer creditworthy Australian borrowers a better deal. Photo: Michel O’Sullivan

    JAMES EYERS, financial services editor, Financial Review

    Peer to peer lending has been slow to get off the ground in Australia – the sector’s pioneer SocietyOne, which has just been backed by Westpac’s new venture capital arm, has made just $4 million in loans.

    But P2P’s recent growth abroad has been nothing short of astonishing.

    The P2P industry originated $US2.8 billion of loans globally last year, according to the International Organisation of Securities Commissions. The biggest player in the United States, Lending Club – whose board includes former US Treasury secretary Larry Summers and former head of Morgan Stanley John Mack – has lent more than $US3 billion since its inception in 2007 as one of Facebook’s first applications. Its loan book has almost doubled in the past six months and it is planning a blockbuster float on US public markets later this year.

    In the UK, total P2P lending volumes have just hit £1 billion ($1.86 billion). The British government is a big supporter of the movement and recently provided Funding Circle with £40 million, which will be lent to small to medium business to bolster credit growth.

    If P2P lending does take off in Australia – as Westpac’s venture capital fund and other investors in SocietyOne’s $8.5 million capital raising, including KKR’s local head Justin Reizes, believe that it will – it will, in part, reflect the failure of the big four banks to adapt their personal loan products to changing times. The banks’ one-size-fits-all approach to personal credit penalises good-quality borrowers, who typically receive the same interest rate as poor ones, effectively subsidising them.

    For the banks, the status quo has been highly satisfactory; according to figures from the Australian Prudential Regulation Authority, retail banking makes up 42 per cent of banking profits, with personal lending (credit cards and personal loans) comprising 16 per cent of retail bank profits. On last year’s profit numbers for the big four, this represents almost $2 billion.

    PERSONAL LENDING PROFITS TARGETED

    It’s these personal lending profits that SocietyOne and other P2P lenders are targeting. Borrowers, especially those of high credit quality, can receive from a P2P platform lower rates for a personal loan or credit card with an improved customer experience than banks offer. Investors, meanwhile, make a flexible, short-term commitment and receive a better yield than many fixed-income products by targeting one of the most profitable lines of banking – the provision of personal loans.

    In order to attract investors onto its P2P platform, SocietyOne is incentivised to conduct thorough credit checks of applicants before accepting them. It uses its proprietary technology platform, known as ClearMatch, to assesses the creditworthiness of potential borrowers by using algorithms .

    For the $4 million of loans made by SocietyOne, it has assessed applications for loans totalling $26.5 million. This approval rate of around 13 per cent is about half the number of traditional banks for first-time customers.

    This scrutiny is designed to increase the investment performances of the early vintages and provide investor confidence. So far its credit checks are only putting forward reasonable loans; SocietyOne’s default rate is 2.3 per cent.

    The ClearMatch technology was developed by SocietyOne co-founder Greg Symons over 17 years. It has had 127,000 hours of development time and more than $10 million invested in it before it was applied to the SocietyOne business in 2012. In its previous incarnation, $1 billion of transactions were put through ClearMatch, including by Rabobank, which used it to manage billions of dollars of agribusiness in Europe. It was orientated towards P2P in 2007. It is this technology that attracted Westpac, with its venture capital fund, to invest in SocietyOne.

    SOPHISTICATED INVESTORS ONLY

    Only sophisticated investors are able to invest through the SocietyOne platform, although the company is seeking approval to offer loans to retail investors, which it hopes will be forthcoming towards the end of this calendar year.

    When an investor logs on to SocietyOne’s platform, they enter an online marketplace, not unlike eBay.

    The actual identity of borrowers is not revealed, but before an investor "hits" a loan to fund it, plenty of information is made available to inform their credit assessment: an investor can see a borrower’s suburb (displayed on a Google map); a summary of their personal profit and loss account; various financial ratios, such as debt to income; and the borrower’s explanation of why they want the loan.

    The credit assessment process is highly automated. Using the online money centre Yodlee, applicants for loans provide Society One with six months of bank statements allowing SocietyOne to verify income and examine their personal PNL; their proprietary systems analyse statements to determine spending patterns and hence credit risk.

    Once a borrower is approved, SocietyOne assigns them a credit risk category from AA to D and a sliding scale interest rate is attached. For example, AA borrowers can receive an interest rate of 10.15 per cent to 11.75 per cent, while D borrowers receive 14.1 per cent to 15.6 per cent.

    Investors – who receive an average of 11 per cent interest for funding loans – are able to bid for loans within each band, creating a market for each loan while avoiding irrational pricing.

    SocietyOne conducts the day-to-day administration of the loans on investors’ behalf. Its gross revenue is about 5 per cent. This comprises a 1.25 per cent "receivable management fee" from the investor, and an average 3.5 per cent origination fee from the borrower (who only pays if the loan passes the credit assessment and is originated). Late payment fees are equivalent to banks; there are no servicing fees and no prepayment fees.

    Investors nominally match their commitments to particular loans but money which comes in from investors is pooled into a trust, a wholesale unregistered managed investment scheme, that provides a single source of money that goes out to borrowers.

    TRUST OFFERS ARM’S LENGTH

    The trust has been created as a bankruptcy remote vehicle which cannot fund SocietyOne’s liabilities. SocietyOne is the lender of record and loan originator and holds an Australian Credit Licence.

    Regulators have been watching the development of the P2P sector closely. The UK’s Financial Conduct Authority is about to issue new rules to govern P2P lending, while the Australian Securities and Investments Commission said last year the consumer credit laws were not a barrier to the P2P model working in Australia. Investments through P2P lenders are not deposits, so are outside the government’s deposit guarantee.

    But the International Organisation of Securities Commissions said recently that while the P2P industry globally is too small to pose a threat to financial stability, it did "raise significant investor protection issues, particularly in relation to retail investors".

    SocietyOne’s website states that the average investor returns of 11 per cent are not guaranteed and rely on loans being repaid with no impairment.

    The government’s comprehensive credit reporting reforms, which come into force next month, are set to benefit SocietyOne as they will let non-banks get more information on individuals’ credit history. This will allow SocietyOne to make a more meaningful credit assessment before moving a loan onto the platform.

    Co-founder Matt Symons says these reforms will mean P2P lenders like SocietyOne "are very well placed to offer creditworthy Australian borrowers a better deal and investors direct access to an attractive new fixed income asset class". 

    You can download the document here.

    The Australian Financial Review

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  • AFR: Westpac buys into first peer-to-peer lender

    by SocietyOne Team | Mar 06, 2014
    Westpac Peer-to-Peer lending Australia
    SocietyOne P2P loans Australia

    Westpac’s VC fund will be joined on the SocietyOne shareholder register by Berlin-based incubator Rocket Internet and several local investors including the Australian head of global private equity giant KKR, Justin Reizes. Photo: Dominic Lorrimer

    JAMES EYERS, financial services editor, Financial Review

    Westpac Banking Corp’s new venture capital fund has taken an equity stake in Sydney-based peer-to-peer lender SocietyOne, in a deal that reflects the coming of age of online lending in Australia and the desire of the major banks to get closer to disruptive start-ups.

    Reinventure Group, the new Westpac-funded venture capital manager, has invested $5 million in Australia’s first peer-to-peer lender, whose small loan book is growing rapidly. By matching borrowers and investors through web-based technology, P2P lenders can offer both more attractive interest rates than banks.

    Westpac's investment is believed to be the first equity stake a bank has taken in P2P anywhere in the world (either directly or through a fund), and is intriguing given that the P2P business model has been built on the failure of banks to use technology to enhance the borrowing experience, or to offer risk-based pricing to customers. This has helped make personal lending one of the most profitable areas of banking.

    Westpac’s VC fund will be joined on the SocietyOne shareholder register by Rocket Internet, the savvy, Berlin-based internet incubator, and several local investors including the Australian head of global private equity giant KKR, Justin Reizes, who said he has invested in SocietyOne in a personal capacity.

    The $8.5 million capital raising will allow SocietyOne to develop new credit products. It recently launched livestock loans and loans tailored for young doctors which are being offered to sophisticated investors through its internet-based platform.

    BANK WILL GET ACCESS TO CLEARMATCH TECH PLATFORM

    SocietyOne, which was founded in August 2012 by Matt Symons and Greg Symons (they are not related) has made 200 loans totalling $4 million.

    The loan book has doubled in the past six months.

    "Peer to peer lending as a category is seeing very strong growth globally," Reinventure Group co-founder Simon Cant said.

    "The [SocietyOne] founders have great track records as entrepreneurs and the technology they have brought to the table gives them a great advantage in the P2P space. It is also a business with potential synergies with Westpac."

    SocietyOne P2P loans trend

    Reinventure Group, which was founded by Danny Gilligan and Mr Cant, who each have experience working with digital investments, is the independent manager of the fund, putting it at "arm’s length" from Westpac. But the fund’s investment committee includes Westpac executives Brian Hartzer, CEO of the Australian financial services division, and Jason Yetton, the head of retail and business banking. It is understood that the investment is of interest to Westpac because it will provide insight into SocietyOne’s proprietary technology platform, known as ClearMatch, which assesses creditworthiness by using algorithms.

    The investment is also likely to provide Westpac with insight into the development of financial products that, as a large and bureaucratic organisation, it is not able to exploit. "Our ventures can move at a pace that larger organisations can’t, and can deal flexible and nimbly in niche areas that sometimes get overlooked, and those create lots of earnings opportunities that can be shared [with Westpac]," Mr Gilligan said.

    SocietyOne’s Matt Symons said: "In practical terms this partnership will allow us to accelerate our rate of growth, and that’s exciting because it means we will be able to offer more borrowers a better deal and give more investors access to attractive fixed-income asset classes." 

    SocietyOne would not confirm whether it was profitable. While demand for P2P loans in Australia has so far been muted, SocietyOne is preparing for an increase in demand, and is understood to be examining another deal to bolster its coffers with institutional funds to ensure sufficient money is available to meet any rising demand for loans.
     

    You can download the document here.

    The Australian Financial Review

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  • As a valued customer, do you get personal validation?

    by SocietyOne Team | Feb 27, 2014

    Investors Borrowers P2P lending

    By now, most companies will consider you a "valued customer" – that trite, well-worn catchphrase that literally means you’ll be treated just like everyone else. The more big corporations talk about "acknowledging their customers" the more they seem to stray away from actually providing those valued customers with a more personalised service and experience.  

    Peer-to-Peer lending does more than just pay lip service to the common adage. In P2P lending, where people invest in other people, getting to know you better is an essential part of the process. Think of the platform as the host at a cocktail party who is busy making introductions. Except in this case, your personal details - or Personal Identifiable Information - are never actually shared with anyone: investors only see relevant information to help them make an investment decision based on your credit grade, purpose for the loan and financial profile. 

    A key part of these 'introductions' is your "story" or loan purpose. Are you financing a wedding? Or doing up the old kitchen? Maybe you're consolidating more expensive credit card debt? Investors may readily relate to your needs because in many cases, they have been there themselves. 

    Take Paul, for example, the busy owner of a mentoring company who came to SocietyOne for an unsecured personal loan. "My time is valuable, so I didn’t have to trek down to the local bank and have an appointment with a banker who doesn’t value my time," he said. "If you qualify for a loan, this process is the fastest, most seamless way to borrow money." 

    Paul’s loan was filled by 15 investors in 1 hour. So it's not match.com. It's a marketplace for loans, more like eBay, with two important forces at work: dynamic market pricing and custom rates. 

    After Paul was vetted by SocietyOne's underwriting process, his loan was listed on the P2P platform with a B rating (a reflection of his good credit score), meaning investors could bid on his loan within an interest rate band of 12%-13.5%. Paul had the option of accepting or rejecting any bids in this price range. 

    The auction mechanism among interested investors determined Paul's final weighted average interest rate, in this case 13.12%.

    For a growing number of people, this is a much more empowering way to get a loan and to tap into a marketplace to find better, more personalised rates. With market dynamics at work, borrowers with good credit can get better rates and be rewarded for having made sound financial choices.  

    This is how P2P lending not only values you as an individual, but truly validates who you are as well. 

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  • Hanging on to your New Years Resolutions

    by SocietyOne Team | Jan 20, 2014
    By now, your resolutions for 2014 are being put to the test and either going strong or slowly being abandoned. Improving personal finances are usually at the top of the list, so here are just a few ways to encourage you to stay on track.

    Resolve to Pay off credit cards

    1. Show me the money
    One of the most important things you can do this year is manage your cash flow. You can do this by putting pen to paper and keeping a ledger of everything you spend every single day. Buy a coffee? Write it down. You’ll be surprised how much insight you get from your household’s spending habits by doing this. Every fortnight, tally all this information or even enter it into a spreadsheet. Or you can get fancy. There are free programs and software that can help you do this and even link your bank accounts and help reconcile transactions so you can track your savings goals and see your net worth go up every month!

    2. Consolidate expensive debt
    Now that you know where all the money is going, you can start setting a budget. Did you really spend $435 on lunches last month? Figure out how much you need to rein in per line item to reach your objectives. Credit cards with high interest can be a big ongoing expense. Kill them dead by consolidating and refinancing. Not only will you get your interest-free days back on your card, but with structured repayments, this can help you become debt free within a finite period of time. A low-interest unsecured peer-to-peer personal loan is one way to do this.

    3. Meet with a suit (or consult a few books)
    Beyond the basics of budgeting and staying on top of your cash flow, things can get a little more complicated. Superannuation, tax and estate planning may require calling on a few professionals. You could benefit from their experience and industry knowledge so it's always worthwhile to consult the experts to get things right. It can save you time and money in the long run.  

    4. Get the most out of your savings & super
    Is your money idling away in zombie savings accounts earning paltry interest? Are you also paying bank fees on some of these accounts? Make sure your money is working just as hard for you after you’ve earned it. For example, be aware of the requirements if you are thinking of special “introductory” rates that revert to sub-inflation levels without prior notice, or accounts where the “bonus” interest are subject to regular deposits and a limited number of withdrawals.

    And similarly, do you what your super is doing? With 9% or more of your paycheck going into your super, understand your portfolio: is it properly diversified across suitable asset classes or simply set at your fund’s default discretion? Check your fund’s administration fees – are they on par with the market?1  If your fund is underperforming or expensive, compare with industry benchmarks and other providers.

    There are many ways to stay on top of your finances this year. It just takes a few minutes on a regular basis to review your accounts, identify where you can make changes and comparison shop to keep things on track. Good luck!

     



    1. ASIC has a great Superannuation calculator for determining how fees affect your retirement payout: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/superannuation-calculator

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  • An Unsecured Personal Loan in 6 Easy Steps

    by SocietyOne Team | Dec 19, 2013

    SocietyOne P2P Loan Approval

    As a real bank alternative, Peer-to-Peer lending is a faster, easier way of borrowing at better rates, directly from investors. If you have good credit, with a SocietyOne personal loan you can borrow up to $30,000 for many uses like debt consolidation, buying a car or paying for a wedding.  But we often get asked, how does P2P lending actually work? So, to take the guesswork out of applying and qualifying for a SocietyOne unsecured P2P personal loan, just follow these 6 simple steps. 

    Step 1: Complete our quick online registration. This will give you access to the SocietyOne platform and to your account, loan and repayment details. 

    Step 2: Before submitting your application, you’ll need to complete an automated ID verification check. This takes about 5 minutes and usually only two forms of ID are required.  (Remember that our platform is only open to Australian residents, 21 years or over). 

    Step 3: Submit your application. Provide your desired loan request along with your “story”. Since P2P lending is all about other people investing directly in you, your personal story is very important. We’ll also need your personal information, employment and financial details so we can deposit your funds and set up loan repayments. 

    Step 4: SocietyOne will run a credit check, assess your application and assign you a credit grade. If your listing is approved, your loan is listed for funding with an interest rate band based on this credit grade. 

    Step 5: Once your loan is listed on our platform, registered investors will have the chance to review and bid on it within the floor and ceiling rates specific to your credit grade. 

    Step 6: Your funds are deposited in your account once investors have fully funded your loan, usually within 24 hours. SocietyOne will handle repayments from your nominated account to repay all investors throughout the term of your loan. The loan establishment fee, which varies from 1.5% to 4.5% according to your credit rank, is capitalised onto your loan. 

    So that’s the P2P borrowing process in a nutshell! Our fixed rates are some of the lowest in the market and range from 11.05% (12.77% comparison rate) for A-rated borrowers to 15.60% (18.76% comparison rate) for D-rated borrowers. So this Christmas, instead of using expensive credit cards, give P2P lending a try. 

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  • How to rein in a prodigal Holiday season

    by SocietyOne Team | Dec 04, 2013

    Holiday Season Gift Financing Unless you decide to forego Christmas altogether this year by escaping to a deserted island or a winter wonderland, you’re probably bracing yourself for an long list of gifts, drinks, dinners and office parties. 

    Spending this festive season is expected to exceed $29.6 billion, according to the Australian National Retail Association (ANRA), the strongest result in the last two years.1  

    ANRA projects average spend per person to reach $1,280, a very merry sum indeed. 

    To finance the festivities, Australians traditionally take on more credit. According to Veda’s consumer credit demand index - an early indication of the movement in consumer spending and retail sales - credit card inquiries for the September quarter have already jumped 13.7% compared to the same period in 2012, the strongest quarterly result since 20062.

    Credit card providers have been doing their holiday best to market attractive deals like interest free offers on balance transfers for 6 or 9 months. But before you jump on the credit card bandwagon, it might be a good idea to simply plan ahead. In the long run, if you don’t pay down your credit card balance in full, it can be a very costly way to borrow money – particularly if you’re only making the minimum payments. 

    Consider instead, a few simple alternatives to avoid the bill shock that inevitably follows the post-holiday cheer.

    To start, set a realistic budget for all your holiday expenses and don’t overcommit yourself. Be prepared to pay your debt down as fast as possible to avoid paying extra interest charges. 

    If you can’t save the full amount, consider taking out a low-rate unsecured personal loan as an alternative to credit cards. For example, a 1-year, $5,000 unsecured Peer-to-Peer personal loan with SocietyOne would be completely paid off in twelve $456 monthly repayments3

    So this Christmas, don’t stress. Here are some suggested steps to avoid blowing the budget and have yourself a holly jolly season. 

    1.  Figure out what you can afford and put together a budget. 
    2.  Make a list of gifts so you don’t waste any time. 
    3.  Manage your expenses. 
    4.  If possible, save up the entire amount and only use cash when you shop. 
    5.  If you need funds, consider taking out an unsecured personal loan. 
    6.  Use funds to pay down any credit card balance in full and enjoy interest-free credit.


    ​1. ANRA
    2. Veda consumer credit demand index September 2013, http://www.veda.com.au
    3. For an A-rated borrower at 11.05%p.a/12.77% comparison rate. 

     

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  • Consumer credit interest rates still frozen in time

    by SocietyOne Team | Nov 25, 2013

    Whenever the Reserve Bank of Australia (RBA) announces changes to the cash rate, home loans usually attract the biggest headlines. That’s only logical, given that the size of the Australian mortgage market is about $1.3 trillion1. So assuming banks passed on the full 2.25% in rate cuts announced since November 2011, the average Australian homeowner could potentially save $457 per month or $5,484 per year in interest repayments!2 

    In contrast, much less attention is paid to changes in the $93.5 billion personal credit market, where credit cards and personal loans interest rates have barely moved in the past two years3. Since November 2011, the average rate on credit cards has fallen just 0.15% to 19.55%. Banks have reduced personal loan rates by only 0.80% to 14.3% on average, according to the RBA4

    So while banks have been pressured to drop mortgage rates in step with the cash rate, consumers are still paying the same high interest rates on personal credit, an area where banks have traditionally made their biggest retail profits. 

    Historical Consumer credit rates

    It’s a good idea not to rely too much on RBA rate cuts to save on your personal credit commitments5. You’re much better off comparison rate shopping online, refinancing and consolidating debt if necessary. If you’re only making the minimum repayments on your credit card, it could take you decades to pay off your debt

    Looking into Peer-to-Peer lending is also a good start. While banks have maintained the same high interest rates for all consumers, irrespective of their credit, SocietyOne offers personalised, risk-adjusted rates that rewards good credit. For example, if you consolidate expensive credit card debt with a P2P personal loan, you could save up to $684 a month or $8,204 a year in interest charges6. That’s more than the potential savings on a typical Australian home loan!

    And as an investment, P2P lending opens up a new profitable asset class with attractive returns for sophisticated investors – the very same asset class that has helped the big banks maintain their record profits. 


    ​ 1. RBA statistical tables, D5 Owner occupiers and investment lending.
    Deloitte, Australian Mortgage Market Report 2013
    2. The average loan size for all owner occupied housing commitments in Australia was $305,400 as of September of 2013, Australian Bureau of Statistics, Housing Finance, Australia, September 2013, released 11 November, 2013. Assumes average mortgage interest rate of 5.66% for Big Four banks vs. 7.91% in November 2011, RBA historical indicator lending rates.
    3. RBA Financial Aggregates as of September 2013, released 31 October 2013.
    4. RBA statistical tables, http://www.rba.gov.au/statistics
    5. RateCity, http://www.ratecity.com.au/home-loans/mortgage-news/don-t-bank-on-the-rba-for-the-big-savings-experts
    6. For average credit card balances of $8,000 with a 19.55% interest rate, compared to a SocietyOne 11.05%p.a. interest rate for an A-rated borrower.
    Go comment!
  • 5 Ways to Finance your Reno without Breaking the Bank

    by SocietyOne Team | Nov 18, 2013
    We all know the property market is red-hot at the moment. So if you’re considering giving your property a face-lift, there are many financing options to consider, depending on the scope of your renovation project. Big, structural projects that require bulldozers and council approval may call for a construction loan or remortgaging your property1. For smaller, more cosmetic projects2, here are a few ways you can access ready funds to renovate without breaking the bank:

    Property Renovation Financing Tips

    1. Personal Line of Credit
    : Also known as an Overdraft, this is essentially an open-ended loan, much like credit card with a limit, where you pay only for what you use as your project moves along. This option can save you in interest, compared to borrowing one lump sum. An unsecured line of credit can be a flexible alternative and you can access funds through your debit card, online, or at the ATM. A secured line of credit, with your home equity as collateral, is usually known as a Home Equity Loan.

    2. Home Equity Line of Credit or Loan: A Home Equity Line of Credit is a revolving credit with your home as collateral. This is usually about 75% of the value of your property, less the balance on your mortgage3. Repayments terms are flexible.

    A Home Equity Loan is a fixed-term loan also based on the equity in your home and is usually about 80%4 of the appraised value of your house. You pay it back in installments as you would your mortgage. So if your property is worth $500,000 and you owe $350,000, your equity is $150,000 and the bank can lend you up to 75% or 80% of this, or between $112,500 and $120,000. While both options can carry a lower interest rate than an unsecured line of credit, consider them as a second mortgage on your property, with the potential risk of foreclosure in case of default.

    3. Mortgage Redraw facility: Allows you to make extra repayments on your home loan and then tap into these funds as necessary5. Saves you the need to apply for a separate loan if you’ve made more than the minimum repayments. This type of facility is secured by a first registered mortgage over your property. While the preferred interest rate is typically low, sometimes it takes time and there are legal and appraisal costs to consider, including bank fees6. Moreover, you may end up paying more interest in the long run.

    4. Topping up your existing home loan: Increasing your loan limit can be easier than applying for a separate loan. You could also save on new loan application fees. Since your interest rate is tied to your existing home loan, rates are lower than credit cards or personal loans. However, your loan repayments will increase7.

    5. Peer-to-peer Personal loans: Personal loans are a good option if you don’t currently have any equity built up in your property. They are also a much better way to cover your costs rather than adding them to your home loan. Personal loans also generally carry lower interest rates than credit cards, and shorter duration means you don’t pay interest for the long haul. P2P lending is a great way to bypass the banks altogether and go directly to investors with excess cash looking for a decent return. You can apply for a home improvement loan for up to $30,000 at rates that reflect your good credit – the better your credit, the better your rate. The application process is 100% online and your loan could be assessed, approved and funded within 48 hours if all your documents check out.

    And remember Murphy’s Law: renovation projects will always cost more and take longer than you think, so leave a 10%-20% margin for unexpected expenses. This way, you don’t have to re-apply for credit.


    1. Banks can be conservative with renovation loans and may require the piece of mind that you’re using a licensed builder
    2. Smart Property Investment, http://spionline.com.au/resource-centre/investor-tips/11744-financing-your-renovation
    3. ANZ, Westpac
    4. Perry Finance, http://www.perryfinance.com.au/
    5. Luke Howe, “Borrowing Money for Renovations”, MoneyBuddy.com.au
    6. Bankwest Surplus Funds
    7. NAB, Suncorp Bank

     

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  • Get To Know The Score

    by SocietyOne Team | Nov 12, 2013

    How well do you know your credit? Do you know what your credit score is? 

    Most Australian consumers know surprisingly little about their credit files and even less about their credit scores. Given the importance of credit history in accomplishing a broad range of financial transactions, from applying for a credit card or personal loan to submitting a rental application, it’s worth knowing what goes in your file, how scores are calculated and how they affect credit assessment decisions when you apply for a loan. 

    Your credit file includes three pieces of information1:

    1. Consumer Credit Information that includes any overdue accounts, payment defaults or clearouts.
    2. Commercial Credit Information, including credit enquiries. 
    3. Public Record Information with any court judgments or bankruptcy information. 

    There are two main consumer credit reporting bureaus in Australia, Veda and Dun & Bradstreet (Tasmania has a local agency known as TSC Credit Bureau). 

    Each time you apply for credit, the recipient of that application will request your credit file with one of these agencies. The more applications you make, the more requests of your credit file you’ll have, and the less likely you are to be perceived as a person with good credit. This in turn, could negatively impact the cost and availability of credit to you in the future. The reason for this, is that banks and other institutions generally associate multiple credit requests with people under financial duress.

    The problem is that the current system only contains negative credit information, as we saw before, such as applications for credit (including utility accounts). But a new Comprehensive Credit Reporting regime  - already in place in other parts of the world including the US and New Zealand - will be introduced in Australia in March of 2014.  This will be a game changer in many ways. Comprehensive reporting will include positive information about a person’s credit position, most notably their repayment history. If your payment history is solid, your credit file should reflect that.  

    You will also learn more about your individual credit score. Your credit score is a number that is calculated from the information on your credit file to help lenders assess your credit application. The higher the number, the better the score. Scores are not standardised as the credit bureaus use their own proprietary criteria and methodology to determine the scores. But understanding your credit score will be an important aspect of managing your credit profile.  

    Veda, for example, already provides consumers with their VedaScore as part of their product suite. The VedaScore is expressed as a value between 0 and 1200. A credit score of say, 200 implies that the applicant has a high probability of defaulting on their obligation within the next 12 months.  According to Veda2, the national average score is 749, which is fairly good.

    With Comprehensive Credit Reporting, SocietyOne will be able to provide you with your VedaScore without first having to check your credit file, so you’ll know exactly what your risk-adjusted interest rate will be without adverse consequences to your credit report. 

    So what can you do to make sure you keep your credit file healthy?

    • The simplest way is to pay your bills on time. If debt overload is getting you into trouble, make sure you speak to your provider to work out a payment plan to keep overdue debts from being recorded on your file.
    • If you move away, forward your bills to your new address. 
    • Apply for credit only when you need it. Too many credit applications will have a detrimental impact on your file. 
    • Check your file on a regular basis. 


    1. You can request a free copy of your credit file here:  http://www.mycreditfile.com.au/home/free-credit-file.dot
    2. Fair Loans Report, Wall Street Journal, 1 November 2013 http://online.wsj.com/article/HUG1739939.html?dsk=y

     

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  • A Better Way to Save on Credit

    by SocietyOne Team | Nov 04, 2013

    If you look closely at your credit card statement, you’ll notice that it might take you a very long time to pay off your balance. For example, it could take you up to 59 years to pay off $5,0001! This is especially true if you’re only making the minimum repayments, which are usually about 2% of your outstanding balance.

    No wonder they find that Australians’ commitment to their credit cards is stronger than their marriages and last 3 times as long! 

    There are currently nearly 4 million Australians with total balances of about $20 billion who are paying standard credit card rates of 19.55% or more2.  Some 1.6 million of these credit card borrowers, known as “revolvers”, have average balances of $8,000 and pay approximately $1,568 a year in interest charges3. Over time, this can add up to quite a bit of money in interest payments.

    Consumer Credit Interest Cost Comparison Table

    In general, these revolvers are customers with good repayment history who provide Australian banks - among the most profitable in the world6 - with their biggest profit margins7! With the cash rate hovering at historic lows, we estimate that the banks are now earning a combined interest margin of approximately $3.4 billion per annum from these customers8

    At SocietyOne, we think that’s $1.3 billion too much9

    Consumer Debt Interest Repayments Graph

    We believe there is a viable alternative for borrowers with good credit to save 35% or over $500 per year10 on credit card interest and pay off their debt in a structured way at the same time. With a low interest SocietyOne unsecured personal loan for example, the total interest payments on an $8,000 loan for an A-rated borrower over a 3-year period is about $1,566, or roughly equal to the annual credit card interest payments on a similar balance.

    At the end of the day, we think credit cards should work for you, not against you. The goal is to earn back your interest-fee days and get the most out of your credit card, while never having to pay high interest rates again.  

    So, what can you do? 

    1. Go online and comparison shop for a better deal. Use comparison rate sites like RateCity, Personal Loan Finder and Infochoice.  
    2. Use a repayment calculator to figure out how long it will take to repay your debt11
    3. Look for a provider who will reward your good repayment history with the most competitive rate.
    4. Consider a fixed rate unsecured personal loan like SocietyOne to provide repayment certainty. Credit card balance transfer deals are great, but not if you get stuck in another minimum repayment & high interest cycle12
    5. Pay down all debt on your credit card to restore your interest free days. If you’re earning 4% on your savings and paying 19.55% on your card, you’re still losing money. 


    1. Cards linger longer than spouses, NT News, Oct 12, 2013, http://www.ntnews.com.au/article/2013/10/12/326036_ntnews.html
    2. Reserve Bank of Australia (RBA)
    3. RBA, SocietyOne estimates
    4. Comparison Interest rates, assumes repayments as per schedule for fixed term loans, or minimum payments for credit cards. Interest rate charges only, not including $8,000 principal repayment
    5. This comparison rate is based on a SocietyOne A-rated borrower, $10,000 Unsecured Personal Loan for 3 years. WARNING: This Comparison Rate applies only to the example or examples given. Different amounts and terms will result in different Comparison Rates. Costs such as early repayment fees, and cost savings such as fee waivers, are not included in the Comparison Rate, but may influence the cost of the loan.
    6. http://www.smh.com.au/business/banks-make-71-million-profit--a-day-20130623-2oqrw.html
    7. Data sourced from Annual Reports, APRA, for major banks CBA, ANZ, NAB & Westpac.
    8. Based on bank interest margin of 17.05% (standard credit card rates of 19.55% - RBA cash rate 2.5%) times $20 billion in outstanding customer account balances. 
    9. Compared to passing on the savings to borrowers in the form of lower rates, i.e. 12.9% comparison.
    10. Based on a SocietyOne standard personal loan with a 12.9% comparison rate for an A-rated borrower, saving 6.7%p.a compared to a standard rate (19.55%) credit card with an $8,000 balance paying $1,568 per year in interest rates.
    11. A good tool is MoneySmart’s Credit Card Calculator, https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/credit-card-calculator
    12. Loans subject to normal lending policies. Full terms and conditions available on application.

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  • AFR Capital Magazine: How peer-to-peer lending is revolutionising debt markets

    by SocietyOne Team | Sep 04, 2013

    AFR Capital magazine SocietyOne P2P lending article
    Australian Financial Review Peer-to-Peer Lending

    Australia’s big banks have little incentive to introduce pricing on personal loans that is more closely aligned with individual borrowers’ credit risk. “If someone can come in and disrupt that, I think the banks are vulnerable,” SocietyOne CEO Matt Symons says. Photo: Rob Homer

    JAMES EYERS

    In June, 400 lenders gathered in New York for the inaugural LendIt Conference. But this was not your traditional congregation of financiers.

    LendIt, rather, was a gathering of peer-to-peer (P2P) lenders, who are “revolutionising the credit markets and transforming the global banking industry,” according to the sold-out event’s promotional material. The Convene Innovation Centre on Seventh Avenue was buzzing that Thursday morning in the early summer. Blogger Peter Renton described a “palpable feeling that this was the start of something big”. Investment bankers were also there, searching for deals: many swarmed around Renaud Laplanche, the chief executive of Lending Club, a P2P lender that started as one of the first Facebook applications in 2007 and has surpassed $US2 billion ($2.18 billion) in personal loans.

    P2P lenders, who match borrowers and investors through an internet-based platform, offer a compelling win-win. Borrowers, especially those of high credit quality, can receive lower rates than banks offer for a personal loan or credit card, along with a vastly improved customer experience. Investors, meanwhile, make a flexible, short-term commitment and receive a better yield than many fixed-income products by targeting one of the most profitable lines of banking – the provision of personal loans.

    Lending Club made a profit in the second quarter of this year and its loan book has doubled in the past nine months. Its board includes former US Treasury Secretary Larry Summers and former head of Morgan Stanley John Mack. In May, Google took a stake valuing Lending Club at $US1.55 billion, three times what lenders paid to invest in the platform just over a year ago. So, with Lending Club earlier this year flagging its intention to list on the public markets, the bankers at LendIt were keen for a piece of the action on what is shaping up as the blockbuster float of 2014.

    Many had flown to LendIt from across the Atlantic. In the United Kingdom, P2P lending is also taking off: the market will be worth £1 billion ($1.69 billion) by 2016 if it continues its current pace of growth, according to Bank of England-supported research by the Open Data Institute, released in July. The UK market has trebled in size in the past three years; between October 2010 and May 2013, almost 49,000 investors funded loans worth more than £378 million. This new crowd of lenders are being supported by Prime Minister David Cameron, whose Conservative government has been investing alongside them to boost credit. Other powerful champions of P2P include the executive director of financial stability at the Bank of England, Andy Haldane, who noted the potential of P2P lending earlier this year. “At present, these companies are tiny,” he said. “But so, a decade and a half ago, was Google.”

    HIGH-QUALITY RISK

    While P2P lending conjures images of desperate borrowers arriving onto an obscure internet site, cup in hand, after being turned away by a prudent bank, this is a misnomer. Lending Club, and many of its competitors, are largely chasing high-quality credit risk. About 65 per cent of Lending Club’s loans are for refinancing credit card debt. In order to attract investors onto the platforms and provide them with attractive yields, P2P lenders are incentivised to conduct thorough credit checks of applicants before accepting them. At present, Lending Club has a default rate across its loan book of just over 3 per cent. At Zopa, the UK’s largest P2P lender, the default rate is 0.93 per cent.

    In Australia, P2P lending has been slow to get off the ground. It has hardly been mentioned in the business media. But the potential power of P2P lending was recognised by the Australian Centre for Financial Studies in its Funding Australia’s Future report, released in July, which pointed to technological advancement, innovation and regulation as three factors changing the banking industry.

    “Arguably, we are at a point in history where the interaction of those factors is pointing towards a significantly lessened relative role for traditional intermediation,” the report said. While there has been very little direct financing by savers of borrowers in Australia to date, it added that “developments in technology and information availability could facilitate” P2P lending in the future.

    Conditions in Australia, for both borrowers and investors, seem ripe for P2P lending to emerge. Australia’s big four banks have failed to adapt their personal loan products to changing times. Their one-size-fits-all approach to personal credit doesn’t properly price risk, meaning good-quality borrowers receive largely the same interest rate as poor ones (effectively subsidising them), while service is generally poor. Meanwhile, on the investor side, Australia has a technologically savvy population with a high level of savings searching for better yields and a stronger sense of community.

    In August 2012, Matt Symons – who was also at the LendIt conference in New York – co-founded Australia’s only active P2P lender, SocietyOne. It has made almost 150 loans, totalling $2 million.

    Symons and the other investors in the Sydney-based company anticipate P2P lending volumes will grow sharply in the years ahead, just like they have in the US and Europe.

    “P2P lending offers a very different approach,” Symons says. “This model becomes really powerful when it supports a return to community, grass-roots, real-people lending, and away from what the banking institution has become.”

    GRASSROOTS APPROACH

    Symons’s eyes were opened to the potential of P2P lending while he was working in San Francisco, where Lending Club and countless other fintech firms are based.

    A former technology lawyer at Minter Ellison, Symons left the law in the late 1990s to establish Memetrics, a data and digital marketing business that was sold to Accenture in 2007, two years after Symons had moved to the US West Coast with his wife and baby. As an Accenture partner, he spent three years embedded inside big banks, helping them to develop analytic tools for their online businesses to help with customer interaction in the digital realm. During this time – the peak and aftermath of the global financial crisis – the banks Symons worked with were under immense pressure and largely unable to allocate the necessary headspace to technology, given the inevitable focus on regulation, he says. “It was an environment where they had the right aspirations – but some combination of legacy systems and understandably distracted management teams meant most of the innovation was coming from outside the industry.” 

    Symons first heard about Lending Club in 2009. “My first impression was ‘wow’, that’s a great idea,” he says. “Creating a marketplace for consumer credit is a very clever way to offer borrowers access to better-priced credit and at the same time offer investors access to an attractive asset class.” 

    Symons returned to Australia in 2010 and was fortuitously introduced to Greg Symons (no relation) by an angel investor the same year. At the time they met, Greg had spent 13 years with a team of engineers developing receivables management software, including for point-of-sale credit. The platform was being used by Rabobank to manage billions of dollars of agribusiness in Europe.

    Three years earlier, in mid-2007, Greg had discovered P2P lending. “There was then not even a search term recognised by Google. I got instant religion,” he says. He then re-orientated his ClearMatch platform towards P2P. It is now the proprietary software of SocietyOne, of which Greg is the other co-founder.

    A GAP IN THE MARKET

    “As someone who has invested in a lot of early stage businesses this seemed to be a really unique asset,” Matt Symons recalls. He continued his due diligence by going to interest rate comparison websites and applying for some small loans at various banks. He realised that, once the application had been submitted and accepted, if he was unhappy with the offered rate and attempted to discover a better price at another bank, his credit rating would be adversely affected because the next bank could only see that an application for credit had been made but not taken up. It would assume their competitor had identified some hidden gremlin on the credit file, rather than presuming a potential customer was seeking a better deal.

    “I really got religion [on P2P lending] when I actually looked at the personal loan application process itself. I found the market conditions to be ripe for disintermediation.

    “The more a creditworthy borrower tries to do price discovery, the further away they get from a decent price. That is wrong; it is not sustainable. Then I looked deeper, and I saw that even if you do get accepted [for a loan], you are paying the same rate as everybody else. I thought the front end of this product experience is rubbish for a lot of consumers. It is crazy there is no risk-adjusted pricing.”

    Australia’s big banks have little incentive to introduce pricing on personal loans that is more closely aligned with individual borrowers’ credit risk because unsecured personal lending delivers them big profits. According to figures from the Australian Prudential Regulation Authority, retail banking made up 42 per cent of banking profits in 2011, or $7.4 billion. Of this, personal lending (credit cards and personal loans) comprised 16 per cent of the profit or $1.2 billion (deposits and mortgages made up the rest).

    “If someone can come in and disrupt that, I think the banks are vulnerable, because I can’t see the banks competing either on rate or on experience,” Symons says.

    PROFITABLE ASSET CLASS

    Stuart O’Brien is a brand consultant, who has worked for Qantas, Lend Lease and Macquarie Group. As well as being an investor in the company, he has been lending on the SocietyOne platform for eight months. “Touch wood, I have had no defaults,” he says.

    Asked what attracts him to fund loans through the platform, he immediately replies: “11 per cent”.

    In fact, O’Brien’s annualised return is 11.67 per cent. He admits he had a hard time convincing his wife and his accountant about SocietyOne initially, but says they have now been won over. “Once Australia understands how P2P lending works, I expect it will be quick to catch on,” he says. “This unlocks one of the most profitable asset classes, one that has been protected by the big banks. That is a big opportunity for me.”

    O’Brien, who is a sophisticated investor as defined by the law (lending through SocietyOne is not yet available for retail investors) says he is aware of the investment risks. Unlike a bank deposit, there is no government guarantee against losses. He points to the risk of mass defaults on the loans, but says with his diversified portfolio of around 100 loans, 20 per cent of lenders would have to default before he felt an impact. (SocietyOne’s default rate at June 30 was 2.3 per cent.) 

    Another key risk is investing in poor credit. The banking editor of the Financial Times, Patrick Jenkins, criticised the lack of clarity around the credit-checking process for many P2P lenders in the UK, and their lack of “skin in the game”, meaning they had “no explicit interest in making sure the loan is a decent one”.

    “Banks might have done themselves and the world a lot of damage in recent years, but they are still better judges of risk than the average investor,” Jenkins wrote.

    An examination of SocietyOne’s credit-checking processes suggests the company is aware of such concerns. While it has made $2 million worth of loans, SocietyOne has asessed over $17 million in applications, so only 11 per cent of applicants are approved and moved onto the platform and made available to lenders. This is around half the number of traditional banks for first-time customers. It is designed to increase the investment performances of the early vintages and provide investor confidence. This will assist SocietyOne in mounting an argument to open the platform to retail investors as early as next year.

    The credit assessment process is also highly automated. Using Yodlee, applicants for loans provide SocietyOne with six months’ worth of bank statements allowing SocietyOne to verify income and examine their personal PNL; their proprietary systems analyse statements to determine spending patterns and hence credit risk. Once a borrower is approved, SocietyOne assigns them a credit risk category from AA to D and a sliding scale interest rate is attached. For example, AA borrowers can receive an interest rate of 10.15 per cent to 11.75 per cent, while D borrowers receive 14.1 per cent to 15.6 per cent.

    COMPETITIVE LENDING

    Investors are able to bid for loans within each band, creating a market for each loan while avoiding irrational pricing. SocietyOne receives gross revenue of around 5 per cent. This comprises a 1.25 per cent “receivable management fee” from the investor, and an average 3.5 per cent origination fee from the borrower (who only pays if the loan passes the credit assessment and is originated). The origination fee actually varies based on the credit grade (1.5 per cent for AA to 4.5 per cent for D) and is levied as a percentage of the total loan. Late payment fees are equivalent to banks; there are no servicing fees and no pre-payment fees.

    Investors nominally match their commitments to particular loans but money which comes in from investors is pooled into a trust, a wholesale unregistered managed investment scheme that provides a single source of money that goes out to borrowers. The trust has been created as a bankruptcy remote vehicle which cannot fund SocietyOne’s liabilities. SocietyOne is the lender of record and loan originator and holds an Australian Credit Licence. SocietyOne conducts the day-to-day administration of the loans on investors’ behalf.

    When an investor logs on to SocietyOne’s platform, they enter an online marketplace not unlike eBay. The actual identity of borrowers is not revealed, but before they hit a loan, plenty of information is made available to inform their credit assessment: an investor can see a borrower’s suburb (displayed on a Google map); a summary of their personal profit and loss account; various financial ratios, such as debt to income; and the borrower’s explanation of why they want the loan. (For one live loan for $31,350 on the platform last month, the description was for an “October wedding in Perth”.) Once loans are originated, an “activity feed” updates users of all actions.

    Leah Renwick, who has borrowed $30,000 through SocietyOne at 15 per cent inclusive of costs, says the story provides the investor with “a safety net. It is not just based on a credit score – they need to see the story as to why they should invest in you,” she says. “If I run up a world of debt because I am ignorant and only work casually, then no one is going to buy your loan.” 

    But five investors bought into Renwick’s loan, which was first hit five minutes after going onto the platform and closed after 22 minutes.

    ALTERNATIVE TO THE BIG FOUR BANKS

    Renwick, who works at the Finance Brokers Association of Australia, discovered SocietyOne through comparison website RateCity while seeking an alternative to the big four banks to consolidate her debt. “I was paying too much on two credit cards – 29 per cent – and had other debt at 19 per cent,” she says. “It is lot easier to pay back a two-year loan term than trying to pay off credit cards each month for 10 years.” The loan application process was more rigorous than with a big four bank, she says, but the experience was superior. “If more people understood how P2P worked and there were more P2P lenders out there I think the big four would have a lot of questions that their customers would want answered.”

    As with any new area of consumer finance, regulators have been circling. The acceptance of P2P lending in the US followed a period of legal uncertainty in the early days, after the Securities and Exchange Commission took P2P lender Prosper to court in 2008, alleging violations of the Securities Act when it sold loan notes without an effective registration statement. (Lending Club was forced to close for six months while the SEC approved its registration, while Zopa was forced out of the US market during this time.)

    As P2P platforms grow, and as more institutional money enters the sector, regulatory risks are likely to increase in the future. In the UK, a regulatory framework for P2P lenders, who are represented by their trade group the P2P Finance Association, will be established in 2014 and the sector regulated by the Financial Conduct Authority as part of that body’s adoption of wider consumer credit responsibilities.

    The Australian Securities and Investments Commission is watching the P2P sector and Tim Gough, the acting senior executive leader of deposit takers credit and insurers at ASIC, says Australia’s new consumer credit laws are not a barrier to P2P models working.

    As SocietyOne considers registering its managed investment scheme to allow retail investors onto the platform, Gough says if investment in P2P was available to retail, ASIC’s scrutiny “comes down to the level of disclosure a P2P lender provides to investors”.

    “You can see from [the SocietyOne] website, even in the absence of a product disclosure statement, there are some warnings there for investors – they make it pretty clear the rates of return of over 11 per cent are not guaranteed, and rely on loans being repaid without impediment. It would be unusual to be carrying a loan book with no level of impairment. It is clearly an investment that carries some level of risk . . . and that is what investors need to understand.

    We are a bit surprised P2P hasn’t taken off more quickly [given the overseas experience], but this may be the start of something that will grow more rapidly. We are not a gatekeeper to this type of product being made available to consumer investors.” 

    THE START OF SOMETHING BIG?

    The growth of the P2P sector might also be supported by the positive reporting reforms, which have been approved by both houses of the commonwealth parliament and are set to come into force next March; they will expose more information about the credit history of individuals, allowing new credit providers to make a more meaningful credit assessment.

    “The advantage the big banks have had in seeing more data and being better able to discriminate is being eroded,” Symons says. “This is fuel for this larger trend towards risk-based pricing. It is going to make it much easier to see who are the people living within their means and are low default risks, who are higher default risks, and who are in the middle. It will let you price better and make the market more efficient.”

    The P2P market will also allow investors to construct receipts to meet cash-flow needs, making P2P an attractive alternative to traditional fixed-income investments, which can be locked up. With Australia going to a federal election this coming weekend, Symons says governments of either political stripe are aware of the need to develop a greater range of fixed-income asset classes in Australia that offer reasonable returns.

    But the real allure of P2P lending comes from something more elusive: the power of a “crowd” of investors to validate the lifestyle choices of borrowers and reward them for that, as opposed to a faceless credit department of a bank applying a one-size-fits-all to customers, and in the process, penalising the diligent borrowers.

    Seen in this light, P2P lending looks like an attempt to take banking back to its community roots.

    You can download the document here.

    - The Australian Financial Review, Capital

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  • How a Peer-to-Peer Personal Loan Can Save You Real Money

    by SocietyOne Team | Aug 30, 2013

    Australians have billions of dollars worth of personal loans, but the number who compare and save remains low next to those who compare home loans and credit card rates. The latest estimates are that 1 in 10 Australian adults currently compares credit cards rates, more than any other personal finance product compared online.

    Collectively, Australians owed about $92.4 billion in personal finance commitments as of June 2013, up 5.4% from the previous 12 months, according to the Australian Bureau of Statistics1. Of this total, 58.8% represents personal fixed loans. This means that on average, Australian consumers could be taking on personal loan debt without really comparing rates for the best possible deal (which may not be with one of the major banks). They could be losing out hundreds of dollars in interest payments, money that instead could be working hard in a high-interest savings account, or invested into a share portfolio or superannuation.

    Ditch & Switch: Don’t be shy about comparing personal loan rates

    There is already a lot of media attention on high credit card interest rates, and next to an ordinary purchase rate of 19.55% or more on standard cards, a personal loan at a fixed rate of 14.2% can seem cheap by comparison2. So it’s easy to see where you might think just any unsecured personal loan is a ‘better deal’. But don’t be fooled by the headline rates – make sure you look at the comparison rates carefully, which incorporate all associated fees. Peer-to-Peer lenders like SocietyOne go one step further. At SocietyOne, rates are personalised and determined by a borrower’s own credit history, so the better your credit score, the lower your rate!

    For example, over the course of a 3-year, $10,000 unsecured personal loan, the interest savings on a SocietyOne loan compared to any personal loans of the ‘Big 4’ banks could add up to more than $500, leaving you with less debt and more cash in your pocket after every repayment. Savings on credit card debt would be even greater. You can check different loan amounts and repayment terms using the SocietyOne Savings Calculator which uses a comparison rate of 12.77% for an A-rated borrower.3

    SocietyOne Savings Comparison against Big Four Banks

    High loan rates not confined to the ‘Big 4’

    You might be thinking that the ‘little guys’ (who are actually mostly owned by one of the big 4 anyway) would do better. That’s unlikely, when you look at lenders like St. George (owned by Westpac), which charges a fixed rate of 14.35% p.a. on a 3-year, $10,000 personal loan6. The comparison rate is the highest of the lot too, at 17.59%, which means you would save $726.08 by switching your loan to SocietyOne. Compare SocietyOne rates to see the difference.

    Switching is easier than getting a new loan

    If you’ve already got a personal loan, it makes more sense than ever to switch because lenders might be more willing to compete for your existing debt, particularly if the repayment history is solid. The first 6 months is usually a good time to switch if you can lock in a better rate and save that much more over the life of your loan. Or, you might want to top up your existing loan and borrow more money as the loan approaches term. So, in this historically low interest rate environment, make sure you are out there comparing loan products and getting ready to save some real money.


    1. Australian Bureau of Statistics, Personal Finance Trend Estimates Table 5671, 12 months to June key figures http://www.abs.gov.au/ausstats/abs@.nsf/mf/5671.0 
    2. RBA, indicator lending rates as of August, 2013 

    3. Rates and savings figures are based on a SocietyOne A-rated borrower with a comparison rate of 12.77% p.a. and assuming existing loan has been held for 6 months. 
    4. All loans at fixed rates, current on an amount of $10,000 as stated on each bank’s personal loan repayment calculator - August 19, 2013. 
    5. These calculations are indicative only and do not constitute a quote. Comparison rates, early repayment fees and loan termination fees can affect the overall cost of a loan.
    6. Rates are as advertised on St.George’s website rates as of 15 August, 2013. 


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  • A Smarter Way to Bridge the Digital Divide

    by SocietyOne Team | Aug 13, 2013

    What is the key to not only surviving but also prospering in the digital age? 

    Being smarter. 

    That’s one of the more succinct conclusions of a report published this week by IBM Australia incorporating new research commissioned by the National Institute of Economic and Industry Research. 

    For Australian enterprises to lead in the digital economy and compete in what IBM terms the era of “smart” they will need to adapt, change and take advantage of emerging technologies like high-speed broadband, mobile devices, cloud computing, Big Data, robotics, sensors and intelligent systems, social media and collaboration tools.

    IBM’s so-called era of “smart” is a time when “success will be driven by how effectively enterprises can harness the power of new technologies to deliver unique value to customers and citizens with the speed, efficiency and ubiquity they demand.”

    Adapting new business models will be critical. And particularly in financial services, the report highlights that “the internet is making it possible for individuals to borrow directly from investors without the help of a bank,” referring specifically to SocietyOne’s pioneering work disintermediating the banks in Australia by introducing peer-to-peer lending using platform technologies. 

    “Leaders”, describes the report, are those who have “closer customer relationships and a lower cost base and successfully grow their transaction businesses in a way that delivers superior customer insights and opportunities for new products”.

    Those financial leaders of tomorrow are effectively the disruptors of today. What makes them competitive is their lack of “legacy commitments such as paper-based business processes, large teams and significant capital investments in bricks-and-mortar facilities”. 

    Without doubt, digital technologies are having a huge impact and reinventing businesses globally, with many industries at a tipping point of drastic change. 

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  • P2P: The Next Evolution in Lending

    by SocietyOne Team | Jun 21, 2013

    As the Peer-to-Peer (P2P) industry assembled for the first time in New York City on 20 June for the LendIt conference, the heads of the world’s leading online lending companies had many important milestones to report. 

    Lending Club, the world’s biggest P2P lending company, is at the threshold of originating $2 billion in loans and announced three major bank partnerships in the US. Prosper Marketplace, the US’ second biggest P2P lender, is focusing on meeting lender demand by rapidly expanding their pool of potential borrowers. 

    And Matt Symons, CEO of SocietyOne, shared his plans to build the first true multi-asset class investor platform and deploy the world’s first mobile loan assessment and funding application designed to work on a smartphone, enabled by the company’s robust, bank-grade solution and service layer technology. 

    Hailed as the future of global banking, the technology and innovation that is driving P2P lending worldwide has caught the interest of venture capitalists and institutional investors who are recognising the vast potential of the social lending revolution.

    “Now is the perfect time to educate potential investors on the quality of collateral as well as the depth and diversity of this emerging asset class” said Australian-born Peter Renton of Lend Academy, organiser of the conference, who has referred to SocietyOne as maybe “the most innovative P2P lender on the planet”. 

    Moderating a panel session on consumer P2P lending, Renton discussed the future of the industry with Symons, Scott Sanborn of Lending Club, Ron Suber of Prosper and Peter Behrens of RateSetter in the UK. 

    Symons talked about his strategy for growth in the Australian market, SocietyOne's innovative technology platform and the disruptive force of P2P lending to compete not only on pricing but by offering a game-changing consumer experience and level of empowerment unrivaled by traditional banking. 

    “To have people bid for your loan in real-time on your smartphone, that’s tremendous personal validation right there,” said Symons. “It beats having to beg a bank for a loan.”

    Matt Symons LendIt P2P Panel presentation

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*This comparison rate is based on a $10,000 Unsecured Personal Loan for a three year term. Offer available throughout April 2014 only.  
WARNING: This Comparison Rate applies only to the example or examples given. Different amounts and terms will result in different Comparison Rates. Costs such as early repayment fees, and cost savings such as fee waivers, are not included in the Comparison Rate, but may influence the cost of the loan.
A Comparison Rate Schedule is available at our office or view it online Comparison Rate Schedule.
 SocietyOne Fees.

**SocietyOne Australia Pty Ltd does not guarantee any particular rate of return or the return of capital repayment from the SocietyOne P2P Lending Trust.  Past performance is not an indicator of future performance.

SocietyOne Discounted Rate and Zero Fees Terms and Conditions.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice contained in this website and before making any investment decision we recommend that you consider whether it is appropriate to your situation and seek appropriate financial, taxation and legal advice. Information on this website is intended for residents of Australia only.

SocietyOne Australia Pty Ltd does not guarantee any particular rate of return or the performance of any investment, nor do they guarantee the repayment of capital from the SocietyOne P2P Lending Trust. An authorised representative of and acting on behalf of Ironbark Asset Management Pty Ltd (ACN 136 679 420, AFSL 3410202) as intermediary of SocietyOne Australia Pty Ltd (ACN 151 627 977) ("SocietyOne") holder of Australian Credit Licence No. 423660, Issuer of the P2P Lending Trust.

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