Peer-to-peer lender Harmoney racks up $100m in loans

Peer to peer lender Harmoney says it has facilitated $100 million of personal loans in its first year but is concerned about the market impact of any new competitors.

Harmoney says this is 10 times better than its Australian peers achieved when they started up.

Chairman Rob Campbell says the team was "always looking to beat Australia and in due course we'll get the opportunity to do that on their own turf."

The peer to peer marketplace, whose shareholding investors include Heartland Bank and Trade Me, say it will expand into Australia next month.

Harmoney is facing competition on its home turf with two other licensed peer to peer lenders about to enter the market and others said to be lining up.

Squirrel Money is due to launch in October while LendMe says it will launch before Christmas with or without confirmation of a tie up with an unnamed trading bank which is still under discussion.

Mr Campbell says competitors will help grow the market but his biggest worry is any lack of professionalism from new entrants will reflect badly on the still embryonic market.

He pointed to the equity crowdfunding market where a multitude of platforms have started up with varying models and offers, some of which have failed to attract funding.

"People can be put off that market for a while because if one crowdfunder is not doing very well, then other crowdfunders will not do very well," he says. "That's the biggest danger for us as more people come into peer to peer lending and may not be very good at it."

Equity crowdfunders and the New Zealand Shareholders Association have expressed concern there could be a shakeout in the nascent market which is starting to get crowded with seven platforms having FMA approval and another one seeking a licence for a property platform.

Squirrel Mortgages owner John Bolton, who is launching peer to peer lender Squirrel Money, says while Mr Campbell had a fair point, peer to peer lending was a much tougher market to get into than equity crowdfunding.

"You don't need the same support for the IT platform - you put up an offer, meet it, and are delivered of the obligation. With peer to peer lending there is an on-going responsibility to manage the loan and the investment," he says.

LendMe chief executive Marcus Morrison says the desire to build consumer trust is behind its plan to specialise in secured lending, offering a range of loan products that will be secured by mortgage over borrowers' assets. It's taking a bit longer than planned to get the technology right to do secured lending, he says.

LendMe couldn't control how others in the industry might behave, Mr Morrison says.

"One of the things about peer to peer lending is it's designed to give investors and borrowers wider transparency so you have a view of what others in the market do. How that impacts brand peer to peer is no different to any other industry," he says.

Harmoney launched in September 2014 with $100 million of committed lending capital from institutions including Blue Elephant Capital Management in New York and Heartland Bank.

In its first year it has registered 10,000 investors of which just over 3000 are active. Individual investors have an average account balance of $6000 and had an average realised yield of 13%, net of fees and losses.

Some 80% of its funding is from wholesale investors but the retail component lifted to 50% of all lending last month and that trend is expected to continue.

Harmoney has between 7000 and 8000 borrowers and received loan applications of $1 billion in the past year.

About 90% of accepted loans were funded by the marketplace within one day, with just over half used to fund debt consolidation while 15% went on home renovations.

The company launched an upgraded website today, making public its statistics and loans in market.

The purpose of any loan, which Harmoney grades on risk, is made public but not the borrowers' identities. For example, one borrower wanted $3300 to buy new tyres for his car, ACDC tickets, and to pay the bond on a house he was moving into.

Harmoney is not yet making money and founder Neil Roberts says it needs to double the size of its lending and number of investors to reach the scale necessary to become profitable.

Squirrel's Bolton said he doesn't expect to hit the same scale as Harmoney which has first mover advantage but he also forecasts fewer losses than Harmoney because Squirrel Money is leveraging off an existing business infrastructure and brand.

He's forecasting losses of $700,000 to $800,000 in its first year and to have become profitable by year three.


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