Video: What We Learned From RateSetter’s CEO

Click "Learn" to get help

By on 19 October, 2017 | Read more by this author

What we learned about RateSetter's experiments

Rhydian Lewis, RateSetter's* CEO, got the chance to present his business recently.

I've set the above video to start from the point where I think it might be particularly interesting to individual lenders as regards to RateSetter's own business, especially in the light of its recent misfortunes, which RateSetter large took steps to ensure wouldn't happen again.

Starting at 10:51 in the vid, you get to learn just a little bit more about the different types of loans that RateSetter does. There are nine broad categories of loans, down from what Lewis said was previously 12-15 kinds of loans. His point is that they do try different kinds of lending, but bin the ideas that don't work out.

What we learned about RateSetter's profits

Immediately after that segment, at 13:05, you get Lewis explaining that RateSetter will return to profitability in 2018.

For two years in a row, up to 2015, RateSetter was making more money than it spent, while most P2P lending sites still are not. Over the past two years though, RateSetter returned to making losses.

It is normal for businesses at an early stage to make losses, because shareholders burn through a lot of their own money in order to grow the company rapidly. But it is reassuring for lenders when P2P sites are profitable.

RateSetter  has spent the past two years investing very heavily for growth, has succeeded, and can now allow itself to make money again.

What we learned about supply and demand at RateSetter

At around 16:00, you get Lewis explaining his goal to have RateSetter interest rates become widely recognised as the benchmark rate in P2P lending.

Crucially, Lewis said RateSetter was going to continue to base its interest rates on supply and demand. This means that interest rates get pushed down when there are a lot more people who want to lend than borrow, but rise when borrowers are competing for lenders' money.

Lewis means that RateSetter is not setting caps or floors to the lending interest rates. But without a floor – a minimum lending interest rate – lenders could end up being paid less interest than they deserve for the risks involved. Low lending interest rates might happen if too many lenders become too relaxed about the risks and compete the rates too far downwards.

RateSetter has confirmed to 4thWay that it won't be increasing contributions to its provision fund (its pot of money aimed at covering expected bad debts) if interest rates were to fall very low.

And another thing…

During the video, Lewis also says that he doesn't see the P2P lending industry (or at least RateSetter) to be about offering full protection against 1-in-100-year events, such as a very deep recession.

Conversely, at 4thWay, we aim for precisely that level of protection.

Despite Lewis's comment, RateSetter's five-year lending account has a 4/5 4thWay PLUS Rating, which indicates, based on strict international banking tests of its loans, that lenders might still expect to come out with positive returns even during a 1-in-100-year event. On this point, I'm glad to see that the smart Mr Lewis might actually be wrong.

Read 4thWay's RateSetter Quick Expert Review.

Visit RateSetter*.

The opinions expressed are those of the author and not held by 4thWay. 4thWay is not regulated by the FSMA and does not provide personalised advice. The material is for general information and education purposes only and not intended to incite you to lend.

Journalists, bloggers and specialists writing for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.

*Commission and impartial research: our service is free to you. We already show dozens of P2P lending companies in our accurate comparison tables and we keep adding more as soon as they provide us with enough details. We receive compensation from RateSetter and other P2P lending companies not mentioned above when you click through from our website and open accounts with them. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

One response to “Video: What We Learned From RateSetter’s CEO”

  1. Tom Tichler says:

    The issue with this company is simply that they have deceived lenders and were found out purely because of the FCA taking a close look in order to allow ISA’a. But for that, the market would not have known what they were up to. Plainly put they deceived their lenders who believed it was P2P not wholesale lending – but in a rush to move ahead of the competition they did wholesale and very risky stuff to boot. Yes they have taken steps to rehabilitate themselves but the management and particularly the CEO have not changed. The culture is the same. They are cowboys. Get out.

Leave a Reply

Your email address will not be published. Required fields are marked *

Today’s average interest rates

4thWay® Forecast Returns Index: 4.83%

Showing average expected interest rates for individual lenders after fees and bad debts if you lend today.
Read about the first P2P lending index.

What is the “4thWay”?

There's the savings way, the property way, the stock-market way, and now there's the peer-to-peer lending way. The 4thWay® to save and invest.
Learn more.

What does 4thWay do?

We help people save and make more money, more safely when they cut out the banks and lend directly to other people and to businesses.

Why use 4thWay?

4thWay® is shaped by investors, bank risk modellers and a senior debt specialist, and we're governed by our users to ensure our comparison services and research are trustworthy and complete.

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers two “bonds”, one of which is available as an ISA.

Unlike its P2P lending service, neither of these bonds allows you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×

Why are Orchard’s interest rates different?

Orchard’s lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Orchard’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Got it

×

Why are Wellesley’s interest rates different?

Wellesley’s P2P lending rates appear higher on its own website than on 4thWay®.

This is because we calculate Wellesley’s interest rates the same way most other P2P lending websites do. We do this so that you can compare the rates more easily and so that they show a more accurate picture of what you’ll earn.

Important information before you visit Wellesley & Co.

Wellesley & Co. is primarily a P2P lending website.

But, when you visit the Wellesley website, you’ll see that it also offers “bonds”. Unlike its P2P lending service, its bonds don’t allow you to lend directly to 100+ borrowers.

Instead, you lend to Wellesley and it lends to other borrowers.

We have not risk-rated either of those bonds, but we expect that their structure makes them more risky, particularly because you’re lending to just one borrower.

Got it

×
Back to top