NZ's first peer-to-peer platform promises better returns and lower rates than big banks
The boss of New Zealand's first peer-to-peer lending service, Harmoney, says the online platform will shake up the personal loan market and give retail investors a new option.
Neil Roberts said Harmoney expected to be operating within two weeks after receiving a licence from the Financial Markets Authority yesterday.
Peer-to-peer lending as well as equity crowd funding, which enables the public to buy shares in companies through online providers will be regulated by the FMA and has been made possible by new legislation that came into force in April.
Harmoney will charge fees for the use of its website, which matches lenders and borrowers.
Businesses and consumers will not be able to borrow more than $2 million a year through peer-to-peer lending, but the amount lenders can lend will be uncapped, the FMA said.
Roberts said overseas peer-to-peer platforms such as the US LendingClub, which is preparing for a US$500 million ($570 million) sharemarket listing, and the UK's Zopa could not keep up with demand from lenders.
Low interest on bank deposits meant people were "yield-starved".
"We're opening up a new asset class to retail investors and we're cutting out the banks," he said.
Lenders could expect an average annual return of 12 per cent.
Loans, expected to be around $15,000 on average, would be broken up into $25 "lots" and distributed among lenders to spread risk, he said.
Interest rates would range from single digits up to around 30 per cent and would on average be "significantly lower than the top four banks".
Roberts said Harmoney's borrowers would be mainly "middle New Zealand consumers" who wanted loans for things such as cars, weddings and funerals or to consolidate credit card debt. Harmoney will charge borrowers a fee ranging from 2 to 5 per cent of the loan's total value, and lenders will have 1.25 per cent taken from their repayments.
FMA director of compliance Elaine Campbell said peer-to-peer lending had great potential, but "lenders should also realise the risks are greater than putting money in a bank".
An FMA spokesman said the regulator was reviewing four applications for equity crowd funding licences and another for a combined peer-to-peer and crowd funding platform.
It is expected to grant its first equity crowd funding licences this month.