Fully authorised new peer-to-peer platform looks to shake up “morally bankrupt” short term loan space

The Money Platform looks to fill gap left by payday lenders with new peer-to-peer solution.

A new peer-to-peer lender has launched into the short term loan space after graduating from the City regulator’s project innovate programme. The Money Platform, which is fully authorised by the FCA, is on a mission to reenergise the short term consumer credit market, which has been chronically underserved ever since the regulator cracked down on the nation’s payday lenders.

The Money Platform goes live today, after a two month soft launch. The platform will offer everyday investors exposure to 3-12 week loans of up to £1,000 in size, with interest rates ranging from 0.3 to 0.7 per cent per day. Its targeted net returns for investors are around 12 per cent. The platform balances supply and demand in a way that is somewhat similar to the RateSetter model. Investors effectively “bid” to lend by setting the interest rate that they wish to receive, and then wait for their offer to be matched.

The fee model, which was developed with the feedback of trial investors in mind, does not involve an origination fee. Instead, The Money Platform will retain 35 per cent of the interest on each loan.

Borrowers must pass the platform’s credit checks prior to receiving a loan. They will need to be in full-time employment and must have a “strong credit rating”. They also need to meet “stringent” affordability criteria. But The Money Platform’s credit process is very much a binary thing, either saying yes or no to prospective borrowers. The platform doesn’t do risk-based pricing; its investor demand that sets the price of loans. 

“Historically the short term loan market has been viewed as  ‘morally bankrupt’ – and with good reason,” said Charles Balcombe, co-founder of The Money Platform. “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.”

After reaching its heyday in 2012-2013, the regulator cracked down on the payday lending sector in January 2015 by capping interest rates at 0.8 per cent per day, which equates to a maximum APR 292 per cent. But the regulator also introduced a rule which means that payday borrowers cannot repay more than 100 per cent of whatever they borrow.

The Money Platform’s maximum APR, based on current investor demand, works out at 165 per cent. The startup claims that it is frequently cheaper than unplanned bank overdrafts and other short term credit providers.

For investors, The Money Platform’s goal is to connect individuals to the kind of interest rates that have until now been the reserve of major credit card companies and banks.

The Money Platform is one of only a handful of fully authorised peer-to-peer lenders. The very largest, such as Funding Circle, Zopa and RateSetter, continue to await the approval of the regulator.