Australian Banks make it easier for Ratesetter and SocietyOne.
One week ago saw the launch by Ratesetter of the first fully open to all P2P lender in Australia. Combined with their other high profile competitor SocietyOne, I saw this as the likely start of a change to the Australian consumer lending markets.
Nevertheless, any changes we experience are likely to take some time for the Australian general public to recognise the opportunity and feel confident enough to participate in these Marketplace Lending businesses. Maybe the successful IPO of the US Lending Club over the next few weeks might create more momentum. It could also be the continued marketing and education push that both Ratesetter Australia and SocietyOne will do over the next year or so.
Then I read a short research piece by David Spotswood, and I realised that maybe the Australian Banks will start to do some of the heavy lifting for Ratesetter and SocietyOne. David is the highly regarded Banking analyst for Shaw Stockbroking here in Sydney.
According to David, the last rate cut in Australia was in August 2013. Since then the Australian Banks have experienced a falling cost of wholesale funding and their target deposit mix has remained relatively stable. All their deposit rates have been cut, their 3 month term deposit is now lower by 0.4%, while savings accounts are down by 0.5%. Only last month in October, rates came down another 0.1%.
That means that Banks remain in a strong position, and are able to control and squeeze their interest margins. However, for investors or savers, who leave their money in deposits with the Australian Banks, their returns are now lower than 3%. David, presented a number of charts to show that though interest rates remain low, the actual spread between both deposit/savings rates and the RBA cash rate remains near historical highs. It is more likely that the banks continue to squeeze domestic depositors and these depositors will start to look for alternative assets.
The Australian Banks in their quest for improved interest margins will end up providing a clear and pressing message to the Australian public as to why they should be considering P2P lending as a genuine alternative investment. Australian banks will make it easier for Ratesetter, SocietyOne and P2P lending down under.