Plenti plots peer-to-peer lending revival as funding costs rise

Digital lender Plenti believes the peer-to-peer lending model could still have a viable future in a world of higher interest rates and volatile sharemarket returns, as fintechs grapple with sharply rising funding costs.

Peer-to-peer lending – where investors lend their money to borrowers via an online platform, bypassing banks – was once touted as an approach that could challenge traditional banking. The logic was that P2P lenders could be more efficient because the platforms would take a smaller cut than banks, and their model avoided the costs of branches and intensive regulation.

But despite the sector attracting high-profile backers – Rupert Murdoch’s News Corp and companies controlled by James Packer and Kerry Stokes invested in Plenti’s rival SocietyOne – the industry did not live up to the hype.

In Australia, the P2P model struggled to gain traction and was largely overtaken by more traditional wholesale funding models, while some big P2P players overseas moved away taking retail money entirely.

However, ASX-listed Plenti, which was formerly known as RateSetter and was an early P2P player in Australia, is looking to “reinvigorate” its platform that allows retail investors to fund loans.

Chief executive Daniel Foggo said the company, which provides personal loans, car loans, and renewable energy loans, had seen wholesale borrowing costs rise from about 3 per cent to 6 to 7 per cent as interest rates had risen.

He said it “makes a lot of sense” to get more funding from its P2P platform, and he believed investors would be attracted to the more stable returns at a time of stockmarket volatility.

“As a lending business we do have various sources of funding. We think it makes more sense to allocate loans to these investors because there’s a cost advantage for us,” Foggo said.

“I think we’ve seen people who have seen a lot of volatility in the stockmarket, and who have seen good stability of returns they have been able to earn on the Plenti platform,” he said.