THE UK’S first fully-authorised peer-to-peer payday lender has launched, hoping to shake up what it calls a “morally bankrupt” market.
The Money Platform’s founders Charles Balcombe and Joshua Graham acknowledge that the payday loan sector has a bad reputation, but think their business offers consumers a more ethical alternative.
“Historically the short term loan market has been viewed as ‘morally bankrupt’ – and with good reason,” said Balcombe. “With two years in planning, we are finally delighted to present British consumers with an affordable short term loan option and to shake up this industry through transparency and ethical practices.”
The platform connects retail investors with borrowers looking for unsecured loans. It has had 2,500 applications from borrowers and originated 74 loans since its soft launch in mid-September.
“We’ve been trying to be cautious,” Balcombe told Peer-to-Peer Finance News. “It’s a fairly new sector in P2P and we haven’t been writing lots of loans as we want to make sure our risk models are accurate.”
The Ladbroke Grove-based firm is fully launching in time for the holiday period, which it hopes will be a busy time for consumers needing short-term loans.
“It can be a tough time for people so we hope individuals will use us for support during Christmas and January,” said Graham.
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Loan terms range from three weeks to 12 weeks and the maximum loan size is £1,000. Interest rates range from 0.3 per cent to 0.7 per cent per day and the company is forecasting default rates of seven per cent.
With a representative APR of 165 per cent, it is much less expensive than some of the big-name payday lenders in the market.
Investors can expect returns of around 12 per cent.
The firm received full Financial Conduct Authority (FCA) approval in January 2016 and was put into the regulator’s Project Innovate incubator programme, which supports innovative fintech start-ups.
The firm originally raised £496,000 and is now in the midst of a second round of fundraising from equity investors, including family offices and angel investors, to raise a further £1.6m.
It plans to expand its team and increase its marketing spend once it has completed the fundraising round.
The Money Platform may have some competition soon. Rival P2P payday lender Welendus is hoping to launch in January, although unlike The Money Platform, it is still awaiting full FCA approval.