UK-based peer-to-peer (P2P) lending platform RateSetter saw its revenue jumping 46.8% to £18.5 million in fiscal year (FY), ended 31 March, 2016, from £12.6 million a year earlier, the company said earlier this week. Due to major investments, it turned to a pre-tax loss of £4.9 million in FY 2015/2016 for the first time in three years. In the preceding year, it posted a pre-tax profit of £476,000.
“The company’s results are in line with expectations set out at the start of the year and reflect the decision to charge more fees over the lifetime of loans rather than upfront and a planned increase in investment back into the business,” the statement read.
RateSetter expects to continue its considerable development and growth. It intends to continue to invest heavily in FY 2016/2017, which is expected to lead to another year of loss.
The platform employed a new scheme for collecting fees – now users pay a solid share of fees over the lifetime of a loan, rather than just upfront as prior to the change. This ensures a more sustainable income stream for the company, but resulted in an overall loss.
“If all fees had been taken upfront when loans were written, rather than charged over the lifetime of loans, RateSetter would have recorded a pre-tax profit in 2015-16,” the company said in the statement.
“The switch from up front to recurring fees was not a decision we took lightly. However, it greatly enhances the sustainability of our business – we strongly feel that it will prove to be a very positive development and anticipate that others in our industry will follow our lead,” said Rhydian Lewis, RateSetter founder and CEO. “Being an early stage lending business is tough and you are prey to negative selection. However, we are now beginning to see P2P work and attract more investors and better borrowers,” he added.
Meanwhile, loans under the company’s management grew by an annual 70% to to £581 million in FY 2016/2017. The number of active investors using the RateSetter platform also posted a significant growth of 66.8% on the year to 31,036 in the period under review from 18,608 to 31,036 a year earlier.
“Today these figures stand at £640 million [in loans] and 36,310 [active investors] respectively – with a 70 per cent increase in new active investors in the period since the EU referendum compared to the same three months last year,” according to the statement.
RateSetter is a brand operated by Retail Money Market Ltd., licensed by the UK Financial Conduct Authority (FCA). Since its launch in September 2010, more than £1.4 billion in personal and business loans has been raised through the platform, of which £500 million were distributed in 2015 alone. In 2014, the platform became the first marketplace lender to launch with a retail license in Australia. It is one of the largest perr-to-peer (P2P) lending platforms in the UK.