Last week, it was reported that RateSetter, a leading UK peer to peer lender, was considering a merger or sale of the business. A report in SkyNews said the COVID-19 pandemic had exacerbated a “funding squeeze” compelling the Fintech to approach potential acquirers.
RateSetter has been operating since 2010 having originated over £3.6 billion in online lending serving more than 84,000 investors. At the end of 2019, RateSetter stated:
“We are proud that the total amount earned by RateSetter customers is nearing £150 million, and we are now delivering almost £1 million of interest every week. The advent of stronger regulation for our sector means that we go into 2020 with even greater confidence of extending our track record of delivering the most consistent and readily accessible returns in peer-to-peer.”
But no one ever considered a global pandemic in their roadmap and the advent of the Coronavirus crisis has apparently challenged RateSetter – just like many other Fintechs.
In response to the article claiming a possible merger or acquisition, RateSetter took its blog to add some perspective to the claims. RateSetter said like any business it was always keeping all options on the table while it said it anticipates consolidation in the online lending industry.
“Like all businesses, we always keep all options under review. We have existing, developed plans to raise funds in 2020, which are advancing. We do expect consolidation in our sector, with RateSetter potentially being a consolidator rather than potentially being acquired.”
Regarding a potential public offering, RateSetter was sanguine in its response noting a listing was not realistic in the current economic environment. Regardless, the company plans to be a public company at some point in the future. It is just not clear how that will emerge.
As for possible defaults caused by COVID-19, RateSetter said its portfolio has been “stable”
“In the current climate, we will give support to our borrowers. Our Provision Fund is managed with a buffer to be a shock-absorber for external events and our focus remains on investor protection.“
The Coronavirus outbreak has caused an increase in investment release requests but the majority of investors continue to participate in the platform and liquidity remains solid.
RateSetter is probably an example of a broader challenge taking place in the P2P/Marketplace sector where investors wisely reassess their exposure and platforms review credit risk. This is a challenging time for all businesses, not just Fintechs, but the companies that are well-capitalized should be in strong position once the crisis moves on.