Lending

on the rebuildingsociety.com blog

30th Oct, 2017

Fin vs. Tech

Is it the “fin” or the “tech” that is the key to developing the future of online lending?

“FinTech” is one of the biggest buzz words in finance and technology. Online lending platforms are just one of the many different types of companies at the forefront driving the industry. Given the buzz, it’s not surprising that every company with any finance-related technology is attempting to rebrand themselves as a FinTech company, trying to enjoy some of the limelight and investment on offer. With so many companies trying to dress themselves up as FinTech companies, it is difficult to truly understand or identify what a FinTech company really is, and often difficult to distinguish between true FinTech companies, financial services companies that have technology, and technology companies that are dipping their toes into financial services. We wonder: will it be the “fin” or the “tech” that really has the biggest impact on the development of the industry, specifically within the world of online lending?

Open-source

The financial services industry, in the traditional sense, is an industry that has long been able to rest on its laurels. In doing so, they have neglected to truly take into account the changing needs and habits of their consumers. This has created an opportunity for companies that have dared to think differently; leading to the creation of P2P lending, crowdfunding and money transfer platforms. The ability of these companies to understand consumer needs and meet them, using new technology, has seen many of them grow very quickly. Perhaps more importantly, it has also seen consumers think differently about how they manage their finances.

Whilst the creative technological solutions have been key to the creation and initial growth of the FinTech industry, the most significant development of this revolution has been the change in the mindset of consumers, spurred by the advances brought about by technology. Now more than ever, people are openly engaging with one another about the management of their finances; whether it be about who they have a mortgage with, the best and easiest ways of transferring funds to a different currency, or how to make the most out of one’s savings. Not only are consumers now engaging with one another; they are also more actively engaging with their financial services providers. Even more importantly, they are demanding better services and products from them. Consumers are getting excited about finance.

Traditional finance companies may continue to develop new financial products, and deliver and enhance them through new technologies, but if they fail to consider the new engagement of their consumers, these products are unlikely to be successful.

For example, online lending has become a success story, not because of the advent of a new financial product, but rather through making an old, in-demand financial services product more accessible to consumers. Of course, these companies would not long survive if the “fin” part of the product was neglected. If a company failed to observe good credit risk decisioning processes and poor lending practices, for example, these products – and with it the companies – would fail.

One could argue that whilst “tech” may be driving the FinTech industry, it could not operate without experience of the “fin.” It is likely that the biggest driver of the future of FinTech, specifically within the online lending market, will be, for the first time, the consumer, as they have become both the lenders and the borrowers.

Many online lending platforms may have already come and gone, but online lending is still arguably in its infancy. The products on offer and the types of loans available through these platforms still very closely resemble the more traditional loan types, with the online accessibility and speed of access being the main differentiators. Only over the last two years has the UK seen newer products such as the Innovative Finance ISA come to the market; yet even these mirror older financial concepts.

The fact that consumers hold the power to more significantly influence the financial products available to them, along with the ever-evolving way in which they are delivered, will surely lead to an extremely interesting period of financial services development. Changes in dynamic will lead to other changes, which will not only pose new challenges for FinTech companies and the financial sector as a whole, but will also likely raise some very interesting questions and challenges for the regulators of these markets around the world.


18th May, 2016

Did You Know: Average Return of All Lenders

Our Did You Know series highlights features, aspects and information about the platform that may have passed you by.

In line with our campaign for improved transparency and communication with lenders, we crunched the numbers on our loanbook to deliver you a picture of the average returns enjoyed by rebuildingsociety lenders.

The data we analysed covers the period between our inception up to the end of the 2015/16 tax year, and takes into account all interest received up to this point, losses relating to bad debt, and expected losses on any under-performing loans. The figures do not include promotional credits or any profit/loss from Microloan Trading.

As always, past returns are not necessarily a guarantee of future performance.

So here are the facts:

  • 15.5% AER: If you had placed the same amount on every loan in the said period, your net return would have been 15.5% AER, which compares very favourably with the reported 7.3% AER for one of our largest competitors.
  • Security Counts: The most notable impact on returns was the security offered. It will come as no surprise that loans with only a personal guarantee represent our lowest returns for lenders at just 8.88% AER – though still higher than the 7.3% AER reported by our largest competitor.
  • Size Matters: Our medium sized loans (£50,001 – £99,999) gave the best returns, narrowly ahead of large loans (£100,000+).  This is to be expected given that additional security is required above £50,000, so the medium and large loans are unhampered by the poorer performance of loans backed only by a PG.
  • Cream of the Crop: By quite a margin our highest rates of return were offered by loans that were medium sized and backed with property as security.

Want the numbers to sink your teeth into? Download an excel spreadsheet containing the data.


27th Jan, 2015

Lenders Doing Clever Bids

This is a guest blog by Neil Faulkner, director of 4th Way, a comparison site focused on the p2p industry, on the lending patterns of rebuildingsociety lenders in recent auctions. It’s an impartial view of activity on the platform and Neil’s lending recommendations are his alone, not endorsed or recommended by rebuildingsociety.

Here at 4thWay.co.uk, the P2P lending comparison site run and governed by individual lenders like you, we collect and gawp at lending data rather like three-year-old’s hoarding little stones.

And so rebuildingsociety’s Nick Moules asked me to write about 4thWay’s research into recent lending patterns on rebuildingsociety.

The overall news is really good. It’s clear that the vast majority – about 85% to 90% – of successful bidders are within around half a percentage point of the average rate.

In addition, the average rate is typically very close to the top bid, being within approximately 0.5 or 0.75 percentage points.

Any higher bids are being outbid. In some less active P2P lending marketplaces, a large minority are getting much higher rates than average. But this isn’t happening here. This shows us three things about rebuildingsociety:

(more…)


01st Dec, 2013

The best way to invest money for a property deposit in 2014

In 2014, it might be time to look at innovative ways of putting enough cash aside to get on the bottom rung of the housing ladder as the future of Help to Buy comes into the spotlight, as Nick Moules explains.

The reality

Since the housing crash, it has been well-publicised that first-time buyers (FTBs) have been frozen out of the housing market. The Help to Buy scheme has an uncertain future (before it has really started) and if evidence of a housing bubble grows, political pressure to cancel the scheme will be ramped up.

From a lender’s perspective, it’s a tough ask to support FTBs as they’re typically the riskiest part of the market without the incentives; loans are at a high loan to value (LTV) and they’re under regulatory pressure to reduce risk and balance their books.

But it’s worse for the would-be borrowers for several reasons: (more…)


02nd Apr, 2013

Case study: A lender’s story

A rebuildingsociety.com lender, JL, shares his story of how he became a peer-to-business lender and his tips for building a portfolio in this emerging asset class.

“I heard about peer-to-business lending though a newspaper article in July last year and to be honest, I was a bit annoyed that I didn’t discover it earlier, such has been my enthusiasm for it since. It has added valuable diversity to my portfolio and provided a gross return of 11 per cent.

(more…)


28th Feb, 2013

The quandary of regulation

There is no more divisive subject in the crowdfunding sector at the moment than regulation. On 26 February, rebuildingsociety.com talked and exhibited at the UK’s first crowdfunding conference, “Crowdfunding Deep Impact”, held at Hertfordshire University. Nick Moules outlines the basics of the argument for and against.

While everyone in attendance (including Vince Cable through a pre-recorded video) agreed that crowdfunding in its many guises is undoubtedly a positive movement for everyone – there were huge divides over whether regulation applied by the FCA would be appropriate for the market.

Part of the complication is down to the different types of crowdfunding available: (more…)


15th Jan, 2013

Lender Tip: Ask Borrowers Questions Before You Lend

It’s something not many of our lenders have chosen to do so far, but there is the option on our community pages of asking our borrowers questions about their financials or plans, in fact any part of their business that you feel is important.

You might like the look of an opportunity, but just want to be clear in your mind about an existing debt or the future plans of the business. If it’s a 5 year loan, what is planned to change in that time?

Lenders are entitled to ask these questions and we encourage the debate. To get started, have a look at the Marketplace and then select a business. From the borrower homepage, choose the discussion tab and enter your question. Borrowers are notified of the question and encouraged to reply as soon as possible to keep the auction process moving.


29th Oct, 2012

Resuscitating Streets

Reading about the latest attempt to resuscitate Britain’s high streets by the Distressed Retail Property Taskforce fills one with feelings of deva-vu. This time last year, Mary Portas was trying to do the same, but the cost of living has continued to rise in that time and shoppers will continue to shop online because it is convenient. These campaigns seek to address one side of the problem – if the shoppers had more money to spend, they probably would.

So it’s not looking good for the high street, but the UK has to accept that the business model of the last 50 years has changed. Consumers will vote with their feet and retailers might choose to move exclusively online to save the physical overheads incurred through owning or renting premises.

There have been calls for all out of town planning applications to automatically go through ministers, but why should a business forego an excellent opportunity to get shoehorned into a unit that might not be the right size or dynamic for its operation?

You can’t halt change, but there is opportunity there.

(more…)


23rd Oct, 2012

The Investor Stats Widget is coming…

Soon, registered users will be able to see their investment statistics at a glance with the Investor Stats Widget, which will appear on the Dashboard and login page.

As shown in this preview image, lender users will get information on returns, outstanding loans, deductions and risk will be visible. It will update in real time as you make investments, receive repayments or add funds to your account. With this information you can adjust your risk appetite, which will filter through to your automatic bid settings.

If you’re registered but not able to add funds to your account yet, we’ll need to verify your address. You can start this process by following this link and logging in to your account:

Newly registered users must verify their address before adding funds.

https://www.rebuildingsociety.com/security-questions/

Happy lending!


11th Oct, 2012

How many instant access savings accounts beat inflation?

Think low, very low. It’s actually none. According to the website savingschampion.co.uk, there are no instant access savings accounts on the market at the moment that give basic rate taxpayers the power to beat CPI inflation. To do this they would need to pay 3.13% or higher, something achieved by six notice accounts and a range of cash ISAs, but nothing where you can get to your money easily.

There’s a mention of Barclays’ e-savings account which caught our eye, because a member of our team closed his account last year once he realised it was only paying 0.10% interest. It’s taking liberties even calling that a savings account…

(more…)


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