RATESETTER will return to profit next year, its chief executive and co-founder has said.
The peer-to-peer lender was profitable in the financial years ended 2014 and 2015, but has fallen into the red since then, as it has invested heavily into scaling up the business.
The ‘big three’ platform published a recording of a recent speech by Rhydian Lewis (pictured) on its website on Thursday, in which he underlined his belief that RateSetter is a “sustainable and profitable model”.
“The key thing about fintech and P2P lending, the big open question is when are these platforms going to become profitable and at what pace are they going to become profitable?” said Lewis.
“Are they going to become profitable?
“We wanted to make the point that we have been profitable so we know what it’s like, but at a much smaller scale than we are today and we have invested dramatically over the last couple of years and we expect to return to profit next year, so we’ve seen the full cycle but we fully expect our model to be a sustainable and profitable model.”
Last September, RateSetter reported a pre-tax loss of £4.9m in its latest annual results, down from a pre-tax profit of £476,000 the previous year. However, revenue rose by 46 per cent to £18.5m over the period.
The company attributed the loss to a new fee structure – charging a greater proportion of its fees over the lifetime of the loan – and investment in marketing, IT, staff and a larger office.
Many P2P lenders have been loss-making as they invest in scaling up the business. MarketInvoice’s losses doubled in 2016 and Funding Circle’s UK business only became cashflow positive in the fourth quarter of 2016.
RateSetter is celebrating its seventh birthday this weekend. Since its launch in 2010, it has facilitated loans worth more than £2.1bn, linking 57,000 lenders with 388,000 borrowers. Its lenders have earned a total of £82m of interest, at an average rate of 4.36 per cent.
In his speech, Lewis also said that P2P has “some real systemic benefits” for both investors and borrowers, as it is a “genuinely helpful” asset class for people and “a new source of funding”.
His long-term aspiration for RateSetter is for its rates to become viewed as benchmark money rates like Libor, he said, with hundreds of thousands of people exchanging money in real time.