RateSetter is one of few P2P lenders operating in the motor finance market. Sotiris Kanaris speaks to its head of motor finance Nick Elkan about the company’s experience in the market so far

When peer-to-peer (P2P) lending first appeared in the UK in 2005, there was a degree of scepticism about its likely success and longevity.

As numerous P2P lenders launched over the past decade, and as the value of loans generated through this finance avenue grew year after year, consumer views started to change and the media began to speak of a ‘revolution’ in the finance market.

With 239,180 loans of all types provided since its launch 2010, RateSetter has become a recognisable brand in the marketplace for consumer and business finance.

The P2P lender has been operating in the motor finance industry for as long as it has been trading, with loans for vehicle purchases being the company’s largest single category of active retail unsecured loans. As of 30 December 2015, 16% of RateSetter’s retail unsecured loans were of this type.

Nick Elkan, head of motor finance at RateSetter, tells Motor Finance the car finance market is attractive for the company and, as a result, it focused on building a team with experience in the field.

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"We see it as a well-established market and one where we understand the risk and return," adds Elkan.

However, Elkan highlights that it is a complex market, which requires lenders to fully understand its characteristics and the way it functions before entering.

RateSetter provides a personal loan product for car buyers, which is available through its affiliated dealerships, car supermarkets and brokers. The company’s average loan for a vehicle purchase stands at £6,156.

When comparing personal loans to hire purchase, Elkan remains bullish about the advantages.

"We believe that a personal loan product – rather than hire purchase, for example -gives more flexibility for the customer," says Elkan.

Competitive advantage

Elkan says that the process for a customer to secure a loan through RateSetter – from application to payout- is more "user friendly" compared to the one offered by ‘traditional’ finance companies.

"We also think that there’s an opportunity for us, as we’ve brought in a fresh new process that dovetails seamlessly from application to payout. This is more responsive and user-friendly than some of the legacy systems still used within the industry and it provides a better experience for both partners and end-users," he explains.

Elkan believes that RateSetter has an edge over other non-fintech car finance providers in terms of flexibility, speed and transparency. He says that this system is not only attractive for customers but for partners as well, as it makes "their lives easier."

In addition, Elkan says that P2P lenders are also benefiting from the increased number of consumers looking for loans online.
"Online personal loans are our home turf, and we’re an online business. It’s in our DNA, so we’ll always work hard to ensure that we have a competitive advantage in this area," he explains.

However, Elkan highlights that there are challenges for companies offering new products to a market, as they have to focus their efforts on educating the customers, which he characterises as a long process.

"One of the things we work hard on is educating clients and customers on the benefits of what we do," he says. "This is a relatively new product to many people, so understandably they want to be reassured."

Another challenge experienced by P2P lenders, is that they are competing with companies that have operated in the industry for decades and have strong relationships with customers.

Elkan says that it’s an industry where relationships "go a long way", adding that relatively new players like RateSetter need to work hard in order to persuade customers to consider them.

He highlights that there are "no shortcuts to trust" and that in order to build trust a company needs to do an excellent job and consistently prove itself.

"It’s also a small industry which relies heavily on relationships," adds Elkan. "If you drop the ball, you’ll find that the whole industry hears about it.

"However, if you do a good job, you’ll build up an excellent reputation – that’s our focus."

The company has benefited from developing a strong reputation, as it found that more customers hear about RateSetter through word of mouth and that more new partners are contacting the company.


Elkan says the P2P lender aims to grow its loan book in motor finance even further, as the market signals have been positive.
He says: "We have the appetite to expand, as we believe we have a good proposition, and one which is being well-received by the industry.

"We’re able to provide excellent service and competitive pricing to our borrowers and partners – it’s a good opportunity.

"By growing our loan book, we also provide more diversity for our investors, which makes it beneficial for both sides."

RateSetter Factfile

– RateSetter was launched in the UK in 2010. Launched in Australia in 2014.
– Investors include major investment fund managers, Woodford Investment Management and Artemis.
– 239,180 loans provided (this includes all types of lending, not just vehicle purchase).
– Around 16% of active loans are for vehicle purchase.
– The average loan for a vehicle is £6,156.
– The average term for a RateSetter loan (all loans, not just cars) is 27 months.