Monday, 6 May 2019

First User Experiences of Our Money Market



Having selected Our Money Market for our fourth peer to peer lending investment platform, I will go through my first user experiences from the sign up process to navigating the platform to make my first investments.

The sign up process was very straight forward with the online application form indicating it takes about five minutes and an additional two minutes to fill out the identity verification checks. Overall the process didn’t feel like it took that long with the entry of all the usual details of your name, email, date of birth, address, etc.  You then move onto the ID verification checks.  What stood out to me during this process was it was the first platform to require two forms of ID (eg your driver’s licence and Medicare card or passport).  Needless to say it was a seamless process and we were signed up in minutes and ready to transfer funds in.

Transferring money into your account was particularly easy due to Our Money Market having its own unique Bpay details.  Transfer some money in (minimum of $50) and you are ready to start lending.
This platform allows you to view all details of available loans once you have verified your account.  The details provided on each loan include a sections on;

  • Loan details (all the typical items such as loan amount, rate, term, repayment frequency, loan purpose and loan grade), 
  • Non identifying personal information (gender, age range, occupation, residential status and city)
  • Credit history (credit score, number of consumer enquiries, defaults, etc)
  • Financial information (Monthly expenses, employment details, income and existing credit obligations).

The provided information gives you the necessary details to make an informed decision on whether you wish to invest in the available loan or not.  The platform provides three ways to invest your money: Quick Invest, Invest and Auto Invest.

Quick Invest is a simple way to build a portfolio of the available loans based on a risk profile you choose.  While I think this is a great feature, when there are only one or two loans on offer (which is all I’ve seen at the moment) the feature seems a little redundant at this point in time.

Invest is where you can review each individual loan and select the loans you want to invest in.  This is my preferred method as I like to be actively involved in the selection of the loans I invest in.

Auto Invest is a function to set up the auto investment of funds.  It has the ability to set a maximum percentage exposure to any one loan and a maximum exposure to each loan grade.  This gives you the ability to set up your maximum preferred exposures to each loan grade.

The grades of loans cover A+, A, B, C and D with each loan grade divided further into five sub-levels.  Our Money Market ranks each loan with one of these categories.  A+ is considered the best ranked loan with the lowest risk of lender default and returns on these loans are lower. D rated loans, on the other hand, have a higher risk of default and corresponding higher interest rate to compensate for the risk.  Knowing that we are investing in individual loans and thus exposed to the risk of default, diversification is the best course of action to minimise potential losses.  This means investing smaller amounts in more loans to reduce the risk.  This risk can be reduced further by having a combination of different grade loans.

The process of investing in a loan seems fairly straight forward where you add the amount you want to invest and click through to invest.  It brings you to a page showing the projected returns and you confirm you are committing the funds to the loan.  One thing I found odd was that a number of loans I’d committed funds to, disappeared prior to the funding closing period and the money was returned with no details why.  I’m assuming this occurred because the borrower changed their mind and withdrew their application, but never the less it is something to keep an eye on when you are working to invest your funds.

The general account overview looks good allowing you so see a good account summary showing Net Annualised return, total interest received, invested funds, committed funds (assigned to a loan not yet issued) and funds available to invest.  Scrolling down you can get more details on your portfolio.

Reporting is key to understanding how your investment is preforming.  One thing I found while going through the available reports on this platform, was that statements appeared to only include the total loan repayments (not split out into principle and interest) which means I couldn’t find a report that shows how much interest I’ve earnt during the month.  Unless I’ve missed something, to me this is a shortcoming of on the available reporting but will keep you posted if I find out its user error on my part…

Overall I like the platform which seems relatively straight forward to use.  I like the visibility of the loans you are investing in which gives you better understanding of the potential risks you are getting involved with.  If other people have experience with investing on Our Money Market, interested to hear your feedback and experiences on the site.

Monday, 22 April 2019

Comparison of Peer to Peer Lending retail investment platforms


Having identified a number of platforms available to retail investors, I wanted to break down what is on offer by each to be able to make an informed choice on which I potentially wanted to invest in.  Following the same logic I used for selecting my first peer to peer platform, I focused on the following;

  • How the investment logistics works
  • What are the minimum investment terms
  • What are the fees involved
  • What is the historical performance
As such I will be focusing on Estate Baron, Funding, Latrobe Financial, Lendex and Our Money Market.


Estate BaronEstate Baron works a little differently too many of the other peer to peer platforms.  You select a development to invest in and get your return typically on completion and sale of the project (which can be several years from point of investment).  The quoted returns are typically for the duration of the project (e.g. if a project estimates 20% returns and the expected duration is 18 months, your annual return is 20% divided by 1.5 years which is 13.3% pa.  Note if the project goes longer your capital may be tied up for longer and your returns reduce the longer it goes on.  On the flip side the reverse is true if it is finished early.  Returns on projects vary greatly as do the minimum investments (minimums from $2,000 to $50,000).  For investors seeking regular income, Estate Baron do have an investment called Monthly Baron ($20,000 minimum) that has targeted returns of 10% aimed to provide monthly incomes through a diversified portfolio of property development investments.

Funding Funding offers short to medium term loans (1 month to 3 years) with residential backed securities to a maximum Loan to Value Ratio of 70%.  The minimum Investment in a single loan is $5,000 and can be added to in $1,000 increments after the minimum investment into each loan.  Funding have target investor returns of 7% after fees.  If I’ve read the PDS correctly, Management fees are no more than 6% of the outstanding loan amount.  This is paid by the borrower after collections are made on behalf of investors.

Latrobe Financial Latrobe Financial offers several types of investment however I have focused on their P2P loan offering which Latrobe has named Selective Investments Account.  The Selective Investments account offers individual investment into residential and commercial property loans. Each loan is secured with a registered first mortgage over the property.  Loans range between 12 months to 5 years in length with the rolling 12 month investor performance currently sitting at 7.87%.  Labtrobe management fees are 1.45% of the total funds invested. It should be noted that on this platform, that on top the main PDS, there is a Supplementary PDS for every loan available for individual investment.  

LendexLendex offer investments in commercial and residential property loans secured by registered first mortgages.  Loans can have terms between 1 to 15 years with quoted investor returns ranging between 3.73% and 8.5% (AA rated residential loans to B rated commercial loans).  The two items that are not clear from the website are the minimum investment amount and how Lendex make their money (e.g. a management fee or percentage of the interest).  Watch this space as I endeavour to find out the details.

Our Money MarketOur Money Market offers individual investment into non-secured personal loans with terms ranging from 3 to 5 years with the minimum investment of $50 towards a single loan.  Our Money Market have a single service fee of 12.5% of all interest earned.  The current performance of all their loans issued to date has given an average return of 11.41% to investors.

I’ve updated the original table showcasing the performance of the different platforms.  In this case I’ve updated the current historical performance of the first four that were covered in my earlier blog for easier comparison of the retail investment platforms.

Provider
Fees
Min Investment Term
Historical Performance
MoneySpot
1.075% Management Fee
1.025% Expense Fee
6 Months
12.84% (1)
RateSetter
10% of all interest earnt
1 Month
7.69% (2)
TruePillars
2% of the interest rate offered to the borrow
1 Year
10.88% (3)
Wisr
1.79375% Management Fee
1.045% Fund Admin Fee
36 Months
7.67% (4)
Estate Barron
Unknown
12 months
10%+ (5)
Funding
No more than 6% of loan amount
1 month
7% (6)
Latrobe Financial
1.45% Management Fee
1 month
7.87% (7)
Lendex
Unknown at this stage
1 Year
3.73% to 8.50% (8)
Our Money Market
12.5% of all interest earnt
3 Years
11.41 % (9)
I’m always on the lookout for new platforms, so if you do hear about one not listed above, please let me know.  Our next investment and platform review will be Our Money Market.  I’ve selected this platform given the low entry point for diversification and great returns.  

Friday, 29 March 2019

P2P Lending Investment Platforms Australia



As my P2P investment journey continues, I’m always on the lookout for other opportunities in the market where I can invest and share my experiences.   You may know back at the start of my journey I wrote a blog on who offers P2PLending investments.  Since that time I’ve found a number of other platforms and thought it was worth an update.  While I’m sure this is not an exhaustive list, it does highlight there are many platforms out there to invest into in Australia.  The list below are platforms I’ve come across while researching the field and looking for new opportunities to invest. 

What I have also found in this time is that peer to peer lending takes many forms.  While I was initially looking at loans either personal or business, there are whole other categories around peer to peer lending in the form of property investment.   These range from funding for large scale development projects to bridging loans for people who buy, renovate and sell, to funding the purchase of commercial property.    



P2P Provider
Loans purpose
Investors
Min Investment Amount
Business
Sophisticated
Not provided
Business
Sophisticated
$1,000
Personal
Sophisticated
$2,000,000
Business
Sophisticated
Not Provided
Personal & Business
Sophisticated
$100,000
Business
Sophisticated
$1,000
Personal
Retail & Sophisticated
$1,000
Personal & Business
Retail & Sophisticated
$10
Business
Retail & Sophisticated
$100
Personal
Retail & Sophisticated
$10,000
Newly identified P2P Investment Platforms
Property
Sophisticated
$50,000
Property
Sophisticated
$5,000
Property
Sophisticated
$25,000
Property
Sophisticated
$10,000
Property
Retail & Sophisticated
$5,000
Property
Retail & Sophisticated
$5,000
Property
Retail & Sophisticated
$1,000
Property
Retail & Sophisticated
Not Provided
Personal
Retail & Sophisticated
$50



It is important to note that every platform has a slightly different structure so be sure to carefully read through the Product Disclosure Statements and understand what you’re investing in.  In my next blog I will endeavour to break down the platforms available to retail investors.  

While I will continue to update this list periodically, if you do find a platform not listed above please comment below or send us an email.

Thursday, 14 March 2019

Growth of Peer to Peer Lending in Australia


Peer to Peer lending in Australia has been around since 2012 with SocietyOne claiming to be the first P2P platform to start trading in Australia.  While they may have been the first, P2P lending didn’t become available to the retail investor until 2014 with RateSetter becoming the first platform available to everyday Australians.  Since that time the industry has been growing to capture more of market share.

I was interested in the stats and growth of the industry so I started doing some research to learn how large the P2P Lending has become in Australia.  Surprising the last government report I can find on the topic (and all articles I’ve read still reference this) is the ASIC Survey of marketplace lending providers: 2016–17.  This report does indicate that future updates are to follow so I will be sure to keep an eye out.  In the interim, I’ve collated available loans stats from P2P lenders who display their data to give an indication of the growth of the industry.

Before we get to the analysis, there were some interesting insights from the ASIC report on the Australian P2P Lending industry worth highlighting.  The most commonly quoted stat is the size and growth of lending growing from $156 million in Financial Year (FY) 2015-16 to $300 million in FY 2016-17.  To put these figures into perspective, I’ve pulled some Lending Finance stats from the Australian Bureau of Statistics for the corresponding years and tabulated below (all figures in millions).


As can be seen the P2P market is still quite small when compared total debt of Australian consumers and businesses. 

The ASIC report listed out the average and expected default rates of P2P loans.  For 2016-17 the default rate was 2.2% which was lower than ASIC has predicted at 2.9%.  Projections from the P2P platforms put the 2017-18 loan default rate at 2.4%.  While we wait for the latest ASIC report for the industry averages, the default rates currently quoted by RateSetter is 0.6% for 2018 and MoneySpot quote a current default rate of 3.822% in their latest monthly report.  To put P2P lending default rates into perspective, the consumer default rate of big banks was between 1-3% in 2016, while the national mortgage default rate in mid-2018 was sitting at 1.58%. 

The other interesting statistic in the ASIC report was the number of P2P retail investors.  The results were surprisingly with numbers much lower than I would have guessed.  The graph below is an extract out of the ASIC report showing the breakdown of investors.


Now we get into the challenge of trying to determine how the industry has grown.  To approach this I’ve collected the available data on loan books from the P2P platforms websites and collated into comparative years.  The data used below was sourced from MoneySpot (through all available individual monthly reports), RateSetter (download of loan book) and TruePillars (entering details of all loans visible on the website – missing about 20 loans based on the numbering convention).  The graph below shows the growth in total loans issued over time.  As can be seen RateSetter has had some significant growth over the past 18 months compared against the other platforms.


From here the loans funded were split out into individual Financial Years to match the ASIC report.  This gives us an indication of the potential portion of the market at the time of the ASIC report and how it has grown.  The graph below shows the cumulative loans issue per year for the three P2P platforms above. 


I’ve broken the above down into the table below to show that that the industry is growing year on year at the moment.  The table below is in millions of dollars.


Given the different growth rates of the P2P platforms it’s hard for me to make a projection on the potential size of the market to date so we will just have to wait for ASIC to come out with the details.  However it appears evident the industry has experienced significant growth since the previous ASIC report.  What will be interesting is what impact the Banking royal commission will have on the P2P lending space and if it will help drive the P2P industry by driving people away from the traditional banks to alternative financing arrangements.

First User Experiences of Our Money Market

Having selected Our Money Market for our fourth peer to peer lending investment platform, I will go through my first user experiences fr...