Whether it's Uber taking a piece of that taxi pie, Airbnb moving into the hotel market, Trade Me encroaching on the retail space, it's clear that online peer-to-peer platforms are having a big influence on the way people do business. And when reflecting on what the torrent days did to the recording industry, it's clear that the peer-to-peer threat isn't one that industries should take lightly.
With the enactment of the Financial Markets Conduct Act earlier this year, Government opened the door to peer-to-peer lending, meaning that micro lenders—whether banks or payday loan companies—would be next in line to take on the challenge posed by the peer-to-peer threat.
It didn't take long for Neil Roberts to spot this gap in the market and he founded HarMoney, New Zealand’s first peer-to-peer lending site.
The company launched in September with a hefty $100 million contribution from four investors, including Heartland Bank, and business is already going well.
Roberts told Stuff earlier in November that HarMoney had already processed $4.5 million in loans, about half of which were debt consolidations, with the average loan being around $14,000 at an interest rate of between 18 to 19 percent.
As part of its early push in the Kiwi market, the company has released a quirky animated video, conceptualised by Barnes, Catmur & Friends and produced by Mr Mustard, that positions the platform as an alternative to what banks and micro-lenders offer (the agency is also behind the ambigrammatic logo, which can be read upside down).
"Peer-to-peer lending is a new concept to most New Zealanders," says Barnes, Catmur & Friends creative partner Paul Catmur, "and explaining it usually takes a couple of paragraphs. We set out to see how much of it we could explain in a logo. The ambigram seemed to be the perfect way of explaining that we were recruiting lenders as well as to borrowers. It took a look of massaging, but we're really pleased with the way it stands out. We were a little nervous of what the guys at HarMoney would think of having have half their line upside down at any one time, but they were very supportive."
During the ad, a voiceover says: "Our revolutionary website connects people with money to lend with people who want to borrow, all without going to a bank ... or a shark."
And while referring to micro-lenders as sharks is by no means new, it will resonate with many Kiwis who have fallen victim to the high interest rates and non-payment penalty clauses imposed by some lenders.
Earlier this year, Government passed the Credit Contracts and Financial Services Law Reform Bill in a bid to reign in the business practices of some loan agencies.
This law change now makes it illegal for lenders to profit from default fees and also places additional responsibility on them to ensure that they meet responsible lending criteria.
HarMoney also incorporates procedures to ensure the credit-worthiness of a borrower based on credit history, income, debt and the requested loan amount. Based on the responses, Harmoney will give the applicant a risk grade and associated interest rate according to the HarMoney scorecard.
Once approved, the loans are listed within the eHarmoney system, and investors can then choose the loans they would like to fund. Each loan is fractionalised into $25 segments, meaning that investors don't have to rely on a single borrower for repayments.
The minimum investment is $500, and the maximum amount a borrower can ask for is $35,000. Borrowers can use their loans for debt consolidation, car loans, home improvements, or for holiday. There are criteria on both sides of the equation – displayed on HarMoney’s website. The net investment returns are pegged at between 9.5 percent and 24 percent depending on the quality of the investment.
Roberts recently told Idealog that he hopes to track what the bank’s track record when it comes to loans.
“The stated losses of banks on the grid are in the 3.5-4% range, [and] we hope to track that. We are after bank grade customers, we can’t do business with people who are struggling.”
The success of the business will largely be determined by how effective both investors and borrowers find the platform. And, if the success of other peer-to-peer services are anything to go by, then HarMoney should be around for quite some time, provided of course that another peer-to-peer player doesn't step in and dominate the market.
- Visit Idealog for more on HarMoney.