SocietyOne

Peer-to-peer (P2P) is no longer a fad or the business of start-ups. Around the world, companies like Lending Club, Prosper, Zopa, RateSetter and others are demonstrating phenomenal growth and proving that P2P is a sustainable and profitable business model. More importantly, they are proving that the venerable world of traditional banking and high finance is as vulnerable to the disruptive influence of P2P platforms as other industries like media, publishing, retail, travel, insurance and shipping.

Individual investors originally discovered social lending in 2006 and have been the backbone of the industry ever since. These individuals earned attractive returns while providing lower cost capital to creditworthy borrowers. More recently, venture capitalists and institutional investors have joined the fray, pouring hundreds of millions of dollars in equity funding to the burgeoning industry. As a result, P2P marketplaces have expanded rapidly around the world. 2012 saw the tipping point for the industry as brand recognition and competitive rates helped P2P lenders attract capital and borrowers in record numbers.

A Global Phenomenon

So while banks keep hoarding cash and enforcing strict lending policies post-GFC, marketplace business models are busy unlocking real financial value for borrowers and investors, galloping away with business and consumer loans through a more flexible and personalised approach to lending.

In the US, Lending Club and Prosper have amassed loan books that today total over $2 billion. Lending Club, one of the biggest P2P lenders in the world, has more than 80,000 borrowers and is originating over $140 million a month. In March, it surpassed $1.5 billion in loans and its book is growing at approximately 14% MoM. And just yesterday, in a move that further validates the potential of P2P marketplaces, Google announced that it had acquired a 7% stake in Lending Club for $125 million.

In China, the online lending market seems to be growing just as fast, if not faster. In a country where microlending has traditionally been the backbone of financial activity, particularly among SMEs, part of the $2.4 trillion shadow-banking system is now surreptitiously moving online. The online lending market is now estimated to be around $3.2 billion¹. The lack of market penetration makes the country a veritable hotbed for the P2P industry. There are now as many as 300 estimated P2P lending service providers of one variety or another!²

Regulation and Customer Centricity

The global expansion of these P2P markets has led to a significant spate of self-regulation, but also of official regulatory oversight that strengthens the position of P2P lenders as a credible alternative to banks. In the UK in particular, the government endorsed the P2P industry by including Funding Circle and Zopa in the Funding for Lending Scheme in 2012, making them direct recipients of £30 million ($43 million) in government loans.

And not only have P2Ps made major inroads into the established marketplace by gnawing away at the spreads pocketed by incumbent banks and sharing their lower cost advantage with investors and borrowers, but they have also been able to generate massive goodwill among their rapidly growing member bases. Zopa in the UK has now won Moneywise’s Customer Service Award for Most Trusted Personal Loan three years in a row.

At Home

While financial and credit markets in Australia and Asia-Pacific have been slower to revolutionalise compared to our European, American and Chinese counterparts, it is only a matter of time before the local landscape is irrevocably altered. In fact, the changes are already underway today.

At SocietyOne, we are actively connecting borrowers and investors in a secure, safe and 100% online environment. Our personal loan rates are now among the most competitive in the market. As a Managed Investment Scheme our investors get access to a diversified portfolio of high-yield consumer debt products with predictable fixed monthly repayments. Our versatile and robust, bank-grade technology platform will allow us to introduce exciting new innovations, including smartphone-ready applications. So stay tuned, this is only the beginning.

 

1. Online P2P lending forms banking sub-community in China, December 27, 2012

2. China Shadow Bankers Go Online as Peer-to-Peer Sites Boom, Bloomberg News, Jul 24, 2012

Very recently we introduced a new rate structure on our peer-to-peer lending platform to make service fees more equitable to investors and borrowers alike. We believe the new rates better reflect SocietyOne’s services in assessing the quality of borrowers, the origination of loans and the servicing of our loan book.

SocietyOne’s comparison rates will remain as competitive as always and for borrowers with good credit histories, rates will be even more competitive.

The changes mean that for the first time in Australia, loan establishment fees will be based on a variable rate that takes into account the creditworthiness of borrowers and the true cost of assessing and originating a loan.

SocietyOne’s one-time set up fee is an all-encompassing fee that reflects all the costs associated with establishing a loan. As before, there are no application fees, service charges, break penalties or other hidden fees. If a loan does not get issued, no set up charges are applied.

In summary:

- The loan set up fee is a one-off loan establishment and origination fee, determined by the Credit Ranking of a loan, as per the chart below.

- The previous $120 fixed borrower fee will now range from 1.50% to 4.5% according to the borrower’s SocietyOne Credit Ranking. 

- For investors, the previously variable rate Receivables Management Fee (RMF) will now be a standard 1.25% across all loan credit categories.

- The RMF is a fee charged to investors to service the loans, maintain the accounts and to establish a contingency for a collections management in case of a SocietyOne default.

- Existing loans in the SocietyOne portfolio will not be affected by this new fee structure.

Do you know how much you need to live on when you retire?

If you’ve done your planning and factored in prevailing interest rates, savings potential, inflation and life span – then you probably have a good idea. According to the Association of Superannuation Funds of Australia, the average retirement income a couple is expected to need in Australia and be comfortably off is about $1,080 a week, up 2% from 2011.

The question then becomes: will your retirement investment strategy generate the necessary returns you need to sustain you through your golden years? And is your super up to the task?

Many people are finding that in the wake of the GFC, with plunging cash returns driven by lower interest rates, popular investments like dividend-paying equity and Term Deposits are simply not going to generate the income they need to meet their retirement objectives.

So every week more and more Australians take the management of their retirement funding into their own hands by setting up a SMSF. Something like 700 new SMSFs are established each week by people looking to actively improve their returns. There are currently 500,000 established SMSFs in Australia, managing more than $475 billion, according to the Australian Taxation Office (ATO).

But according to the ATO, the average SMSF has 30% of its portfolio allocated to cash or Term Deposits. With inflation running at 2.2% p.a. and super fund cash investment options paying just 2.6%-2.8% p.a. or less, many of these accounts are hardly producing decent returns.

In markets like the US and the UK, where interest rates (and therefore super returns from fixed income) have been lower for longer, frustrated savers are increasingly ditching their fund administrators and considering new investment propositions like peer-to-peer lending that offer higher returns with predictable fixed cash flow repayments.  P2P lenders in these markets are reporting surging demand with Zopa alone adding 10,000 new investors in 2012, as desperate savers look to escape the inflation trap and declining interest rates paid on deposits. US based Lending Club has nearly 100,000 registered investors who've funded over $1.3 billion in cumulative loans since 2007. Last year, total investor funding for the top three P2P lenders in the US and the UK increased to $230 million, as investors recognised the returns potential of this market.

And as the only fully compliant P2P lender in Australia, SocietyOne is a now offering Sophisticated Investors with an SMSF the opportunity to invest into a portfolio of consumer loans. It’s a smart way to beat the interest slump and keep your retirement goals on track.

John Kehoe

Financial services entrepreneur Matt Symons believes there is a gaping hole in the personal credit market.

Consumers using unsecured personal credit, including credit cards, are slugged an average interest rate of 19 percent. It doesn’t matter if they have the best credit record or the worst, they pay the same high rate.

“It’s not a risk-adjusted pricing model,” Mr Symons said. “The most inequitable pricing model is for people who have excellent track records.”

Banks dominate the market for personal credit in Australia. After seeing the success of an alternative personal credit model while living in the United States, Mr Symons believed there was room for a niche player in Australia.

So-called “peer to peer lending” connects sophisticated investors who have surplus funds with creditworthy borrowers, who want to access unsecured credit at a more competitive rate.

US financial services start-up, LendingClub, has originated more than $US1 billion in loans and appointed former US Treasury secretary Larry Summers and the former head of Morgan Stanley, John Mack, to its board.

Mr Symons and his business partner, Greg Symons (no relation), hope to follow in the footsteps of such models.

Last year they set up an online business in Australia, SocietyOne, which recently surpassed $1 million in loans.

Amazon, eBay and online dating sites have successfully built pure online businesses but online success in personal credit has been limited, perhaps due to the complexity of credit assessments and originating loans.

Matt Symons began his career as a corporate lawyer at Minter Ellison specialising in intellectual property and technology, before building his own data and analytics start-up, Memetrics, which was sold to Accenture in the US.

Greg Symons has built and licensed consumer finance technology platforms to banks around the world.
SocietyOne is targeting sophisticated investors, such as wealthy individuals and family office trusts to provide funds, which are stored in a Macquarie trust account. It then intermediates the funds to creditworthy borrowers. They can borrow between $5000 and $30,000 and repay the loan in principal and interest. Eventually, the business may provide car loans and credit for small business.

Borrowers must have a strong and stable employment history and their credit track record is verified through Veda, a credit records bureau.

SocietyOne’s team of about 20 ex-bankers also examines past bank statements, checks verification data and makes other inquiries regarding the credit history of potential borrowers.

Matt Symons said borrowers receive a much more attractive interest rate, from 12.95 per cent. Investors are offered targeted returns of 10 per cent, net of management fees and allowing for the provisioning for losses in the portfolio.

“It’s an asset class that has been fantastic for the banks and which investors haven’t traditionally had access to,” he said.

But what if a loan turned sour? Mr Symons said each investor owns only a small proportion of each loan and risk is diversified.

An investor can have more than 100 borrowers in his or her portfolio.

You can download the document here.

The Australian Financial Review

Australians are frustrated at the dominance of the big banks. The Big Four control more than 87% of all household loans, including personal loans, and about 90% of the Australian mortgage market. All four reported record profits in February and higher net interest margins in their Australian retail businesses, according to a recent article by the Australian Financial Review. 

The survey by D&M Research was commissioned by Abacus Australian Mutuals, a group that represents independent mutual organisations in Australia. Consumers groups like Abacus are now asking for a sweeping and wide-ranging inquiry into the lack of competition in the country’s banking system. Last week, they launched the "Balance Banking" campaign to change the face of banking in Australia. 

What does this mean for borrowers?   

For starters, banks have been reluctant to pass on the Reserve Bank of Australia’s 175 basis points worth of cuts in the cash rate since November 2011. They have kept, on average, about 42 basis points of the RBA’s cuts from borrowers. Rate cuts of even 10 or 20 basis points can mean significant cash savings for family households, sometimes adding up to hundreds and even thousands of dollars a year in mortgage repayments.   

For depositors, the outlook is not much better.   

The dominant market share of the banks could soon result in declining rates of interest being paid on savings accounts. This is because banks are now able to tap the wholesale markets at record rates just 90 basis points above the cash rate.  This means that as deposits get more expensive as a source of funding for the banks, they will begin considering slashing deposit rates as they source cheaper non-deposit funding alternatives.   

At SocietyOne, we believe there is a much better alternative. We believe social lending provides a more empowering experience for borrowers and investors, without having to rely on the intermediation of banks. Market rates are transparent and more competitive. Investors maximise their returns and borrowers get access to loans at lower rates. We certainly believe it’s a more viable way to connect borrowers and investors, with greater choice and better value for everyone involved. 

Getting useful and convenient features on the mobile for our borrowers and investors is our aim. Whilst having a full feature online portal is great, we believe our customers want some key functions and reporting at their fingertips no matter where they are.

http://www.wiseclerk.com/group-news/countries/australia-key-take-aways-from-the-society-one-p2p-lending-app/

Mozo has started the year off by taking a look at all the products that were launched or enhanced with new features last year to bring you their list of Banking VIPs (Very Innovative Products). These are the products that stood out among the crowd for their innovation, interest rate worthiness or cool features and are well worth considering adding to your wallet this year.

You will need to scroll a bit, but we're definitely there!

http://mozo.com.au/blog/2013/01/most-innovative-banking-products-of-2013/

Lend Academy's Peter Renton writes up about our efforts in peer to peer lending from a global perspective.

SocietyOne's platform is rich in functionality and Peter hints at things to come in 2013 based on innovative technology and a more comprehensive loan product suite.

http://www.lendacademy.com/societyone-review/

 

SocietyOne launched in August 2012 wanting to prove personal loans as an investment asset class can yield investors above average returns. Whilst this is a baby step in the life of SocietyOne we are proud to have achieved a milestone of a portfolio of $1m in personal loans all funded through our peer to peer lending platform, ClearMatch. Check out our latest infographic on our progress to date.

Congratulations to the whole team at peer to peer lender LendingClub in the US.  LendingClub this week passed an important milestone announcing they have now originated more than $1B in personal loans on their pioneering peer to peer lending platform. See article below

It will be interesting to see how big peer to peer lending can become in markets like the US in the next 3-5 years. It’s clear from the growth in their loan portfolio that more and more consumers are waking-up to the benefits of borrowing through a peer to peer lending platform. It’s also clear that Lending Club have done a great job delivering great returns to their investors (they have for instance announced they have 45,000 investors on their platform). As the number of investors grows the amount of funding they have available to fund consumer loans also grows which allows LendingClub to attract an ever larger number of borrowers.

It’s a virtuous model and if current industry rates of growth continue, LendingClub looks set to become a very large 'mainstream' lending business.

A huge thanks to all the Aussie borrowers and lenders who have signed-on with SocietyOne since our launch in August this year. As Australia’s first fully compliant peer to peer lender we are really encouraged to see the success that peer to peer lending is enjoying in Countries like the US and the UK and super excited to be making peer to peer lending available to Australian borrowers and investors

If you are interested in learning more about what we are doing at SocietyOne please sign-up here or follow us on twitter and on Facebook.

To read about LendingClub's success use the link below:

http://techcrunch.com/2012/11/06/the-p2p-lending-experiment-lending-club-surpasses-1b-in-personal-loans-hits-profitability/

A Buying Guide For People New To the Personal Loan Category

A number of our customers have told us they found the process of trying to find the best personal loan confusing and time consuming.

At SocietyOne we are always listening to our customers so we thought we would put together a simple buying guide to help people new to the personal loan category find the right personal loan. If you have any ideas about how we might improve this buying guide and or any personal experiences you wanted to share in finding a personal loan please share them with us.

1. Step 1 - Understand Your Options
The personal loans category has been around for at least 30 years and has not changed much in that time. There are basically two types of personal loan:

a)    Secured personal loan (a loan involving an asset that can be placed on the PPSR – Personal Property Security Register)
b)    Unsecured personal loan (a loan where the provider of the loan does not receive security against the borrowers promise to repay the principle and interest on the loan)

There are then basically two ways personal loan interest rates are calculated:
a)    Fixed rate (the rate of interest is fixed for the life of the loan)
b)    Variable rate (the rate of interest varies depending on the Reserve Bank Cash Rate)

2. Understand How To Compare Loans
The most important thing to understand when comparing the cost of competing personal loans is the difference between the ‘headline advertised rate’ also known as the APR (Annual Percentage Interest Rate) and the ‘true cost’ of the loan also known as the CR (Comparison Rate). If you want to understand how much interest you are actually going to have to repay over the life of the loan that you have to understand the Comparison Rate. Sites such as ratecity.com.au, infochoice.com.au and mozo.com.au are good places to visit to determine the Comparison Rate and therefore the true cost of different personal loans.

3. Understand Your Credit Profile
When reviewing personal loan Comparison Rates to determine the true cost of a personal loan its also important to understand that two further factors are going to impact the ‘borrowing cost’ of your loan. The first is your credit rating and the second is the length of time you plan to take to repay the loan (also known as the loan term). Looking at the role of your credit profile first its important to understand that quoted Comparison Rate’s are actually the rate the loan provider would offer to lend money to people with good to very good credit profiles.

Its important for people applying for personal loans to understand that each time you apply for a personal loan the recipient of that application (i.e. the Banks) will request your credit file. The more times you apply therefore the more requests of your credit file and therefore the less likely you are to be perceived as a person with a good credit profile which in turn can negatively impact the cost and availability of credit to you in future as Banks will assume that multiple credit requests are often associated with people under financial stress.

A good example of how to avoid this is to apply to a loan provider that will request your credit profile once and then present it to multiple investors see for example SocietyOne.

4. Selecting A Loan Term
As mentioned above the second factor that will have a material impact on personal loan your monthly repayments will be the duration over which you repay the sum that you have borrowed. Its generally true that you should aim for the shortest repayment period possible as the shorter the loan period the lower the total amount of interest that you will pay. It is however also true that the shorter the loan repayment time frame the higher the monthly principle and interest repayments you will have to make as a borrower over the life of a loan.

5. Applying For A Personal Loan
Once you have chosen a loan provider the next step is to apply for a loan. The loan application process generally involved the following steps:

1.    Filling in an application form
2.    Providing supporting documentation that the loan provider can use to identify your identity, confirm your employment and understand your capacity to repay the loan)
3.    The loan provider will then usually review the information you have provided together with your credit profile see Veda.
4.    The loan provider will then generally contact you and indicate whether you application has been approved and if so at what rate they are willing to provide a personal loan to you.

We hope this is helpful and look forward to getting your feedback. If you have any questions, comments or war-stories we would love to hear them.

Good luck!

SocietyOne Team

A new personal lending platform that bypasses the banks by directly connecting borrowers and investors

Sydney, NSW, 21st August 2012 – SocietyOne announced today the launch of Australia’s first fully compliant peer-to-peer (P2P) lending platform.  SocietyOne runs on a proprietary loan management platform called ClearMatch™ that provides a safe, secure and 100% online (paperless) loan application and online loan management solution.

The SocietyOne platform makes the personal lending market more efficient by removing the need for banks to sit between borrowers and investors. With a proven technology platform and a 100% online loan application and loan management solution SocietyOne is able to operate far more efficiently than a traditional bank. SocietyOne then shares these operating efficiency savings with borrowers in the form of better rates and with investors by opening up access to a new fixed-income asset class. Making SocietyOne simply a better way to get a personal loan.

"P2P lending is disrupting the traditional bank controlled personal lending market in countries like the UK and in the US. P2P lending is working in these countries because it offers borrowers access to better rates and provides investors with access to an asset class that has historically generated great returns for banks. We see no reason why P2P lending cannot shake-up the personal lending market here in Australia in the same way it has internationally" said Matt Symons, co-founder and CEO of SocietyOne.

By applying for a personal loan with SocietyOne, individual borrowers can access up to $30,000 in unsecured loan funds that are provided by multiple investors who have the opportunity to build a diversified portfolio of consumer loans by investing small amounts into many individual loans posted on the SocietyOne platform. SocietyOne handles member authentication, bank account verification, credit checking, credit reporting, funds transfers and collections.

SocietyOne is a responsible borrowing option. Instead of offering revolving lines of credit and  variable lending rates, SocietyOne offers fixed monthly interest and principle repayments, no monthly charges and no early repayment fees.  SocietyOne only list on its platform loan applications from borrowers who have good credit histories and low default risks.

SocietyOne generates revenue by collecting a one-time application processing fee of from borrowers and a service fee from investors.  SocietyOne has an Australian Credit License and employs borrower identity verification and borrower credit assessment techniques comparable to those employed by traditional banks.

“We believe SocietyOne shows that technology-driven innovation can bring real competition to the Australian retail banking market. The initial reaction to SocietyOne has been overwhelmingly positive and I think most people sense there has to be a better way. We believe that better way is to bypass banks altogether which allows us to offer borrowers a better deal and in doing so open-up a new asset class for investors.” said Matt Symons, CEO of SocietyOne.


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About SocietyOne

The entire team at SocietyOne are driven by a desire to shake-up the personal lending market by offering Australian borrowers a better deal and investors a new opportunity. SocietyOne was co-founded by Matt Symons (CEO) and Greg Symons (COO) with the goal of using an online technology platform to disrupt the consumer lending market in Australia. Matt Symons brings to SocietyOne a proven track record in building and commercialising technology based businesses in both Australia and the US. Since 2007 Greg Symons has driven the development of the ClearMatch™ platform, capitalising on his experience running finance companies and his extensive experience building software applications for Financial Services organisations.


For Further Media Information Contact:

Linda Jansezian
Marketing Manager
P: 1300 144 221
M: 0408 498 669
linda.jansezian@societyone.com.au

Sydney – August 6, 2012 – SocietyOne Australia’s first fully compliant peer-to-peer lending business launched today.  By connecting borrowers and investors via our safe and secure proprietary ClearMatch Technology platform SocietyOne removes the expense of having banks act as middleman between borrowers and lenders. By using technology to reduce costs and increases efficiency SocietyOne offers borrowers a better loan rate and investors access to a new asset class.

“Peer-to-Peer or P2P lending offers compelling benefits for both borrowers and investors" said Matt Symons, CEO of SocietyOne. "Online platform businesses have dramatically changed the way Australians research holiday options, compare insurance quotes and buy and sell cars. P2P lending is revolutionising the consumer lending market internationally (particularly in the US and the UK) and we can see no reason why it cannot shake-up the personal lending market in Australia."

At launch and as part of our responsible borrowing strategy, SocietyOne invites borrowers with good credit history and low default risk to apply here for a personal loan. SocietyOne personal loans are available up to a limit of $30,000 and for a duration of between 1-3 years. Borrowers have the certainty of fixed monthly principal and interest repayments as well as the benefit of no early repayment fees.  

Our plan is to revolutionise consumer lending by offering a better way to connect borrowers and investors. But to do that we need your help so please get in touch and share your feedback here. We really appreciate all the feedback we have had already and would love to hear from prospective borrowers or investors.