P2P lender posts £4.9m loss after fee changes

P2P lender posts £4.9m loss after fee changes



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RateSetter has recorded a pre-tax loss of £4.9m over the past year despite making a profit the year before.

The loss comes in spite of the peer-to-peer lending platform seeing a revenue growth of 46%, increasing it to £18.5m from £12.6m the previous year.

RateSetter is attributing the loss to 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 lender believes that the new fee structure creates a more sustainable recurring income stream as more money comes in over the term of the loans, which reduces the pressure to lend in order to generate revenue when credit conditions are poor.

If the fee structure had remained the same, RateSetter claims that it would have recorded a pre-tax profit.

Rhydian Lewis, founder and CEO, added that having turned a small profit in 2013-14 and 2014-15, the lender had planned to deliver an increased level of investment in the business.

“The switch from upfront 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.”

RateSetter also revealed that its loans under management increased by 70% to £581m, while the number of active investors grew to 31,036 compared with 18,608 over the same period last year.

Since the EU referendum, RateSetter has seen a 70% increase in new active investors compared with the same three-month period last year.

However, despite RateSetter expecting to grow considerably, it is still predicting that it will record a loss again as the business continues to invest to scale.

“Being an early-stage lending business is tough and you are prey to negative selection,” added Rhydian. 

“However, we are now beginning to see P2P work and attract more investors and better borrowers.”

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