Squirrel Money is set to launch its peer-to-peer lending platform on the 29th this month, after a year of building its entire platform in-house.
Squirrel founder John Bolton told NZ Adviser the peer-to-peer lending addition will be a fantastic complement to their existing business but doesn’t see it as a space many other mortgage brokerages will want to explore.
“I think the thing with P2P lending is with the technological shift that we’ve had and with the regulations changing it’s become easier to do these sorts of things but it’s still not easy,” Bolton says.
“There’s a lot of governance and compliance that goes into getting these licences which is why you’ve only seen four licences issued in the last year."
He says the barriers to entry are quite high as are the costs involved and the platform is the most challenging part because they are hard to build.
“I think over the next two to three years, maybe two or three of these platforms will emerge as dominating the market and then there’ll be no appetite for other people to come in."
Although peer-to-peer lender LendMe, which is yet to launch, intends to offer mortgage size loans specialising in secured loans between $25,000 and $2 million, Bolton doesn’t think those loan sizes will be the focus of the peer-to-peer space.
“That sort of market will probably emerge fairly quickly but I don’t think it’s a very big market - that secondary market has always been quite small.”
Bolton says the benefit of building the platform in-house rather than licencing a platform from overseas, is the ability to customise and adapt it as needed.
“We’ll be able to respond to how consumers are using it and I think innovate very fast, which is what I’m looking forward to,” he told NZ Adviser.
Squirrel Money will offer loans of up to $70,000, targeting the retail market including homeowners, Squirrel's current client base, and new and growing families. But Bolton sees potential in the small business space also.
“I think there’s plenty of scope in the small business space because that’s a market that traditionally the banks have been pretty conservative with."
Harmoney was the first P2P lender in operation in New Zealand and Lending Crowd has obtained its licence but Squirrel is the first to include a reserve fund.
“We’ve got a reserve fund which means that we’re creating provisions for borrowers defaulting and that way the individual investors don’t have to worry about that because it’s covered by the reserve fund.
A former general manager of ANZ’s product division, Bolton says Squirrel is not unlike a retail bank in terms of their presence and type of breadth of proposition they offer.
“I love the industry, i love banking - for me we’re not just a mortgage broker we’re a retail based financial services provider and I see us ultimately providing a full suite of financial services products.