FR: Why do you think the peer-to-peer industry is growing at such a rapid rate?
The most obvious reason is that the investments offer very attractive returns. RateSetter investors can earn as much as 6% for a five year investment, and while capital is at risk, our Provision Fund has ensured that no individual investor has ever lost a penny.
Over the last five years, RateSetter has led the evolution of the P2P industry into a simpler, investor-friendly proposition. For example, rather than wade through countless borrower applications across various risk grades, our investors simply choose how long they want to invest for and at what rate – RateSetter takes care of assessing creditworthiness of borrowers.
Add to this developments such as FCA regulation and the forthcoming introduction of the Innovative Finance ISA, and it’s not hard to see why the industry has grown strongly and that is expected to continue in 2016.
FR: How will regulatory changes continue to influence the market?
The P2P industry has been fully regulated since 2014, but we are now moving from an interim authorisation from the regulator, to full authorisation. Much of the change has already happened as platforms prepared for full authorisation – applications for this closed in October.
Our investors probably won’t notice much difference, as most of the changes affect process, structures and practices behind the scenes.
FR: There has been a 21% increase in the number of over-55s investing in RateSetter since pension freedoms were introduced - is this a trend you see continuing?
Yes, for a number of reasons. Firstly, peer-to-peer lending is simply an attractive asset class. The returns on offer through our platform are appealing in their own right, particularly for retirees who need to earn an income from their investments.
However, we’re working hard to make RateSetter even more attractive to over-55s: for example, several SIPP providers now allow investments with RateSetter, allowing people to make the most of the tax advantages that pensions allow.
FR: With more first-time buyers turning to peer-to-peer lending, do you think peer-to-peer has the potential to transform the mortgage market?
It certainly has the potential to transform the mortgage market, but this is an area that banks currently service quite well.
However, investing with RateSetter is a great way for future house buyers to save for a deposit for a mortgage. Many of our investors are putting money away for exactly that purpose.
FR: Have you got any big plans or exciting news coming up that you can tell us about?
The big focus for us at the moment is the Innovative Finance ISA, which will allow investments with peer-to-peer lenders such as RateSetter to be included within a tax-free ISA wrapper. This is a huge move and an exciting product to be working on. Expect to see the RateSetter ISA up and running on 6 April 2015!
FR: What more can be done to educate IFAs on the benefits of peer-to-peer lending?
Broadly speaking, there are two things that we’re doing. The first is raising awareness of peer-to-peer lending among IFAs – it’s an evolving industry, so we don’t expect everyone to be aware of what we do or how it works. That’s changing though, especially as the industry attracts more mainstream interest and continues to prove itself.
The other task we have on our hands is to make the platform more accessible. For example, we’ve created an IFA portal for advisers, which means that they can invest on behalf of their clients, set a fee and control multiple accounts easily. Without tools such as these, peer-to-peer lending can appear impractical, so this is an important area and one in which I think we lead the way.
