More Aussie borrowers are dumping banks for peer-to-peer lenders, CommSec reveals

By Ceyda Erem ·

Out with the old, in with the new is the word on the street when it comes to taking out a personal loan.  

According a recent CommSec Economic Insights Report, the number of Aussies borrowing from non-bank financial institutions rose by 10.3% over the year to August.

“Banks are facing greater competition from non-banks. At the same time bank deposits are only lifting at a 2.5% annual rate, putting greater reliance on external funding. It is clearly a competitive and challenging environment for financial institutions,” said CommSec chief economist, Craig James.

And if recent Mozo news is anything to go by, it appears that peer-to-peer (P2P) lenders are giving the big banks a run for their money.

RELATED: Peer-to-peer lender MoneyPlace reveal what makes a ‘top’ borrower
In August, RateSetter announced that in 2018 it had the highest number of debt consolidation loan applications since the business began in 2014.

And in September, marketplace lender SocietyOne announced it had become the first P2P lender to hit $500 million in lending, with hopes of hitting $1 billion by the end of 2019.

RELATED: Society One’s new campaign set to help Aussies keep their hands off their plastic

SocietyOne CEO, Mark Jones, attributed the company’s success to its convenience, an attractive feature to younger borrowers.

“Millennial consumers have been increasingly demanding a fairer, faster, easier and more personalised mobile-centric solution from almost every brand they transact with,” he said.

He also went on to say that revelations from the Royal Commission may have contributed to Aussie borrowers turning their backs on the big banks.

“The Royal Commission has undoubtedly helped remind customers to check they are getting a good deal from their bank. It never hurts to get a second opinion,” he explained.

RELATED: Kickstart your spring renovation with these 5 great personal loan

So with the news of P2P lenders shaking up the market, we thought it was worth having a quick runthrough of what exactly a P2P lender is and the major players in Australia.

What is peer-to-peer lending?

Peer-to-peer lending is quite similar to traditional lending except that your loan is funded by investors, usually through an online marketplace, instead of being funded by a single bank.

And depending on the borrower, P2P lending generally promises more competitive rates and fees than a typical bank.

Who are Australia's major peer-to-peer players? 

In Australia, you’ll find that there are three major peer-to-peer lenders, they are:

  • RateSetter - Kickstarting their journey in the UK before hitting Aussie shores in 2014 is RateSetter. Aside from being the first P2P lender in Australia to offer investment opportunities, the platform globally has issued more than $3 billion in loans!
  • MoneyPlace - A newbie to the P2P world MoneyPlace, is a lending platform providing competitive rates to its most creditworthy borrowers. And although they may be fresh off the block, in 2015 the platform entered into a five year $60 million partnership with Auswide Bank as support during the lender’s starting growth stage. 
  • SocietyOne - SocietyOne were the first P2P platform to launch in Australia in 2011 and started off with a bang by implementing a different approach to lending in which risk-based pricing is used to match the needs of the borrower to their investor’s requirements.

But if you prefer variety when it comes to your personal finance options, then you’ll need our personal loan comparison tool. It compares a range of lenders from the big banks to smaller non-bank lenders.

Ceyda Erem
Money writer

Ceyda Erem is Mozo’s authority on Energy, as well as having broader expertise as a personal finance writer. She loves to put her researching and writing talents into stories that help our readers to make more informed financial choices, whether that’s about finding the best energy deal or writing about the latest sneaky bank tricks. Ceyda has a Bachelor of Arts (major in writing) from Macquarie University.