SYDNEY, Australia – Personal lender SocietyOne, despite a series of false beginnings, is not ready to test the market.
SocietyOne has finally hit its stride with its loan originations significantly higher and just recently obtained a warehouse funding facility in the National Australia Bank. The long-awaited public market listing for the personal lender is expected to happen anytime this year.
SocietyOne is the first-ever peer-to-peer lender in Australia and offers a personalized car loan interest rate. The online lender tailors the car loan interest rate it offers to customers based on their credit history. It means that SocietyOne will offer a better interest rate if customers have a better credit score, and that is applicable for financing to buy a brand-new car or a used one.
The online lender offers secured and unsecured car loans with different interest rates.
Being a big online lender in Australia, the initial public offering for SocietyOne has been advertised for several years following media moguls stacked into the company since 2014. However, it has taken a lot longer than previously expected for the lender to build a properly governed and professional major bank alternative in the personal loan market worth $20 billion.
However, SocietyOne has seen new lending record levels in each of the past three months. Its origination has majorly increased by 51% in 2019, which can be equated to $234 million. SocietyOne was founded in 2011 as the first peer-to-peer lender in the country, offering personal loans at low-interest rates. Since then, the online lender has been making significant moves in the market, from writing as much as $20 million to $25 million worth of new loans every month.
Currently, SocietyOne’s loan book is over $300 million and is well on its way into making $1 billion worth of cumulative lending. The lender is said to have a nearly $200 million valuation based on the 65% of the global lending book for the global peer average valuation multiple. However, under the ASX, SocietyOne could be worth even more.
According to Mark Jones, chief executive of SocietyOne, the market could drive an even higher value on the chance for them to have an impact equal to their existing incumbent.
Meanwhile, SocietyOne has recently signed a new warehouse facility funding worth $100 million with the National Australia Bank, which is scalable to around $200 million. Further, major shareholders of the online lender have tipped an additional $15 million recently for the company’s equity in hopes to back its growth and the new facility.
According to the co-founder of Reinventure Group, Simon Cant, he is more optimistic about the business than he was even before. Reinventure Group is a venture capital fund of Westpac that is one of the early investors in the business back in 2014.
Cant further stated that as first-ever in the market, SocietyOne would get the first break. However, it also means that they will be the first one that is going to make all the decisions as well as learn from the challenges that may come ahead. He explained that there are certain things needed some walking through to ensure that the business remains in shape, and that is currently present.
Cant also said that the firm has a very strong management team that possesses a great deal of experience as well as understanding when it comes to banking, which is also boosted by their scale-up experience.
The new warehouse funding facility comes together with a brand-new unit trust funding structure specially built for more sophisticated investors as well as the merging of its bank funders. Right now, with SocietyOne, peer-to-peer lending has become institutional funding, evolving from previously being a loan backing for mum and dad investors.
Meanwhile, Jones hopes that the warehouse can provide around 50% of the entire funding, with one-fourth of it coming from institutions, while the other one-fourth gained from the unit trust. The budget for the warehouse is below 4%, and a little more than 7% in total.
Investors have been getting as much as a 6% interest rate per year.
The online lender varies the loan it offers depending on the riskiness of their customers. The percentage of interest rates it offers per year is between 9% and 21% and serving over 32,000 borrowers. SocietyOne uses digital and targeted marketing techniques to discover new customers.
Jones stated that they have an idea of what a good client looks like, which allows them to identify and spend more time in areas where they can find those good customers.
In mid-2018, Jones took over the reins from Jason Yetton. Since then, the lending volumes of SocietyOne have tripled, credit defaults dropped by half, and with the profit going up to around 60%. The amount of loans for the lender in over 30 days past due is at 2.3%, while the loans with over 90 days due are only at 1.1%.
Jones explained that they figured out that good loan clients are online and that they can find them and make them customers in a cost-effective manner. With that, they were able to boost their volume up as well as cut their credit default rate by half, which according to him, is a great place for a lender like them to be in.
Previously, SocietyOne has been gearing up for success this time in 2019. However, their plans were disrupted following the letter from the Australian Prudential regulation sent to its mutual banks, saying that it is not comfortable with them funding peer-to-peer loans.
The letter from the regulation authority caused the reduction of the institutional lending panel to 10 mutual banks from its previous 28. With the reduced number, funders are now putting in much larger amounts and taking their entire interest from loans instead of getting fractionalized amounts.
In the coming months, the powerful shareholders of SocietyOne will converse whether it’s time to take on the ASX. The current shareholders of the online lender include the Seven West Media, News Corporation, Consolidated Press Holdings, and the Australian Capital Equity.
According to Cant, SocietyOne, going into the ASX is a positive market open. He said that as banks start to pull out of unsecured personal lending progressively, the masses have grown increasingly comfortable with fintechs like SocietyOne.