When the story of a business begins with “the first loan was written from my bedroom in Fulham, London,” you know that business’ story has got to be a good one.
That bedroom was Rhydian Lewis’, who founded RateSetter and is its current CEO.
“We’ve passed a few milestones since we wrote our first loan in 2010: We launched in Australia in 2014, passed £1 billion in total lending in 2015 and we now have more than 300,000 customers,” said Lewis. He added that RateSetter has also lent more than £250 million to business borrowers, which has allegedly made a difference at a time when banks are reluctant to lend to SMEs. Most recently, the business passed £50 million in interest earned by its investors.
But as PYMNTS continues the story of “Whatever Happened To…” businesses that started around 2009, the year of our founding, it’s important to take a glance back at where a company started and how it achieved its current success.
RateSetter was founded in 2010 by Lewis, a former Lazard investment banker, and Pete Behrens, the current chief commercial officer, who formerly worked in law and then banking at the Royal Bank of Scotland. The business moved out of the bedroom and into its first office, which — according to Lewis — was “quite a dilapidated place.” The office moved from Southwark to Bishopsgate, London, in 2015.
“We founded RateSetter in order to open up access for everyday investors to the risk and reward from loans — disrupting the exclusivity that banks and funds had held in the past,” said Lewis.
RateSetter’s business is based on peer-to-peer lending, with both borrowers and lenders competing for matched loans, specifying a particular rate they’re willing to accept. Lenders can participate in four markets — one, 12, 36 or 60 months — while borrowers can apply for loans from six to 60 months.
“Our model matches investors’ money with households and businesses looking for attractive loans so that everyone gets what they are looking for,” said Lewis. “The ethos of delivering for our customers sits at the heart of our business and flows through everything we do.”
RateSetter is likely most known for the concept of a “provision fund,” which reimburses lenders should there be a late payment or default. It’s based on borrowers’ payment of a “credit rate” fee related to their individual credit profile.
“The thing I’m proudest of is that. To date, every individual RateSetter investor has received the returns they expected without losing a penny,” said Lewis. “Of course, we can’t provide a guarantee for the future, but it’s a record that we’re incredibly driven to maintain.”
But the success hasn’t always been smooth, as many businesses endure over the course of their lifetime.
The biggest hurdle? Getting consumers to trust and buy into the business. And Lewis recognizes that RateSetter isn’t alone in this problem.
“We often say that there are no shortcuts to trust. The most effective way for us to become more trusted is simply for us to earn it by continuing to build our track record,” said Lewis. “We’ve come a long way, and awareness is increasing, but there’s more for us all to do in this regard.”
Over time, however, trust clearly has been built — with both borrowers and lenders. Accordingly, 2014 was a big year for RateSetter. In July, the British Business Bank released that it would start lending via the business in order to support individuals, traders and other business-related purposes. Later in November, RateSetter opened an office in Australia.
As for the RateSetter team, it’s grown quickly from just two employees to its current 170 employees.
Looking to the future, Lewis said the plan is to achieve a system where each investor gets at least the market rate of interest to ultimately make the RateSetter system become a “benchmark.”
“In other words, the RateSetter Rate can become ‘the going rate’ for money,” said Lewis. “The way our system works is that it’s actually the supply of and demand for money that drives our rates. We let the market set the rate.”
Obviously, this is a departure from the customer’s relationship with a bank, but Lewis said there is much room and much business in this model.
“We’ve always placed our vision in terms of what the outcome is for the consumer,” said Lewis.
And that was probably the goal from the beginning, sitting in that bedroom in Fulham.